The federal government has introduced a controversial bill it says balances the rights of copyright holders and consumers — but it opens millions of Canadians to huge lawsuits, prompting critics to warn it will create a "police state."

"We are confident we have developed the proper framework at this point in time," Minister of Industry Jim Prentice told a news conference in Ottawa on Thursday. "This bill reflects a win-win approach."

However, Liberal industry critic Scott Brison blasted the government for its lack of consultation with Canadian stakeholders and for not considering the implications of the bill if it passes.

"There's no excuse for why the government has not consulted broadly the diverse stakeholders," he said. "The government has not thought this through. It has not thought about how it will enforce these provisions."

"There's a fine line between protecting creators and a police state."

Bill C-61 spells out consumers' rights in how they are allowed to copy media and clears up some grey areas. Existing laws do not specifically allow consumers to copy books, newspapers, periodicals, photographs, videocassettes and music. The new bill would expressly allow them to make one copy of each item per device owned, such as a computer or MP3 player. The bill would also expressly allow consumers to record television and radio programs for later viewing.

The Conservatives' bill, however, also contains an anti-circumvention clause that will make it illegal to break digital locks on copyrighted material, which critics say could trump all of the new allowances. CD and DVD makers could put copy protections on their discs, or television networks could attach technological flags to programs that would prevent them from being recorded onto TiVos and other personal video recorders.

Cellphones would also be locked down, so when consumers buy a device from one carrier, they would be unable to use it with another. Breaking any of these locks could result in lawsuits seeking up to $20,000 in damages.

University of Ottawa internet law professor Michael Geist, a vocal opponent of the legislation, said the anti-circumvention clause invalidates all the other new provisions.

"They've got a few headline-grabbing reforms but the reality is those are also undermined by this anti-circumvention legislation. They've essentially provided digital rights to the U.S. and entertainment lobby and a few analog rights to Canadians," Geist told CBCNews.ca. "The truth of the matter is the reforms are laden with all sorts of limitations and in some cases rendered inoperable."

Cory Doctorow, co-editor of the influential Boing Boing blog, said the anti-circumvention clause will lead to a revival of digital rights management, or the software that prevents media from being copied. The entertainment industry has for the past few years been moving away from protecting its content with DRM because consumers have shied away from buying restricted media.

"You have to wonder what they're smoking on Parliament Hill if they think there's this compelling need for DRM, given that the marketplace seems to be rejecting it left, right and centre," he told CBCNews.ca.

YouTube uploads could bring lawsuits

People caught downloading music or video files illegally could also be sued for a maximum of $500, but uploading a file to a peer-to-peer network or YouTube could result in lawsuits of $20,000 per file.

Canadian internet service providers, meanwhile, would continue to be immune to lawsuits from copyright holders for infringements over their networks. The bill recognizes ISPs as intermediaries and would only require them to pass on violation notices from copyright holders to their customers.

Prentice deflected questions about potential lawsuits by saying the bill is necessary to modernize Canada's laws and bring it up to date with its obligations under the World Intellectual Property Organization (WIPO) treaty it signed more than a decade ago.

"You can get into hypothetical situations," he said, "but the purpose of the bill has been to expand the balance of protection between consumers and copyright holders."

"In fact, it touches each and every one of us, and it is no surprise to find so many different points of view with respect to copyright," he said.

The bill will receive its second reading after Parliament's summer break, which is expected to begin soon. Brison told CBCNews.ca that the Liberals plan to put together amendments to the bill over the summer.

Bill praised by video game, music industry groups

Some copyright holders voiced their support for the bill. The Entertainment Software Association of Canada, the video game industry's lobby group, praised the legislation for trying to protect Canada's industries and artists from theft.

"It’s simple: Every time someone acquires an illegal copy of a video game, money, in turn, is not going to those Canadians who work so hard to develop and publish games. That’s money that cannot be reinvested in creativity, job growth and industry development," Joan Ramsay, president of the group's board of directors, said in a statement. "Copyright reform is essential to strengthen our competitiveness as an industry."

