wired: MS May Have File-Trading Answer
Note the key phrase in the last paragraph here: "..Windows would refuse to play.." - a long way from copy prevention.
PITTSBURGH -- Microsoft has developed a prototype system that limits unauthorized playback of music by embedding a watermark that remains permanently attached to audio files. During a security workshop on Friday, a Microsoft Research scientist demonstrated how the hidden copyright fingerprint is so securely affixed to the audio that it remains intact even if a jazz song is played aloud on speakers in a noisy room and then re-recorded. [...] Such technology could be included as a default playback mechanism in future versions of the Windows operating system. If the music industry begins to include watermarks in its song files, Windows would refuse to play copyrighted music released after a certain date that was obtained illegally. (see www.wired.com)