A Mega lawsuit

April 9th, 2014 at 11:00 am by David Farrar

Stuff reports:

Internet Party leader Kim Dotcom is facing a new lawsuit in the United States from six Hollywood film studios.

They claim in their suit the Megaupload founder “facilitated, encouraged, and profited” from illegal file-sharing on the site.

The Motion Picture Association of America (MPAA) filed the suit on behalf of the studios this morning (NZ time).

The lawsuit was filed by Twentieth Century Fox Film Corporation, Disney Enterprises, Paramount Pictures Corporation, Universal City Studios Productions, Columbia Pictures Industries, and Warner Bros Entertainment in the US District Court for the Eastern District of Virginia.

The US Government is already seeking to extradite Dotcom to face charges of copyright conspiracy, racketeering and money-laundering allegedly carried out by his file-sharing company, Megaupload.

It’s an interesting move. Does that signify concern over whether the criminal case will succeed, or was this always planned?

Dotcom is specifically named in the suit, under his most famous name as well as Kim Schmitz and Kim Tim Jim Vestor.

Kim Tim Jim Vestor???

According to the Government’s indictment, the site reported more than $175 million (NZ$203.4m) in … proceeds and cost US copyright owners more than half a billion dollars.

The studios allege Megaupload paid users based on how many times the content was downloaded by others. But the studios allege the site didn’t pay at all until that content was downloaded 10,000 times.

This is a key detail in both the criminal and civil lawsuits. Other file-sharing websites do not pay people based on how many downloads they get for content they upload. This is how they allege they incentivised copyright infringement, rather than just provided a file sharing platform (such as the new Mega).

This does not mean the lawsuits will be successful. But it is a key factor in why Megaupload was targeted, and not other file-sharing sites. If someone can earn say $10,000 by uploading the latest movie release, well that is a pretty good incentive to do so.

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The Dotcom case

September 27th, 2012 at 11:00 am by David Farrar

Later in this post, I’ll come to how the NZ law enforcement agencies have behaved, but initially I want to cover Dotcom himself. While I admire his intelligence, technical, gaming and PR skills, I’m not quite in the category that he is a poor little innocent victim.

First of all, it is worth recalling he does have a less than clean record to date, before Megaupload. Specifically:

  • hacking, including selling access codes
  • arrested trafficking in stolen phone calling card numbers
  • convicted of 11 counts of computer fraud and 10 counts of data espionage
  • accepting gang-related stolen goods
  • guilty of insider trading in Germany’s then largest ever case of its type
  • guilty of embezzlement

The pattern is someone who is very focused on making money, and pushes the rules, sometimes breaking them.

There is also a reasonable amount of evidence he is a bit of a fantasist, as detailed here. No that’s fine – we all want to be James Bond to some degree, but it is perhaps a reason not to regard everything he says as the holy gospel.

We then have Megaupload. This case is essentially about copyright infringement. I think most people know I was a prominent campaigner against the original S92A and the blackout campaign as it would have seen people lose Internet access upon accusation.

I’ve generally been against most of the demands of the music and film industries with NZ copyright law, and am involved in the fair deal campaign to support NZ standing firm in the TPP negotiations against any provisions which would require a change to our domestic intellectual property laws.

I’m also very firmly in the camp that Internet sites should not be held responsible for the actions of their users, so long as they comply with the law.

However on the basis of evidence seen to date, I don’t quite buy the argument that Megaupload was merely a file-sharing service the same as YouTube or Rapidshare. Their business model is one that arguably encouraged peoplee to not just share popular infringing material, but to make money from it – as did Megauplaod. Quite different to non-commercial torrent sharing.

It is claimed for example that one user, VW, uploaded 17,000 files over six years resulting in 334 million views, and none of the files had ever been deleted, despite takedown notices. My understanding is that links to files were deleted, but not files.

In my personal opinion, Dotcom built a business absolutely based on making money from people sharing popular files, that they did not have copyright of. There is a reason it become 4% of all Internet traffic.

However there is a big *If*. He may have done it legally. While one can debate the ethics of certain actions, it is the law which states enforce. He may have managed to set up his business model in such a way that he made tens of millions from the site, and didn’t break US laws. Ultimately this issue will be decided by Judges – initially in NZ on whether there is enough evidence of offences that would be illegal in both NZ and the US – and then if extradited in the US in a trial.

As with his previous actions, I think Dotcom set out to push the law to its boundary. He may have stepped over. He may not have. That is for the legal system to decide. But I don’t accept the analogy that Megaupload operated just like YouTube or Rapidshare, and that a guilty verdict for Dotcom would affect those other sites greatly.

We then come to the NZ side of things. The exact details of the GCSB role should be made public soon, and will be fascinating. Graeme Edgeler has an excellent post on this issue. He raises the issue of should the GCSB have been involved at all, even of Dotcom did not have residency.

The overall impression I have of NZ law enforcement agencies is they were desperately keen to impress the boys from the US. To have the FBI and likes over here saying this guy is wanted for hundreds of millions of dollars of charges, and this case will be globally massive seemed to have got people into a mindset that we have to make sure we don’t disappoint Uncle Sam by just sending in Constable Smith to interview Dotcom.

