Megaupload Helped DOJ In NinjaVideo Prosecution; And DOJ Uses That Against Megaupload

from the outrageous dept

On Friday, we wrote about the unsealed seizure warrants against Megaupload, and noted that they showed how Megaupload had assisted in a criminal investigation, in which they were told not to interfere with the files, but then those very files were used as evidence against Megaupload itself. It's now come out that this was part of the case against NinjaVideo, which we wrote about a few times. Apparently, NinjaVideo used Megaupload to store some of its files, and the DOJ sent a warrant to Megaupload, which they complied with:

“Megaupload complied with the warrant and cooperated with the government’s request,” Rothken said. He said Megaupload had gotten “a number of such warrant and subpoena type requests a year and still have an expectation that as classic ‘online service providers’ they are immune from liability for the acts of users who are the target of such warrants and subpoenas.”

But, as the unsealed warrants show, the DOJ later used those same files as evidence that Megaupload "knew" there were infringing files on its servers, leaving out the bit about how they had requested Megaupload not delete them. That seems like yet more fairly egregious behavior by the DOJ in a case that's chock full of it. Once again, I'm left wondering how the DOJ could do so many questionable things in their pursuit of Dotcom. It really looks like they bought Hollywood's mythic story about Dotcom hook, line and sinker, and believed that once they took him down, the case would simply fall into place.

Rothken calls the government’s argument “outrageous.” Given the NinjaVideo search warrant, and the government’s specific request for secrecy and to retain the files, Megaupload might have been accused of evidence-spoliation if it had taken the movies down, says Rothken.

“If anything, such a cooperation request by the government bolstered Megaupload’s view that as a cloud storage intermediary it was operating lawfully even if some users may have been misbehaving,” Rothken said.

Back when the Megaupload indictment and arrests first came down, I had a conversation with a couple of lawyers who insisted that, given the claims in the indictment, the DOJ must have had really strong evidence against Megaupload. But pretty much every discovery since then has suggested that they only had strong evidence in their minds...

Filed Under: copyright, criminal investigation, doj, warrants
Companies: megaupload

Unsealed Megaupload Seizure Warrants Reveal Use Of Flawed Logic... And An 'Undercover Computer'

from the did-it-wear-a-mustache dept

Last month, we wrote about how the EFF, representing Kyle Goodwin, had asked the US district court handling the Megaupload case to unseal the warrants for the seizures of Megauploads domains and servers. The court has now ordered the documents unsealed. To be honest, there isn't too much surprising in them. There are some huge leaps to assume that hosting a cloud service somehow makes you criminally liable for what people do on that service. In fact, part of it ridiculously argues that the "proof" of criminality is the fact that the DOJ had alerted Megaupload to some infringing files, and those files had not been taken down. However, as Megaupload's lawyer points out, the "alert" was in the form of asking for cooperation, which Megaupload granted, and not to "interfere" in the investigation. Taking down the videos would be interfering. Megaupload's lawyer, Ira Rothken explained to CNET:

"MegaUpload was served with a criminal search warrant for alleged third-party user conduct and was advised not to interfere with that criminal investigation or with the files -- as such disclosure, would jeopardize the ongoing investigation. To ask MegaUpload to cooperate and then use that cooperation against them, to us seems to be both unfair and misleading."

Most of the argument in the warrants is just repeating the already questionable claims in the indictment -- which is what you'd expect. They're also not all that different from previous domain seizure requests -- with a few notable exceptions. First, you'll notice that the special agent who conducted the investigation has all personal information redacted. Apparently the Justice Department would prefer that its agent not receive the ridicule that the agent who made myriad mistakes in earlier domain seizures received.

But what was really amusing was the description of the investigation, which apparently involved an "undercover computer."

Using an undercover computer, [redacted] observed how a visitor may view content hosted on Megaupload.com. For example, on November 20, 2011, [redacted] observed the copyrighted picture "Zack and Miri Make a Porno," which was released in 2008 by The Weinstein Company, on the website Megavideo.com.