A coalition of eight music lobby groups, including the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) and the Canadian Recording Industry Association (CRIA), jointly thanked the government for tabling a bill it said was long overdue. The coalition said it represents 21,000 performers and 15,000 musicians, artist managers, music publishers, music retailers, manufacturers, record labels, and distributors and retailers of musical instruments.

"Vocal opponents of this bill will characterize it as mimicking what's already been done in the U.S., but that's oversimplifying things," Stephen Waddell, ACTRA's national executive director, said in a statement. "Around the world, 64 countries have already implemented the WIPO copyright treaties. Canada is at least going in the direction of finally catching up."

Prices of computers, iPods could jump

Intellectual property experts said the bill is mixed in the benefits it would provide and the problems it would create.

Mark Hayes, partner in the intellectual property group of Blake, Cassels & Graydon LLP in Toronto, said ISPs — which got the exemption from prosecution they wanted — and educational institutions, which would be able to copy materials from the internet that they previously could not, were among the winners. Consumers would also benefit because what they can do with their media has now been spelled out.

"They get some recognition of the rights to time shift and format shift," he said. "Before, nobody knew what the rules were."

Among the losers could be consumers shopping for electronics devices. Although the bill allows consumers to make a certain number of copies of their media, copyright owners could seek extra charges for the additional copies that will doubtlessly be made.

"Owners of computers and iPods could end up paying quite a bit more for those products in the future," Hayes said.

Downloading on the rise

According to the latest survey from Statistics Canada, one in five Canadians aged 16 and older who used the internet at home said they had downloaded or watched TV or movies over the internet, an increase from 12 per cent in 2005.

The percentage of home internet users who downloaded music — either paid or for free — also increased from 37 per cent to 45 per cent in the two-year span. Part of that increase can be attributed to a change in methodology, as Statistics Canada for the first time included 16- and 17-year-olds in the study, a demographic more likely to download media than older groups.

Critics feared the bill will mirror the U.S. Digital Millennium Copyright Act (DMCA), which similarly brought in restrictive measures and opened the door for copyright owners to enact huge lawsuits against violators.

The minister was forced to retreat on introducing the bill in December after being hit with major public opposition. More than 20,000 people joined a protest group started on social networking site Facebook by University of Ottawa internet and e-commerce Prof. Michael Geist, an outspoken critic of the bill.

The opposition to the legislation has only grown since then, with the Facebook group counting more than 40,000 members before the bill was introduced. More than 1,000 new members joined the group on Thursday, with many expressing their outrage with the proposed legislation.

"I was a Conservative until this morning. This one has crossed the line," one member wrote. "We need an election. NOW!"

Canadian artists, librarians and students, as well as a business coalition made up of some of Canada's biggest companies — including Rogers Communications Inc. and Telus Corp., as well as Google Inc. and Yahoo Inc. — have expressed their opposition to any legislation that imposes harsh copyright restrictions.

Opposition widespread

The chorus of opposition was joined last week by a coalition of consumer groups — including Option consommateurs, Consumers Council of Canada, Public Interest Advocacy Centre (PIAC), the Canadian Internet Policy and Public Interest Clinic (CIPPIC), and Online Rights Canada (OnlineRights.ca) — that wrote a letter to the government. The consumer groups expressed dismay they had not been consulted on the legislation.

Prentice responded to questioning in the House of Commons last week by saying he would not introduce the bill until he and Heritage Minister Josée Verner were satisfied that it struck the right balance between consumers and copyright holders.

Geist has repeatedly attacked the government on his blog for its lack of public consultation on the issue. However, Prentice has met with U.S. trade representatives and entertainment industry lobbyists to discuss the legislation.

"Prentice should be honest about the core anti-circumvention rules that are likely to mirror the DMCA and run counter to the concerns of business, education and consumer groups," Geist wrote on his blog. "Those rules are quite clearly 'Born in the USA.'"