This morning the company, which once terrorized the music industry with free peer-to-peer file sharing, launched what it claims is the world’s largest MP3 store. An OS-agnostic shop, Napster’s new storefront offers more than 6 million tracks encoded at 256Kbps and priced at 99 cents apiece. The tracks are free of digital rights management protections and playable on virtually any device–including the iPhone and iPod.

With 6 million songs, Napster (NAPS) has the largest DRM-free catalog of any online retailer. Its selection is about three times the size of Amazon’s (AMZN), and while Apple’s (AAPL) iTunes also boasts a catalog of over 6 million songs, only a fraction of those are offered free of copy restrictions.

But really, does that even matter? Because as compelling as Napster’s new MP3 store might be, it doesn’t have nearly the reach or mindshare of iTunes–which, at last check, was among the most ubiquitous pieces of software around. And how do you compete with ubiquity? Certainly not by failing to support Apple’s Safari browser, that’s for sure.

This week members of the House Judiciary Committee passed the Prioritizing Resources and Organization for Intellectual Property (called “PRO IP” groan…) Act of 2007, legislation that would create an “anti-piracy czar” at the White House level, a separate IP-enforcement division at the Justice Department and ratchet up already high civil penalties for copyright infringement.

The measure is backed by many of the most powerful politicians on the House Judiciary Committee, including John Conyers (D., Mich.), Lamar Smith (R., Texas) and “Hollywood” Howard Berman (D., Calif.), the content cartel and, of course, Zucker, who likes to tell everyone that it dramatically advances the cause of protecting innovation, technological invention and creativity.

Said Zucker, “This is such an important step in combating this incredibly serious piracy and counterfeiting problem that’s getting worse, not better.”

In Zucker’s eyes, maybe. But not in the eyes of consumer folks like Google Senior Copyright Counsel William Patry who calls Pro IP “the most outrageously gluttonous IP bill ever introduced in the U.S.” and consumer advocacy group Public Knowledge which feels it is in sore need of adjustment.:

This bill takes already extraordinary copyright damages and increases them, expanding the threat of litigation intended to stifle competition and innovation. … Increasing penalties is one of the least necessary, and quite possibly counterproductive, actions the committee could take, particularly when current law is adequate to deal with most infringement issues and because the higher penalties serve only to force faster and larger settlements potentially from innovators. … Instead of following the course of this bill, the committee should look to the future, to a more realistic and rational copyright regime that can adapt pre-VCR copyright laws to a post-YouTube world.”

Broader issues? Like reasonable network-management practices? The responsibility to deliver traffic fairly? Service disclosures? The sort of issues that might figure prominently in a “P2P Bill of Rights?”

Guess not.

Anyway, Comcast has already scrapped its policy of deliberately slowing some traffic flowing over BitTorrent and other P2P networks, so there’s really no need for Federal Communications Commission Chairman Kevin Martin to bust its chops anymore. As Mitch Bowling, Comcast’s senior vice president and general manger of its Internet service, told the New York Times, Comcast’s new policy is to slow traffic based on usage pattern, not application. “[Our new technique] will be based purely on individual consumption by consumers,” Bowling said. “Anything in addition to that is outside the scope of what our network management goal is.”

So the company plans to throttle traffic to the customers that use the most bandwidth. Hmmm. I wonder who those might be? The folks who use the Internet for email and Web browsing or those who use it for downloading digital media?

Back in February the cable company claimed it was perfectly reasonable for it to throttle or degrade the performance of peer-to-peer file-sharing services on its broadband network. But when Federal Communications Commission Chairman Kevin Martin suggested the agency was mulling action against it, Comcast had a moment of clarity. In March, it said it would work with BitTorrent to develop P2P-friendly network capacity-management techniques. And today it announced plans for an industry-wide effort to create a “P2P Bill of Rights and Responsibilities.”

The document–which is to be created with the help of other Internet service providers, P2P companies and content providers–would specify how ISPs should manage P2P applications running on their networks and how consumers should use them. Said Tony Werner, Comcast Cable’s Chief Technology Officer, “By having this framework in place, we will help P2P companies, ISPs and content owners find common ground to support consumers who want to use P2P applications to deliver legal content.”

And by announcing its plans to create this framework right before the FCC hearing on its P2P-throttling techniques to be held at Stanford (in Palo Alto, Calif.) Thursday, Comcast is hoping the agency won’t take action against it for violating its Net neutrality rules.

It’s a Comcastic day for BitTorrent. This morning the cable provider, under fire for degrading the performance of the peer-to-peer file-sharing service on its broadband network, announced plans to develop better ways to manage peer-to-peer traffic. To that end, Comcast (CMCSA) will work with BitTorrent to develop a network capacity-management technique that is protocol agnostic.

Said Tony Werner, Comcast’s chief technology officer, “This new architecture would enable many new and emerging applications and will be based upon an open, nondiscriminatory framework that could interface with or support multiple technologies. We believe that P2P technology has matured as an enabler for legal content distribution, so we need to have an architecture that can support it with techniques that work over all networks.”

Of course you do. You just didn’t realize it until FCC Chairman Kevin Martin pointed it out, right?

Anyway, like most such corporately altruistic pledges, this one has the potential to do more good than bad–or more bad than good. “… We must recognize that these are two commercial entities whose goals are, in the end, to make sure that their networks and technologies are as profitable as possible,” writes Public Knowledge’s Jef Pearlman. “One can conceive of a world where an ISP and an application developer band together to make a proprietary system in which sanctioned application data gets preferred treatment, the ISP gets greater control of the application running on your computer, and both companies are happy in the exact situation we want to prevent. Time will tell what this partnership actually means.”