I'm still trying to figure out just what an "undercover computer" is -- and where I can buy one. Also, seems kind of random to choose Zack and Miri as the sample file to download -- especially given the director/writer of that particular movie, Kevin Smith, has talked extensively about how he believes "piracy" actually helps him gain more fans. Yes, the film's copyright is held by The Weinstein Company -- whose owners appear to have a slightly less enlightened view of infringement -- but it still seems like an odd choice.

In addition to those oddities, there are some other claims within the filings that don't make much sense. They make the argument that seizure is necessary with claims that are, simply speaking, not true:

Neither a restraining order nor an injunction is sufficient to guarantee the availability of the Subject Domain Names for forfeiture. By seizing the Subject Domain Names and redirecting them to another website, the United States will prevent supporters of the Mega Conspiracy or third parties from redirecting the Subject Domain Names to servers elsewhere in the world, and thus using them to commit additional crimes. Furthermore, seizure of the Subject Domain Names will prevent visitors from continuing to access the websites located at the Subject Domain Names.

To put it simply: that makes no sense. Either a restraining order or an injunction would, in fact, prevent those other things from happening. Yes, Megaupload could have ignored the two, but then it would face additional charges for ignoring the court. Given that Megaupload had repeatedly engaged in various lawsuits against it in the US before, there was simply no evidence that Megaupload would directly ignore the court and, as such, face additional charges.

Finally, the documents also show the DOJ's request for these documents to be sealed. You can understand why they wanted the warrants sealed prior to the takedowns and arrests happening. But those all took place within a week of the seizures being approved by the judge. There was no reason to keep them under seal. Yet the DOJ claims that it "has considered alternatives less drastic than sealing, including, for example, the possibility of redactions, and has determined that none would suffice to protect this investigation." That is, of course, empirically and definitively false because we've now seen the unsealed and redacted document and they do nothing to endanger the investigation (other than, perhaps, revealing the weaknesses of the DOJ's arguments).

Filed Under: copyright, criminal copyright, forefeiture, investigations, seizure
Companies: megaupload

German Court Sees Through The DOJ Fairy Tale, Rejects Attempt To Seize Megaupload Assets

from the a-string-of-failures dept

We've covered a series of embarrassing setbacks for the US government's case against Megaupload over the past few months. It's a pretty stunning trail of errors by US officials who seemed to think that a scary story about a "bad man" would trump a lack of actual evidence or following legal procedure. While the case may hold up in the long run, it seems like everywhere you look there's evidence of highly questionable activity by the government.

The latest setback comes from Germany, where the US sought assistance from officials in seizing various assets of Dotcom's or Megauploads. However, the court has now rejected the request:

The Frankfurt judges have since rejected this request, because it contains insufficient evidence. The US legal team failed to demonstrate that a web hosting service for the illegal upload of copyrighted files, amounts to a criminal offence.

According to the German 'Telemediengesetz' (communications legislation), a hosting service for foreign files will generally not be accountable unless the host had active knowledge of illegal activity. The judges also emphasised that the concept of knowledge is limited to positive knowledge. Therefore if the service provider believes that it is possible or likely that a specific piece of information is stored on their server, this is not sufficient evidence of knowledge of abuse.

According to the court ruling, there is no legal obligation to monitor the transmitted data or stored information or to search for any illegal activity.

Of course this was the same point that we raised the day that Megaupload was shut down. While it may be true that many Megaupload users have infringed on copyrights, there's a massive leap from that point to the idea that Megaupload is a criminal enterprise -- yet the US government's case basically skips over any details to make that leap. Thankfully cooler heads are recognizing that a significant amount of the US's case seems to be based on a fairy tale that US officials -- under the influence of Hollywood -- keep telling.

Tip to DOJ officials under the sway of Hollywood's version of the internet: remember, these people make their livings telling fairy tale stories. You know those opening credit lines about how something is "based on a true story"? Yeah, quite frequently the actual truth is a long way from what's shown. It seems that you may have been taken in by another such Hollywood "true" tale.

