Would that songs' "sharing" model violate copyright laws?

So lately I have been to my friends house and he has like entire wall of CD, probably 10,000 or so. I was browsing through and picked 4 that I like. He told me no problem, as I always return them "on time".

Then he said "you're web programmer, why dont you build a website where I could upload my music instead of you coming and looking through CDs one after another?", so I smiled (he is not that much into computers or internet) and replied "that's like a graveyard of companies that did it and quickly got in serious legal troubles". Although I am not aware if someone is/was in jail for audio copyrights infringement, but I am sure its not easy to live with $1B in liabilities because you had 1,000 songs and the judge said each was worth $150,000.

So he replied: "well, you borrowing those CDs from me right now. This is not illegal, as I do not make any money off of you and the same time if you posses those CDs, I cannot listen them at the same time, riight?".

Does he have a point or not?

In other words: lets say I design a simple website based on Amazon S3 (traffic) where you can upload your music (I could do a md5 checksum on client side of each file and if a it exists on server, skip uploading part [I know there are different bit rates and coders etc but that checksum approach would limit bandwidth usage anyways]) and "share it" with acknowledged/accepted friends only via "borrow/lend" model.

If A and B are friends, then A can look through B songs list, and B can look through A songs of list. At any time, either A or B can "borrow" a song/CD from B or A. Once this happens, that song/CD become unavailable to the owner, until he request it back (then it "comes back" right away into the owner's profile, and lender looses rights to play it). There would be no functionality to download/copy/own the song by lender (you could only play it via web or maybe some stand alone player or perhaps a plug-in to existing players?), but I wouldn't loose any sleep or put serious efforts into protecting the system, since there are always ways to break into it or copy files.

So what do you think?

Sharing to me means you had something (a file), you split it (copy) into two and shared it/pirated it. In this case, only one person at the time would have/own the song/album. Is it still pirating?

I wonder if that model would keep RIAA's claws off and give them some serious headache. ;-)