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Organisations including the Association of Independent Music (AIM), which represents independent record labels, the Musicians' Union and rights bodies and collecting societies agreed at a meeting in London to propose a new Value Recognition Right, which would allow the music industry to create a commercial relationship with any organisation 'deriving value' from either the sharing or storage of music.

'Presently music creators are not being paid when their music is distributed over unauthorised file-sharing networks,' they said in a joint statement. 'At the same time, consumers are being sued for infringing copyright when they use such services. Between the two, sit digital operators (such as Internet Service Providers (ISPs), mobile companies and device manufacturers) that profit extensively and reap wider value from the unauthorised distribution of music whilst being protected from liability by a series of legal immunities and safe harbours.'

The statement says that a Value Recognition Right would: bring ISPs into the value chain which links creators to consumers; encourage the emergence of legal music sharing services; and make unlicensed intermediaries, rather than consumers, the target of copyright enforcement actions.

In practice, they add, this right could only function through a series of changes to the law that would allow the music industry to enter into the kind of licensing negotiations with digital intermediaries that can be difficult under the current copyright framework.

The concept of a Value Recognition Right will be finalised over the summer before it is submitted to the Government's Gowers Review of Intellectual Property, which is due to present its findings in the autumn.

Alison Wenham, AIM chairman and CEO, said the time has come to debate the future of copyright law.

'The thoughtful, expert input that has already flowed in from around the industry has led to a breakthrough in fresh thinking on this incredibly important subject,' Wenham said. 'We believe the Value Recognition Right is the most innovative potential answer to problems

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which current applications of copyright law cannot properly deal with.'

Musicians' Union general secretary John Smith, said that performers and composers are the people who stand to gain most by the introduction of a Value Recognition Right.

'The lack of a Private copy levy in the UK has seriously disadvantaged the music creators in this country vis-à-vis their European counterparts, this is an ideal and unique way to redress the balance,' Smith said.

But digital rights campaigners condemned the proposal.

'This proposal is ill-conceived and grasping,' said Suw Charman, executive director of the Open Rights Group. 'Suggesting that ISPs and telcos should be responsible for the content transferred by their users illustrates how poorly the music industry understands the net, the right to privacy, and the ISPs' duties to their customers under the Data Protection Act. They are looking at booming technology markets, such as the growth in iPod sales, and wondering how they can get themselves a slice of the action.'

ORG believes that such as change in the law would let the music industry force licences or levies on a wide variety of businesses, not just ISPs and telcos. Manufacturers of any device capable of storing an MP3 would need to pay up. This could include companies that make hard disks, mobile phones, portable media players, game consoles and memory cards/sticks.

Applying a levy to every service or product which 'derives value' from music would drastically over-extend copyright's reach, it argues, and would endanger ISPs' immunity from responsibility for the content of their network until they have been notified that illegal material is being hosted or transferred.

'AIM and their colleagues also seem to be implying that the ECommerce Directive, which protects ISPs' status as "mere conduits" and is crucial to the net's development, should be torn up,' Charman said. 'Messing with that for financial gain would be very foolish. AIM's proposals are like charging the Post Office a fee in case some of the packages it delivers have illegally copied CDs in them, and making them responsible for the contents of every parcel they deliver.'

ORG adds that in other European countries where a private copy levy is applied to media and devices such as iPods, it has 'damaged new and novel music businesses, open source, data sharing applications, and business models based around media'.

Adam Singer, chief executive of royalty collection society, MCPS-PRS Alliance disagreed: 'Digital networks are built by strip-mining creativity and copyright was never designed for digital strip-mining, so we need a serious act of creative conservation.'