Feds Shut Down Megaupload For Copyright Infringement

By Wendy Davis for MediaPost

One day after Internet companies mounted a massive protest against proposed anti-piracy legislation, the federal authorities shut down the cyberlocker Megaupload for alleged copyright infringement. The government also said it had obtained arrest warrants against seven company executives, including founder Kim Dotcom.

As of Thursday afternoon, four people were in custody in New Zealand. Megaupload is now run by Kaseem Dean (also known as “Swizz Beatz”), husband of musician Alicia Keys; Dean wasn’t named in the case.

In a 72-page indictment unsealed on Thursday afternoon, the feds allege that Dotcom and the other execs engaged in a conspiracy to infringe copyright. The indictment charges some of the executives with infringing copyright themselves by personally uploading infringing files. If those allegations are true, the government probably isn’t going out on a huge limb by charging those particular executives with piracy.

But, in a move that’s more of a stretch, the feds are also attempting to hold the executives responsible for infringement by users.

Some of those allegations reflect a “very aggressive” position by the authorities, says Santa Clara University law professor Eric Goldman. “DOJ is flexing its muscles,” he says, adding that the indictment will “generate a lot of angst in the tech community.”

For instance, the feds fault Megaupload for not having a search engine on the site. The indictment, handed down by a grand jury in the Eastern District of Virginia, alleges that the lack of a search engine furthered a conspiracy because it “conceal(ed) the fact that the primary purpose of the website and service was to reproduce and distribute infringing copies of copyrighted works for private financial gain,” the indictment charges.

But lacking a search engine was seen as a positive for the cyberlocker Rapidshare in an infringement case. In that matter, U.S. District Court Judge Marilyn Huff refused to issue an injunction shutting down the site. Huff said in a written opinion that the fact that RapidShare isn’t easily searchable weighed in its favor because “the public cannot enter rapidshare.com and browse through a catalog for desired materials.”

The government also alleges that Megaupload encouraged people to infringe copyright by offering cash rewards to users who uploaded popular files — presumably professionally created content — that were frequently downloaded by other users.

But it’s far from clear that such a structure violates copyright law. In a civil lawsuit pending in federal court in Florida, the Motion Picture Association of America is arguing that Hotfile should face liability because it pays users who upload popular content. That case has yet to go to trial.

Given the scope of indictment, it will take time to sort out the details and separate the charges that might go somewhere from the nonstarters. At this point, it’s not even clear that company executives will be extradited to the U.S.

At the same time, the very aggressiveness of the indictment is in some ways is a big gift to opponents of SOPA and Protect IP. If nothing else, the government has demonstrated that it already has all the tools it needs to shut down alleged piracy sites without new laws
.