Mega prosecution

When the FBI ordered the arrest in New Zealand of founder Kim Dotcom and other principals of the Megaupload file-sharing site, the raid did a lot more than send its 150m subscribers into deep mourning. The FBI’s case sets the scene for a once-and-for-all debate – legal and otherwise – about how original creative content can be used on such sites, if at all.  The issue in a nutshell is whether there are any rules at all for proprietary material in the cyberzone.

Megaupload is – or rather, was – a “cyberlocker” site. That is, a place for hosting content it did not create. Supporters call them digital lockers or open file-sharing sites but the FBI describes Megaupload, the grandaddy of them all, as a criminal enterprise. Not surprisingly, there are a veritable plethora of websites based on much the same principle.

Their attraction is that users – and Megaupload had 50m of them every day – can get to see millions of files without having to go anywhere or paying much, if at all.

Megaupload’s problem was that most of its content and profits (more than $175m in the last five years, according to prosecutors) came from copyright-breaching, pirated content. Megaupload’s principals have also been charged with racketeering, money-laundering and a variety of other grave charges, all of which raise the risk of “serious jail time”, as lawyers point out.

With the vigorous support of the owners of the creative content, the FBI had been working on the Megaupload case for two years while Kim Dotcom, an obese 38 year-old giant with multiple residencies and citizenships, and his associates lived the high life near Auckland, New Zealand’s biggest city. Infamous for hurtling around the neighbourhood in a stable of high-powered luxury sports cars with in-your-face number plates like “Guilty”, “God”, “Mafia” and “Hacker”,  they brought retribution down on themselves, according to many observers.

The raid was a globally coordinated exercise involving agencies in America, Hong Kong, Britain, New Zealand, the Philippines, the Netherlands, Germany and Canada. Yet its timing surprised many dwellers in the cyber zone because it seemed to some as though the enterprise was trying to go legit. According to Dotcom (who has several names including Kim Schmitz), Megaupload had been withdrawing content whenever rights-holders complained, which was all the time.

The founder had even appealed to PayPal to boycott opposition sites that, he wrote, “are known to pay uploaders for pirated content.” He liked Megaupload to be thought of as a “file-hosting” site.

However the FBI charges that all this was just an elaborate smokescreen and their prosecutors provided examples of numerous communications between Megaupload employees that reveal, they said, a systematic mining of all kinds of proprietary content.
Ultimately it’s an intellectual property issue and the hugely powerful Motion Picture Association of America, a particular victim of the site, has no doubt that the law is on its side. It describes Megaupload as: “the largest and most active criminally operated website targeting creative content in the world.”

Yet one interesting argument raised by supporters of open file-sharing sites is that owners of creative content should make it more easily available and at reasonable prices. They cite with approval, music-sharing sites such as Spotify for which subscribers can pay a monthly fee. As web technology site TechCrunch pointed out, such sites are convenient and affordable. “People who care about their time don’t bother to download illegally.” If that ever happens though, it’s almost certain that Megaupload won’t have any involvement.