Filed Under: assets, copyright, criminal, doj, germany, hosting, kim dotcom, liability
Companies: megaupload

Me.ga Domain Pulled Out From Under New Kim Dotcom Venture

from the well-look-at-that dept

As we've noted, we've been avoiding stories about whatever "new" service Kim Dotcom is launching, because it all sounds like hype and vaporware to us. Until there's something real, it's all just rampant speculation, and it's a little silly how much adoration people have for an idea whose details have not been released at all. However, we will cover factual information related to the effort, and as was widely reported by others, the plan had been to use the domain name Me.ga. This had a few useful "features." First, it plays on the "mega" prefix that is so closely associated with Dotcom's offerings. Perhaps more importantly (at least, it's a key thing that many in the press covered), the .ga domain is not technically subject to control or seizure by the US (though, of course, SOPA/PIPA were intended to deal with just that kind of situation).

However, even without SOPA/PIPA, there is still the power of diplomatic pressure, and it didn't take long for the Communications Minister of Gabon to announce that the domain was being suspended:

"I have instructed my departments... to immediately suspend the site www.me.ga," announced Communication Minister Blaise Louembe, saying he wanted to "protect intellectual property rights" and "fight cyber crime effectively".

"Gabon cannot serve as a platform or screen for committing acts aimed at violating copyrights, nor be used by unscrupulous people," the minister said.

Of course, that seems pretty presumptuous on a number of levels. Since the service has not been launched -- and the actual details have not been revealed -- it's a bit premature to declare that the site must somehow violate intellectual property rights or be useful for cybercrime. And if government officials are stepping in to kill off cyberlockers based entirely on rumor and innuendo, will .ga block any other cyberlocker as well? Considering how popular such services are -- including those run by well-established companies like Amazon, Google and Dropbox -- it makes you wonder how Gabon decides who gets to use a .ga domain.

There may also be a separate issue at play here. As some have noted, the .ga top level domain is administered by Gabon Telecom, which just so happens to be a wholly owned subsidiary of Vivendi... the same company who owns the world's largest music label, Universal Music. I'm sure that's just a coincidence.

Filed Under: .ga, copyright, cyberlocker, gabon, kim dotcom, me.ga
Companies: mega, megaupload

Justice Department Continues Handwaving To Avoid Facing Up To Its Questionable Behavior In Taking Down Megaupload

from the quick,-look-over-there! dept

We already wrote about the motions from Megaupload, the MPAA and Kyle Goodwin, concerning Goodwin's attempts to regain access to the backup files he uploaded to Megaupload. However, there is also the Justice Department's own filing, which deserves its own separate post.

As we noted a little over a week ago, Goodwin, represented by the EFF, was using Goodwin's attempt to retrieve his data to also seek to unseal the seizure order that led to Megaupload's servers being taken. The Justice Department clearly does not want that, and you can see it by the way in which it hits back at Goodwin. It insists that Goodwin hasn't done nearly enough to prove that he actually has "property" hosted on those servers:

To date, Mr. Goodwin has failed to make such a showing – he has not shown that he has a cognizable, legal interest in property seized by the government, nor has he shown a deprivation of a property interest based on any government seizure.... The only facts submitted to the Court by Mr. Goodwin regarding his interest in the servers imaged by the government are in a declaration he submitted in support of Non-Party Carpathia Hosting’s Emergency Motion for a Protective Order where he states he used Megaupload’s service.... However, if mere use of the service was sufficient to create a legal ownership interest in servers leased by Megaupload from Carpathia, then there could be hundreds, if not hundreds of thousands, of “owners” of each and every single Carpathia server. Such a result is absurd. Cf. Board of Public Utility Comm’rs v. N.Y. Tel. Co., 271 U.S. 23, 32 (1923) (“Customers pay for the service, not for the property used to render it . . . . By paying bills for service they do not acquire any interest, legal or equitable, in the property used for their convenience[.]”).

