Megaupload Founder Launches Risky New Cyberlocker

by Wendy Davis, Oct 19, 2012, 5:37 PM

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Megaupload founder Kim Dotcom, currently fighting extradition to the U.S. for alleged criminal copyright infringement, reportedly is gearing up to launch a new cyberlocker, Mega.

Unlike Megaupload, the files on Mega are encrypted in such a way that only users and apps can access them. Dotcom's business partner, Mathias Ortmann -- also under indictment -- tells Wired that he believes the new venture won't result in the same kinds of legal headaches as Megaupload.

Wired writes that Ortmann expects to have an "ironclad safe harbor" because Mega won't be able to know what material users have uploaded.

Ortmann might be optimistic that he's hit on a surefire strategy but, on first glance, the service seems anything but lawsuit-proof. Even if the service is encrypted, that won't necessarily prevent Hollywood or the record labels from suing.

And if a content owner who sues can prove that the site is used for piracy, the fact that it's encrypted isn't likely to be much help to Mega in court, according to Santa Clara University law professor Eric Goldman. He tells MediaPost that a federal appeals court ruled nine years ago that a service provider can't avoid liability for users' copyright infringement merely by encrypting files.

In that case, the 7th Circuit Court of Appeals upheld a ruling that shut down the peer-to-peer service Aimster. The company argued that it didn't know whether users were infringing copyright with the service because the files were encrypted. But the federal appellate court ruled that Aimster's encryption didn't give the company a defense. "Willful blindness is knowledge, in copyright law (where indeed it may be enough that the defendant should have known of the direct infringement," the judges wrote. "A service provider that would otherwise be a contributory infringer does not obtain immunity by using encryption to shield itself from actual knowledge of the unlawful purposes for which the service is being used."

Of course, none of that means that Mega will be legally responsible for any copyright infringement by users. Much will depend on the specific facts, including how the company responds to takedown notices and the like.

But the Motion Picture Association of America already is expressing doubts about the company. An MPAA spokesperson told The Hill: "While we haven't seen how this alleged new project will operate, we do know that Kim Dotcom has built his career on stealing creative works."

Which probably means that Dotcom and Ortmann should get ready for yet another legal battle.

 

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