Hard News by Russell Brown


The Mega Conspiracy

Amid the storm of commentary since Friday's Megaupload raids, one issue has been oddly absent: what about the customers, paying or otherwise, who use the site for its ostensible purpose -- as an online locker for files they own or are permitted to copy? What if Kanye, Will.I.Am and Snoop Dogg had some choice beats stashed away -- as they imply in the video for The Megaupload Song?

Well, they'd be out of luck. On the basis of untested allegations about the activities of what in the FBI indictment that formed the legal basis for the raids calls "the Mega Conspiracy", the servers are shut and their stuff is gone -- for the time being anyway.

As Cato Institute research fellow Julian Sanchez points out:

Civil forfeiture laws have, frankly, always been subject to abuse. But when a suspected drug dealer’s car is seized, the effects are at least limited to the suspect and his family. The de facto seizure of an entire online platform, by contrast, affects all the users of that site, including many thousands who were using it to engage in legitimate, protected speech. And precisely because the non-pirate uses are less likely to involve public links, it’s extremely hard to know in advance exactly how much collateral damage is inflicted on legitimate activity by the seizure. In this specific case, I’d wager the proportion of illicit to legitimate content was quite high, but I can guarantee there’s also a whole lot of copyright-infringing videos posted to YouTube at any given instant as well; most people, presumably, recognize that shutting down YouTube in order to disable access to those videos would not be worth the enormous cost to protected speech.

There's a popular, mistaken belief -- reiterated in this rather odd AFP story published on the Herald website -- that making a copyright work of music and/or video available as a stream rather than a download is somehow not an infringement.

Well, if the copyright is asserted, it is. What keeps YouTube alive is its prompt and frequent recourse to the "safe harbour" provision of America's Digital Millennium Copyright Act, which protects it from legal action if it acts with dispatch in taking down an infringing file on notice. These notices are not always accurate -- a cluster of New Zealand recording artists have found their videos being removed from YouTube on notice from companies (hello Warner Music!) that have no current claim on the material.

But swathes of material on YouTube is potentially infringing. Some of it is claimed but left there on a revenue-sharing deal with the rights owner -- this is what TVNZ will generally do when it is notified that its content has been uploaded without permission. Much of it has simply never been claimed. But everyone knows it's there -- and in theory, the same US government powers deployed against Megaupload could be used to shut down YouTube -- not to mention MediaFire, Rapidshare, YouSendIt and all the other server farms. It's worth noting that among the Megaupload defendants are employees who were responsible for acting on DMCA takedown requests.

Actually making the charges stick in court is another matter, as legal blogger Jeremy Byellin writes:

The mens rea (necessary mindset) for the charged crimes in the indictment is willfully (otherwise known as “intentionally”) is quite a high standard to prove beyond a reasonable doubt.

Basically, the feds will have to prove not only that members of the “Mega Conspiracy” knew copyright infringement was going on, but also either actively engaged in it themselves or “aided or abetted” in its commission.

The indictment gives enough examples of statements by “Mega Conspiracy” members that should well enough establish they had knowledge of pirated material being uploaded onto and downloaded from their servers.

That alone isn’t enough to reach the “willfully” threshold, though.

The question for the court will be whether that knowledge, coupled with the “Mega Conspiracy’s” continuing to operate their servers and the business with full knowledge that infringement was occurring rises to the requisite “willfully” level.

The court’s specific findings here may not only make MegaUpload civilly liable (by removing the protection of the DMCA’s safe harbor provisions), but it may also establish a new standard for prosecuting similar file-sharing websites.

Which is a little scary, especially if pre-emptive shutdowns were to become standard practice.

Of course, not every proprietor makes quite as handsome a target as Mr Kim Dotcom (nee Schmitz) does. His Wikipedia article notes convictions in his native Germany for computer fraud and handling stolen goods, insider trading and embezzlement -- for all of which he received probationary sentences, and in one case a fine.

Schmitz declared these convictions when he sought residency in New Zealand, but was granted residency under the Immigration Act's "investor plus" category, after he bought $10 million in government bonds -- which have now presumably been seized along with his fleet of cars. (He was still prevented from buying the $30 million Coatesville property where he lives.) He has subsequently hob-nobbed with the great and good -- most notably, Act MP and former Auckland mayor John Banks, who will presumably be asked about his relationship with the flamboyant visitor.

The indictment is dated January 6 and the FBI has apparently been working with New Zealand authorities since August, so I think the theory that the raid was timed as revenge for the internet pushback against the SOPA and PIPA bills in the US House and Senate respectively is dubious. The explanation offered in David Fisher's Herald on Sunday story -- that the feds wanted to take advantage of Dotcom's colleagues being with him for a birthday party -- seems more likely.

But it's still somewhat unnerving to see dozens of New Zealand police officers closing public roads and raiding private property in service of a copyright claim from interests in another country. We can only presume that our taxes are paying for actions that may carry on for some time yet.

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