The proposal seems to have received a cool reception from the House subcommittee on small business, which heard several hours of testimony today about how small recording labels and musical acts are using MP3s to gain market share.

So far, there are no legislative sponsors for any of the proposed amendments to the Digital Millennium Copyright Act, the 1998 law that tries to untangle the knotted Internet copyright picture.

But Lloyd Doggett, the Texas congressman who was the co-founder of the Congressional Technology Working Group, is said to be interested in the changes.

Chuck D., EMusic execs take the stand
Testifying before the subcommittee today was rapper Chuck D., who launched the Napster-like Rapstation.com and is a vocal supporter of Napster.

Also testifying was Peter Harter, vice president of global public policy and standards at EMusic.com (EMUS), the Redwood City, Calif.-based MP3 music provider. Unlike Napster, EMusic requires its users to pay for the music and has agreements with a number of music companies.

Identifying Napster's users
The group responsible for the proposals is the influential think tank Progressive Policy Institute (PPI), said to have both the attention of President Clinton and Vice President Al Gore on cybercrime issues.

The group wants companies such as Napster to collect identification from its users. Those wanting anonymity would have to leave credit card numbers or home addresses, similar to eBay's (EBAY) program.

"With the cloak of anonymity removed, copyright holders can identify the real culprits," writes PPI's Shane Ham and Robert D. Atkinson.

PPI also wants to give judges more freedom to shut down sites like Napster when a "vast majority" of its users engage in piracy.

Napster says it shouldn't be held accountable for any piracy because it does not store music on its computers. But it did recently bar more than 300,000 Metallica fans from using the site because of concerns that they were able to get pirated Metallica songs.

Music industry can police itself
Gene Hoffman, EMusic.com's 24-year-old president and CEO, doubts the proposals will get very far.

Rather, he thinks the recording industry and Internet music sellers can adequately police themselves.

He says, "Now is not the time for changes to the DMCA. But music fans must recognize that artists and record labels must be compensated for their work."

EMusic.com also offers music in an MP3 format, but differs from Napster because it charges 99 cents per song or $8.99 per album. The company launched in January 1998 and sold its millionth MP3 in the last financial quarter.

Napster works more like a co-op. Users can trade songs in the MP3 format, which the record industry says is piracy.

Cybertarians call for new business models
Taking a less moderate approach is Robin Gross, staff attorney for intellectual property and fair use issues for the Electronic Frontier Foundation, the so-called online "cybertarians."

She says new business models, not an updating of the Digital Millennium Copyright Act, is the answer.

"There is some degree of piracy, there always has been and there always will be," she says. "The middle ground is to really experiment with new business models."

The debate promises to be around for months or years to come. Aside from Napster, more MP3 sharing sites have cropped up. One such site is Scour.com, a search engine for finding music and movie files, in which superagent and former Disney (DIS) president Michael Ovitz has a controlling interest.