Talk about willfully misrepresenting Goodwin's position... Goodwin isn't claiming a property interest because he used the service, but because he uploaded his own content. He's not claiming a property interest in Megaupload, but just in the data he uploaded. Apparently the DOJ is trying out diversion techniques to hide from the real issue.

The DOJ then goes on to state, by footnote, that they believe that even if Goodwin's content was taken down by the government's actions, that's okay because he was probably infringing anyway:

Based on the government’s review of Mr. Goodwin’s website, ohiosportsnet.tv, the list of files uploaded by a Megaupload user using the account name “ohiosportsnet,” and the MD5 hash values of those files, it is not clear that Mr. Goodwin or his company owns the rights to all the data that he (or others using the “ohiosportsnet” account) uploaded to Megaupload. Numerous videos produced by Mr. Goodwin have as their soundtracks recordings of popular copyrighted music. Many videos on his website begin with a statement describing the copyrighted music and including a disclaimer such as “we don’t own the rights.” In addition, the “ohiosportsnet” account at Megaupload had uploaded numerous music files, including music files with MD5 values that matched the hash values of pirated versions of popular music. Even assuming Mr. Goodwin has not contracted his rights to any data uploaded to Megaupload away, the extent and nature of those rights may vary file to file.

Indeed, the nature of the rights may, in fact, vary file to file. And that's true of everything hosted on Megaupload... or any other server online. And yet, the DOJ's own actions were to take down the whole damn thing, ignoring the fact that there was plenty of legitimate and non-infringing content there. Yet now it wants to parse carefully about how each file may have different rights? Really?

Furthermore, as the EFF has pointed out in an interview with Tim Lee at Ars Technica, the DOJ's admission that they specifically looked up Goodwin's Megaupload account raises other serious questions about the DOJ abusing its powers:

But Samuels says it's the government who has some explaining to do. "The government's approach should terrify any user or provider of cloud computer services," Samuels told Ars by e-mail. "The government apparently searched through the data it seized for one purpose, in order to use it against someone who was hurt by its actions but who is plainly not the target of any criminal investigation, much less the one against Megaupload."

Samuels told us that the government's response to Goodwin's petition demonstrates "that if users try to get their property back, the government won't hesitate to comb through it to try to find an argument to use against them."

From there, the DOJ continues its sleight of hand tricks, by claiming that if Goodwin has any issue it's with Carpathia (the hosting company) or Megaupload, since his contracts are limited to them:

Any ownership interest by Mr. Goodwin in that data would be limited by at least two separate agreements: (1) the contract between Carpathia and Megaupload regarding Megaupload’s use of Carpathia servers; and, more specifically, (2) the written agreement between Megaupload and Mr. Goodwin regarding use of Megaupload’s service. Those contracts not only bind Mr. Goodwin’s use of Megaupload’s service and Carpathia’s servers, they also likely limit any property interest he may have in the data stored on Carpathia’s property.

This conveniently ignores that the DOJ ran roughshod over any agreements and just took the whole damn thing down, and then told Carpathia to delete all the evidence. It would seem that those actions have some bearing on the legal proceedings of the guy who'd just like his data back.

Basically, the government, as it's known to do, is playing hardball here. It doesn't want its own actions looked at closely, so it's challenging Goodwin's credibility while insisting that if anything does go forward, it's focused very very narrowly on Goodwin's specific situation, rather than the government's giddy bull-in-a-china-shop routine that created this mess in the first place.

