It had to happen and it finally has. RIAA are suing an individual for copying a track from a CD they bought to a PC. The legal uncertainty which allows this to happen is the downside of the fair use approach to copyright legislation, which lists principles of when the reproduction of works is allowed without a license.
What we have in Australia is fair dealing, a black letter law where each exemption from obtaining a copyright license is clearly defined. Making one copy of a CD track to place on your MP3 player is one of the actions listed.
Anyone who has used iTunes will notice the drafting error -- "one copy". iTunes makes two copies -- one is stored on the computer and one is stored on the iPod. Everyone who uses iTunes to copy CD tracks are breaching copyright. You need to rip the track directly to the MP3 player, something iTunes does not allow.
All of this is particularly ironic, since iTunes works the way it does to limit unauthorised music copying. If you use your iPod like a USB disk to copy tracks from your friends iPods then iTunes deletes those tracks when you reconnect the iPod back at home.
The Australian Copyright Act is also deficient because it fails to acknowledge that many CDs are shared property -- belonging to a household rather than to an individual. If a mother and daughter both rip the same CD then one of them has broken the law. Makes you wonder about the private life of politicans, who use the words "family friendly" but can't imagine how their legislation might translate to actions within the home (are we expected to put stickers on CDs saying "E ripped this -- hands off"?).
I think the small reforms to the Copyright Act concerning MP3 players were designed to prevent a community backlash when an organisation like MIPI prosecutes some unfortunate individual. Unfortunately, these two drafting errors leave the MIPIs of this world plenty of scope to generate embarrasment for politicans and ruin for individuals.