The United States Department of Justice has issued a statement confirming that it has arrested seven individuals connected to popular file-sharing site Megaupload and its various subsidiaries.
The alleged criminals and two corporations named in the complaint are charged with generating more than $175 million in profits through racketeering, conspiracy to commit copyright infringement, conspiring to commit money laundering, and two substantial counts of copyright infringement. The individuals, including Megaupload founder Kim Schmitz, face up to 20 years in prison if convicted.
One might expect a file locker site to shield itself behind the DMCA’s “safe harbor” provision that protects websites from copyright infringement committed by their users so long as they comply with the copyright takedown notifications. According to the indictment, Megaupload was structured in a way that promoted the distribution of copyrighted material.
The indictment alleges that the site was structured to discourage the vast majority of its users from using Megaupload for long-term or personal storage by automatically deleting content that was not regularly downloaded. The conspirators further allegedly offered a rewards program that would provide users with financial incentives to upload popular content and drive web traffic to the site, often through user-generated websites known as linking sites. The conspirators are accused of paying users whom they specifically knew uploaded infringing content and publicized their links to users throughout the world.
The United States Department of Justice further alleges that the conspirators failed to terminate the accounts of known copyright infringers, “selectively complied” with orders to remove copyrighted content, and misrepresented whether content had actually been deleted by disabling particular identified links to a file rather than erasing the file itself. These allegations go far beyond the normal scope of copyright infringement lawsuits and these types of cases are nearly always civil rather than criminal.
The Department of Justice’s and Universal Music’s websites and several others have reportedly been shut down by hacktivists. It will be very interesting to see how this all unfolds. Stay tuned.