Filed Under: doj, kyle goodwin, takedown
Companies: megaupload

MPAA & Megaupload Want In On Hearing Over Whether Former User Can Get His Data Back

from the jockeying dept

In the ongoing saga of all of the Megaupload servers that the federal government seized and then handed back to hosting company Carpathia, telling them to effectively destroy them (and with it all sorts of important evidence in the Megaupload case), the judge is considering holding a hearing to dig into some of the questions raised by the case -- leading a few motions to be filed. The first, of course is by Kyle Goodwin, represented by the EFF, over his desire to get his data back. The filing also raises significant questions about the entire situation:

... the available record already shows that the government acted (and continues to act) with a callous disregard for third-party property rights in data stored on Megaupload. For example, the government knew Megaupload operated a data storage business, and thus held the property of third parties lawfully using Megaupload’s storage services. The government knew its search and seizure of Megaupload’s assets would deprive such third parties of the ability to access and retrieve their property. In seizing domain names and executing the search warrant at Carpathia, the government took constructive possession of all the third-party owned data it had seized and to which it had prevented (and continues to prevent) access by their owners. The government then “released” the third-party owned data in a manner that deliberately made the data both inaccessible to property owners and subject to government-sanctioned destruction, while at the same time blocking all reasonable efforts to allow access.

These failings are striking given that the government is well familiar with the need to accommodate third-party Fourth Amendment rights through minimization when it executes searches and seizures, especially of electronic material.

Of course, Goodwin isn't the only one asking the court to pay attention. Megaupload itself pointed out that it should be included in any such hearing, even though it's technically outside of this part of the dispute. It notes that if the courts order the data retrieval, someone who understands what's on the servers and how to find the relevant material would be helpful. Furthermore, the company is concerned about how the servers will be handled, since it still believes there's useful evidence there that the DOJ appears to want to destroy.

Of course, if Megaupload is filing for something, you shouldn't be surprised to find out that the MPAA is right behind with its own filing, warning that it wants to be sure that the court magically make sure that no infringement occurs if anyone can access their backup data. We've heard this story before, but here it goes again.

... any remedy granted should not compound the massive infringing conduct already at issue in this criminal litigation.... Additionally, if it would be helpful to the Court to consider evidence from the MPAA or its members on such issues as the lack of authorization for the reproduction and/or distribution of their works via Megaupload, or the overwhelming amount of infringement of the MPAA members’ copyrighted work on Megaupload, they will of course cooperate.

Of course, the issue right here has nothing to do with the MPAA's fears about infringement. It's about getting someone back the legitimate data they have on the servers. Why would the MPAA fight so hard against that?

I would imagine this is going to drag on for a while.

Filed Under: kyle goodwin
Companies: megaupload, mpaa

DOJ Hints At Additional Charges Against Kim Dotcom If He Launches Megabox

from the you-wouldn't-want-to-do-that,-now... dept

There have been a bunch of stories over the past month or so about how Kim Dotcom is supposedly getting ready to launch a new service called Megabox. We've purposely avoided such stories, mainly because they're pure hype and speculation for vaporware. If he actually launches something then perhaps there's a story there. Also, we're somewhat amazed (or possibly just amused) at Megaupload supporters who seem to already think that Megabox is an amazing idea, since the details reported about it certainly appear to be little different from garden variety malware, injecting ads into other sites. Either way, in a recent profile of Dotcom in Wired, he talks a little more about the new plans, suggesting that it was something to keep them busy while fighting the lawsuit.

That said, it appears that the Justice Department has seen the PR reports about the new vaporware and are effectively pre-warning Dotcom not to go forward with the plan.

A new filing from the DOJ in the US side of the lawsuit (embedded below), is really a response to Megaupload's recent request to have the charges against the company temporarily dismissed until such time as the individual defendants are extradited. As we've explained, this is mostly a procedural fight, over whether or not the company itself can be charged, despite not having a US presence. None of that directly impacts the individuals who have been charged, but certainly could impact the company's ability to launch a new business.

The DOJ filing mostly argues that there is no legal or practical reason to allow the case to be dismissed, even temporarily, as the individuals are still charged, and re-charging the company at a later date will just waste resources. It also argues that Dotcom's US-based lawyers are the real problem here, as they had offered to accept service of the lawsuit in exchange for some sort of deal early on (which the DOJ refused).

