Megaupload Protests 'Secret' Ruling That Could Help MPAA

It's been almost two years since the federal government raided the New Zealand home of Megaupload founder Kim Dotcom and had him thrown in jail for copyright infringement. The government's theory, set out in a January 2012 indictment, is that Dotcom and other executives engaged in a conspiracy to infringe copyright by encouraging users to upload pirated clips to the online storage service.

To date, the criminal case against Dotcom hasn't gotten very far. U.S. officials are seeking to extradite Dotcom for trial, but no judge has yet granted that request. In the meantime, judges abroad not only released Dotcom on bail, but have cast doubt on whether the raid on Dotcom's home was lawful.



While the prosecution hasn't yet put forward its evidence against Dotcom, the argument for holding him personally responsible for users' copyright infringement always seemed questionable at best. One theory put forward in the indictment is that Megaupload encouraged people to infringe copyright by offering cash rewards to users who uploaded popular files, which were frequently downloaded by other users. But it's not clear that this type of arrangement violates copyright law, let alone constitutes a crime.

One lawsuit that presented the case question involved the cyberlocker Hotfile, which also paid users who upload popular content. But that case, brought by the Motion Picture Association of America, wasn't a criminal matter, meaning that no one faced prison as a result of the verdict. (As it turned out, Hotfile settled the lawsuit this week for $80 million.)

Meanwhile, with the criminal case against Dotcom stalled, the federal government appears to be helping the entertainment industry pursue civil litigation against Megaupload, according to TorrentFreak.

Two weeks ago, U.S. District Court Judge Liam O'Grady in the Eastern District of Virginia reportedly issued a sealed order in the case, TorrentFreak reports. While the details remain somewhat mysterious, Dotcom's lawyers suggest that O'Grady's order will enable Hollywood to mount a public relations campaign against Dotcom. Already some entertainment companies have sued the cyberlocker; others could soon follow.

“It has been brought to our attention by Mr. Dotcom's New Zealand counsel that this court issued a sealed ... order on November 22, 2013, which requires that the government publicly disseminate, through trade associations and a press release, certain information,” Dotcom's lawyers wrote on Thursday in a letter to O'Grady.

Dotcom's lawyers go on to object to the fact that Dotcom wasn't told of the order in advance, and therefore wasn't able to argue his case. “The defendants in this case have been indicted, their assets have been frozen, their business has been destroyed, and their liberty has been restrained. Given these constraints, it is unclear what evils the government fears the defendants will inflict if provided notice of the government's submission, beyond having defendants' counsel come into court to make opposing arguments,” they write.

They are asking O'Grady to withdraw his order and allow Dotcom to oppose the government's request.

“From the outset of this prosecution, the government has sought to deny defendants any semblance of due process,” Dotcom's lawyers write. “The instant effort to circumvent the adversarial process ... is merely the latest example.”

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