Caution seems to have been thrown to the wind, in an attempt to impress that we are up to the job. Ironically the opposite has happened, and NZ authorities have ended up with egg on their face several times. Nowhere it seems were senior officials saying “Hey, let’s slow down and make sure everything is watertight and double checked”. The list of mistakes include:

  • An arguably over the top use of Police resources in the original raid. Armed Police were warranted as Dotcom did have weapons and did not initially surrender, but not sure quite that much force was needed.
  • A paperwork error saw his property seized without giving proper notice
  • Invalid search warrants for the raid
  • The probable unlawful interception of communications by the GCSB

NZ authorities absolutely have an obligation to assist the US with legal extradition efforts. I am not one of those saying we should not have co-operated. If someone broke the law in NZ, and lived in the US, we value the fact that extradition treaties allow them to be sent to NZ.

Whether or not Dotcom broke US law is a matter for Judges. It is unknown at this stage if any significant evidence will be inadmissible due to mistakes made by NZ authorities.  Time will tell. And as I have said, I think Dotcom’s strategy was to push the boundary of the law as far as he could, and he may or may not have stepped outside it. Ultimately that is not a matter for us.

What is a matter for us, is the response from NZ law enforcement agencies. I doubt I am alone is concluding the culture was shall we say too overly enthusiastic, and not cautious enough. The end result has been considerable embarrassment for them, for the Government, and potentially a significant weakening of the case against Dotcom. Hopefully there will be lessons learnt.

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GCSB acted unlawfuly in Megaupload case

September 24th, 2012 at 1:18 pm by David Farrar

PM John Key has announced:

Prime Minister John Key today announced he has requested an inquiry by the Inspector-General of Intelligence and Security into the circumstances of unlawful interception of communications of certain individuals by the Government Communications Security Bureau.

Mr Key says the Crown has filed a memorandum in the High Court in the Megauploadcase advising the Court and affected parties that the GCSB had acted unlawfully while assisting the Police to locate certain individuals subject to arrest warrants issued in the case. The Bureau had acquired communications in some instances without statutory authority.

After being informed about the matter by the Director of the GCSB on September 17, the Prime Minister referred the Bureau’s actions to the Inspector-General, Hon Paul Neazor. The Inspector-General is an independent statutory officer with the power to enquire into any matter related to a government intelligence agency’s compliance with the law.

Mr Key says he has also asked the Inspector-General to recommend any measures he considered necessary to prevent the issue from happening again.

Mr Key expressed his disappointment that unlawful acts had taken place.

“I expect our intelligence agencies to operate always within the law. Their operations depend on public trust.

“I look forward to the Inspector-General’s inquiry getting to the heart of what took place and what can be done about it,” says Mr Key. “Because this is also a matter for the High Court in its consideration of the Megaupload litigation, I am unable to comment further.”

There have been so many stuff ups by law enforcement in this case, that once the court action is concluded it could be worth having a wider inquiry into the entire way NZ authorities deal with extradition cases such as this.

It’s good there is no attempt to hide what happened, and that there will be a formal inquiry into what the GCSB did, and who was responsible for authoring actions that they did not have authority for.

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No bail

January 25th, 2012 at 12:48 pm by David Farrar

Edward Gay at NZ Herald reports:

Internet multimillionaire Kim Dotcom has been declined bail.

The German businessman, a resident in New Zealand, is accused of being at the centre of a computer piracy empire through Megaupload, a website business he co-founded.

Judge David McNaughton delivered his decision at the North Shore District Court today in front of a packed public gallery. …

An immediate appeal has been lodged at the High Court.

The decision is totally unsurprising. His behaviour when arrested combined with four passports and 45 credit cards, screams out flight risk.

I predict the bail decision will not rest at the High Court but they will seek leave to appeal to the Court of Appeal and Supreme Court. Likewise the extradition hearing itself will be appealed all the way to the top. The longer they can delay things, then they will use the Ahmed Zaoui trick and argue the time it has taken to get a decision, means it is unfair to keep him in jail (even though they have caused all the delays).

When he finally does get extradited back to the US, I note he has hired Bill Clinton’s old lawyer so that one will also be taken all the way to the Supreme Court. I expect a resolution to be two to three years away.

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The Megaupload arrests

January 21st, 2012 at 9:03 am by David Farrar

I’m in an area with very limited phone and Internet access, so I heard about the arrests yesterday, but couldn’t blog on them.

I’m reserving judgement on the issue, until details of the alleged offences are known more fully. I would make the point that to my mind there has always been a significant difference between someone who accesses a file-sharing site or torrent in order to (for example) see the latest episode of a TV show not available in NZ, and those who are commercially making money from infringing copyright, or assisting others to infringe.

Whether or not Dotcom and others have broken the law, will of course be a matter for the courts. It is worth noting that the NZ courts will not extradite unless the charges are for something that is also an offence under NZ law. So if for example there was an arrest warrant out for you because you took part in (adult consensual) oral sex in Utah, they would not extradite as thankfully oral sex is not illegal in NZ. Not sure if it still is illegal in Utah, to be honest – just using this as an example.

I’ve been saying for sometime that copyright issues will be a massive battle involving the Internet for the next decade or more.

In this case the US are not necessairly on the wrong side of the argument. I’m not saying their actions are justified either – it really depends on the details of the case. But few would argue that making money out of infringing other people’s copyright is a good thing (if that is what they have done). There is an argument they were just providing a service that “pirates” used. Again, will depend on what is revealed in court.

In other copyright news (and no I don’t think the timing is deliberately related), it looks like the SOPA and PIPA bills in the US Congress are dead. Senators have been dropping their co-sponsorship of PIPA as millions of Americans signed an online petitions and e-mailed their representatives on it.

Also of note is all the remaining Republican candidates for President have come out against the bills. So chalk this victory up to people power.

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