UPDATE 3-Canada to overhaul copyright laws for digital age

(Adds reaction, details on penalties)

By Randall Palmer

OTTAWA, June 12 (Reuters) - Canadians will be allowed to copy legally acquired music to their iPods and computers but would be banned from getting around any digital locks that companies might apply, under new legislation introduced in Parliament on Thursday.

The bill, introduced by Industry Minister Jim Prentice, would also reduce the penalties that companies could seek for most private infringements of copyrights to a maximum total of C$500 ($490) from a previous C$20,000 per infringement.

Currently, for example, someone downloading five movies without authorization for private use could be sued for C$100,000, whereas now the maximum would be C$500 -- a level that would make firms unlikely to pursue such individuals.

"It's not a fine. It's actually a form of damages. In other words, it's the rights holders that have to pursue. It's not the state -- it's not criminal," a government official, who asked not to be identified, told reporters in a briefing.

Heavy, commercial levels of piracy, however, could face far more severe liabilities in corporate lawsuits and would also continue to be subject to government prosecution, with penalties of up to five years in prison.

The bill would still exempt Internet service providers from liability for copyright violations by their subscribers, and would require them only to pass on notices of violations rather than to take down offending material as required in the United States.

It would also allow consumers to record television and radio programs for playing back at a later time, a practice known as time-shifting, but would prohibit people from keeping them indefinitely in a personal library of recordings.