The DMCA was supposed to stop the rampant illegal downloading supported by Napster, as well as keeping encoding standards (such as those that make DVDs region specific) off the Internet.
It failed at both, as online file trading and information sharing continue to grow apace. It's worth noting that online file trading is already illegal under existing copyright law but simply impossibly expensive to enforce. Although the RIAA has brought law suits against hundreds of individuals, this is simply not a meaningful deterrent to the millions of file traders across the world.
Understandably, the RIAA is working on another bill that would simply outlaw file trading software, or software that might be used to trade files. The benefit of this new bill is that it gets to the heart of what the RIAA wants: the ability to shut down any network that people can/might trade mp3s over. It's also unfortunate that 6 years after Napster, no legitimate constituency to support online file trading has emerged. Lots of people happily use it, but they are all actually breaking the law (asinine as it is) and so they can't really stand up and be counted. Warnings about a "chilling effect on innovation" are true and accurate, but people tend to look at out-of-pocket costs (we're no longer selling CDs!) and ignore opportunity costs (the various unknown, unknowable technologies that will never be developed if the bill passes).
In part, though, it is the absence of any distinction between a legal mp3 that can be traded online and an illegal mp3 that should not be traded online, but is, that has prevented a legitimate P2P constituency from emerging. An unknown artist, eager and willing to have their songs distributed online for free, currently has no advantage over a famous artist that does not want his songs distributed online for free.
And on an incidental side note: I give a shout out to the Fuzzy Elf!
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