MegaUpload, the very large pirated video and software downloading network, has just been targeted by the DOJ in a massive copyright criminal case (one of the largest such cases in history). This is a watershed moment in copyright law, given the ongoing controversy around the SOPA / PIPA issue, it will be important to watch how this case unfolds. MegaUpload represents a crossroads at which current safe harbor law meets mainstream internet usage (the site has millions of visitors a month) and a decision in this case could set an important precedent in online piracy and copyright law.
How MegaUpload’s system works:
- MegaUpload netted over $175 million in revenues over 6 years (MegaUpload was founded in 2005)
- $150 million came from subscriptions, $25 million came from advertising
- Some of MegaUpload’s ad revenues came from Google Adsense. Google banned MegaUpload from Adsense in 2007.
- MegaUpload offered a subscription program allowing its members to download copyrighted materials from its servers in Toronto, LA, and Virginia.
- MegaUpload provided no search facilities. The company allowed third party companies to provide search services. When users found a result on a third party site, they were directed to a link on MegaUpload’s servers where they could download the file.
- The company ran a “Uploader Rewards” program which paid cash bonuses to users who uploaded copyrighted materials.
Some important facts about the DOJ indictment of MegaUpload.com:
- The founder of MegaUpload, Kim Schmitz, earned over $42 personally in 2010 alone
- Finn Batato, Julius Bencko, Sven Echtermach, Mathias Ortmann, Andrus Nomm, and Bram Van Der Kolk – all senior employees in the company – have also been charged
- Although Safe Harbor laws protect companies like MegaUpload if they offer a way for users to report copyrighted materials and they respond appropriately – the indictment is based on the fact that MegaUpload allegedly “tricked” users. The company rendered the “report” feature useless by structuring their system such that whenever users uploaded a file, even if a duplicate file existed on their network, a new version would be created – and the report feature would only take down a single version of a given file, so it was virtually impossible to track down all the copies of a given file.
- The company’s management team also personally engaged in the trading of pirated works
- In emails intercepted from company executives, one quipped that “we’re not pirates, we’re just providing shipping services to pirates.”
Implications for SOPA and PIPA
These types of piracy cases are the ones that demonstrate the pitfalls of the open internet. There is obvious abuse in the system, and in these cases the media companies and copyright owners are being harmed on a fairly large scale. The solution, however, must target just these obvious cases while leaving alone the vast majority of the internet, in which some minor cases of infringement may occur, but the benefits of allowing open communication and sharing far outweigh the harm done to copyright holders.