According to the International Federation of the Phonographic Industry’s 2008 Digital Music Report (PDF), global digital music sales rose to $2.9 billion in 2007, up from $2.1 billion in 2006.

Now that 40% increase isn’t nearly the doubling of digital sales we saw in 2006, but it’s not insubstantial, either. Especially when one considers that digital sales grew to account for 15% of the world’s music market, up from 10% in 2006. That means that almost a sixth of music sales already come through digital channels. This despite five or so years of the recording industry’s Keystone Kops approach to the digital music revolution.

All things considered, things aren’t going too poorly–even if the growth of digital music sales hasn’t yet offset declines in physical music. That being the case, it’s difficult not to look askance at the IFPI’s calls for governments and Internet service providers to take a hard line against file-sharing.

“Copyright theft has been allowed to run rampant on [ISP] networks under the guise of technological advancement,” IFPI Chairman and CEO John Kennedy wrote in the report. “Some estimates say no less than 80% of all Internet traffic comprises copyright-infringing files on peer-to-peer networks.”–80%? Does the IFPI suffer from the same math disability as the MPAA?–”ISPs have largely stood by, allowing a massive devaluation of copyrighted music. This in turn–and despite all the positives about our digital growth–has prompted a crisis in recorded music that has wide implications for the whole digital marketplace and all those businesses to whom music is an important ingredient. … Today, however, a sea-change is happening. The whole music sector, governments and even some ISPs themselves, are beginning to accept that the carriers of digital content must play a responsible role in curbing the systemic piracy that is threatening the future of all digital commerce. After years of discussing and debating, I am convinced it is no longer a question of whether the ISPs act–the question is when and how.”

And the answer? Five bucks and a copy of the latest Britney Spears album says it’s network-level filtering.

A bit of background: In 2006 the RIAA sued Pamela and Jeffrey Howell for copyright infringement, accusing the pair of “making copyrighted works available” over a peer-to-peer network. The RIAA had no evidence that the Howells ever transferred content to a third party. It did, however, have screen shots of their Kazaa account. And that was proof enough for the court to grant its motion for summary judgment against them. “It is no defense that a Kazaa user did not directly oversee the unauthorized distribution of copyrighted material,” the judge wrote, noting that “the mere presence of copyrighted works in a shared folder is enough to trigger liability.”

So even though the RIAA couldn’t prove the Howells distributed files illegally, the mere fact that they owned a computer with a shared-files folder on it that contained copyrighted files “made available” over an Internet connection was enough to constitute infringement of the “distribution” rights under the Copyright Act.

Essentially, the Howells have been found criminally liable for what they might have done. Which is an unsettling thought in a Dick-ensian (Philip K.) sort of way. But not for the RIAA which, thanks to this ruling, no longer has to work quite so hard to provide proof of violation in these cases.

“Plaintiffs wish to establish two violations of copyright law when a person both downloads and uploads sound recordings via the Internet,” the Computer & Communications Industry Association and US Internet Industry Association wrote in an amicus brief filed in Elektra v. Barker, another RIAA “making available” case. “Proof of the download violation may be relatively straightforward when a plaintiff can establish that a recording has been copied to a person’s computer. Proof of a violation by uploading cannot, however, be established merely by showing the availability of files for potential uploading. A plaintiff must establish a connection to someone else’s actual download. That requires a plaintiff to establish a connection between an uploader and a corresponding downloader, to establish the facts of an actual transaction between the two. Although such proof may require investigation, a plaintiff should not be relieved of its burden. Since copyright holders may (and often do) seek statutory damages of up to $150,000 per work infringed, see 17 U.S.C. §504(c)(2), without having to prove actual harm, for such remedies they should be required to furnish allegations and proof of actual violations.

“The remedies provide an adequate incentive for a proper investigation. Amici believe that plaintiffs want to invoke the concept of ‘making available’ instead of the statutory elements of a section 106(3) distribution because plaintiffs perceive that the investigations needed for proper allegations and proof of uploading liability (as contributory infringement liability for another’s download) are burdensome.”

At a hearing yesterday by the House Committee on Oversight and Government Reform, Chairman Henry Waxman (D., Calif.) declared P2P networks a “national security threat,” claiming they’d caused federal employees to accidentally share sensitive or classified documents. “We used the most popular P2P program, LimeWire, and ran a series of basic searches,” Waxman said, referring to a bit of research done by his staff. “What we found was astonishing: personal bank records and tax forms, attorney-client communications, the corporate strategies of Fortune 500 companies, confidential corporate accounting documents, internal documents from political campaigns, government emergency-response plans and even military-operation orders. … It is truly chilling to think of what private information an organized operation or a foreign government could acquire with additional resources.”

Certainly is. But not nearly as chilling as the idea of government employees installing P2P software on government-issued computers holding classified government documents. No wonder the government got a C- on its 2006 Federal Computer Security Report Card.
The FBI is losing laptops like baby teeth, the Transportation Security Administration is misplacing hard drives with the Social Security numbers and bank account information of its employees, and now federal employees are jeopardizing the security of government emergency-response plans and military-operation orders by messing around with P2P clients.

Don’t try telling that to committee members like Rep. Jim Cooper (D., Tenn.), though. During yesterday’s hearing, he drew and quartered the lone representative from a peer-to-peer software company in attendance: LimeWire Chairman Mark Gorton. After suggesting that Gorton’s own home computer was likely leaking sensitive documents, Cooper lambasted him as “one of the most naive chairmen and CEOs” he’d ever encountered. “I’d feel more than a shade of guilt at this point, having made the laptop a dangerous weapon against the security of the United States,” Cooper said. “Mr. Gorton, you seem to lack imagination about how your product can be deliberately misused by evildoers against this country.”

Evildoers, huh. Is that a euphemism for federal employees doing government work on computers connected to peer-to-peer networks?