Making P2P Legal
P2P holds significant potential for both artists and fans, but it can't fully be realized until the lawsuits stop. We've seen this story many times with new technology and old media, so the solution is no mystery: we need a licensing plan for P2P. Think of a license as a shield from lawsuits. Here are a couple of ways to get legal:
Voluntary Collective Licensing
Copyright holders could voluntarily join together and offer "blanket" licenses, also known as "Voluntary Collective Licensing."
This is how the "problem" of radio was ultimately resolved (only after copyright owners gave up on trying to sue it out of existence, of course). A "performing rights organization" (PRO) was formed, songwriters and music publishers were invited to join, and blanket licenses were given to any and all radio stations that wanted them.
Today, there are three major PROs in the United States - ASCAP, BMI, and SESAC. In exchange for a fee, they will give blanket licenses to anyone who asks. (For antitrust reasons, the terms offered by ASCAP and BMI are closely monitored by a federal court.) Once licensed, radio stations may play anything, anytime, without having to ask permission first. The PROs then divide up the fees among their members.
This solution does not require any changes to copyright law and leaves price-setting to the copyright owners. Something much like this could be developed for file-sharing. Copyright owners could get together and offer blanket licenses on nondiscriminatory terms, either to ISPs, software vendors, or consumers directly.
The problem, of course, is that this solution has been available to copyright owners all along. It only works if virtually all copyright owners join and forgo lawsuits in exchange for a reasonable piece of the pie. So far, the big entertainment companies have shown no interest in pursuing a voluntary "collective licensing" plan.
What happens if copyright holders refuse to grant licenses at any price? It wouldn't be the first time; this situation arose with player pianos, cable TV, satellite TV, digital recording media, and Internet radio as well. Traditionally, however, the government has stepped into the fray and "compelled" copyright holders to license their work for a fee. This is called a "compulsory license" (or "compulsory").
The first American compulsory was adopted when the music industry fought the Napster of 1909: the player piano. Sheet music publishers claimed that the creation of piano-readable sheets was against the law and that they should have the right to monopolize the booming piano roll industry. Congress disagreed and instead crafted a compulsory license that paid recording artists while protecting the new technology. Today, this license allows bands to record (or "cover") another band's song (so long as they've paid the $.08 per copy of the recorded track).
While a compulsory always requires copyright holders to make their works available for fair compensation, the particular method of compensation is totally open. In the world of Internet radio, for instance, a webcaster pays for the songs that she plays. Her fees and playlists go to a central distribution point, and the artists on the playlists are compensated. On the other hand, cable TV companies pay broadcast networks directly when they play network programming like "The Simpsons."
This kind of licensing has often been necessary. When copyright holders can't reach consensus on licensing terms, Congress has properly stepped in to move things forward. You can ask them to do the same thing today using EFF's Action Center.
Making P2P Pay
There are lots of ways to compensate artists once the lawsuits stop. You can read about payment options here.