What's interesting about the filing is that, without directly addressing the new effort to launch Megabox or whatever Dotcom is calling the new thing, they appear to be warning him that doing so may lead to additional charges against him. The argument as it relates to the procedural question is that, in his push to be allowed to post bail in New Zealand, Dotcom clearly indicated that he would not and could not restart Megaupload or a similar business, because the government had so completely shut him down. As that relates to the procedural question, the DOJ is arguing that there can be no "harm" to the company Megaupload because Dotcom has already said he won't relaunch the company. So if he won't relaunch, what does it matter if the company is charged now or later?

But then the DOJ goes a little further. After it uses all those quotes of him promising not to relaunch anything while out on bail, the DOJ tosses the following into a footnote:

Defense Counsel’s claim that the corporate defendant can and should be allowed to operate undermines the sworn statements of Dotcom that he has no plans or ability to continue to operate or fund the businesses in the Indictment during pendency of the extradition process. If defendant Dotcom intentionally misled the court in New Zealand about his intentions and capabilities in order to obtain his release from pre-extradition confinement, it seems Defense Counsel’s representation might endanger Dotcom’s bail situation or even subject him to additional charges.

In other words, beyond this procedural question, the DOJ is hinting that if Dotcom launches something new, they may say he violated the conditions for getting bail.

The DOJ also uses this as an opportunity to (once again) try to block Megaupload from using its law firm, claiming that because the lawyers are arguing for the case against Megaupload to be dismissed, and this might lead Dotcom to launch something new, that there's a conflict of interest:

The issue raised by the claim of Defense Counsel is particularly awkward since defendant Dotcom is also their client. As the government has pointed out repeatedly, there are a number of conflicts in Defense Counsel’s representations of the various defendants in this matter, of which this is only the most recent example, that have yet to be reviewed by the Court

None of that actually makes much sense. Whether or not they have a legitimate claim for getting the case against Megaupload dismissed, that is a separate issue from whether or not Dotcom launches something new. While I'm guessing the procedural fight is a dead end, the fact that the DOJ is even using that to toss additional threats at Dotcom should he launch his new project shows that they'll leave no stone unturned in trying to hit back at Dotcom.

Filed Under: doj, kim dotcom, mega, megabox, threats
Companies: megaupload

EFF Files Motion To Have Court Release Seizure Warrant In Megaupload Case

from the should-be-public-info dept

In the ongoing case involving Kyle Goodwin trying to get back the content that he backed up via Megaupload and lost as a result of the US taking down the site, the EFF (representing Goodwin) has asked the court to unseal the initial seizure warrants that the US relied on to grab the Megaupload servers from hosting company Carpathia. They point out the number of concerns that New Zealand courts have raised with the legitimacy of the warrants, as well as some basic principles related to the limits on such warrants within the US.

.... these materials will certainly assist him to learn what steps, if any, the government took to inform the court of the scope of its planned seizure and related execution of search warrants. They would also show any plan provided by the government or the court in the warrant materials for minimization to protect innocent users before the seizure or to segregate the data after seizure. Federal judges increasingly impose detailed conditions prior to execution of computer searches.... For example, Judge Kozinski in the Ninth Circuit has observed that if the government refuses to forswear the ability to retain or use data that should have been segregated initially, the judge “should order that the seizable and non-seizable data be separated by an independent third party under the supervision of the court, or deny the warrant altogether.” .... Unsealing will allow Mr. Goodwin, as well as the general public, to learn which, if any, such conditions were undertaken in this case.

Similarly, under the Fourth Amendment people have a right to be secure in their “papers” and “effects” against unreasonable searches and seizures. A person's “effects” may be the subject of Fourth Amendment protection even where there is no particular privacy or liberty interest.... A property seizure occurs when a governmental intrusion meaningfully interferes with an individual's possessory interest.... The Fourth Amendment analysis, in turn, requires the Court to determine whether the seizure was “reasonable.” Gaining access to the materials that served as a basis for the government’s seizure of his property can assist Mr. Goodwin and other innocent Megaupload users in determining whether the seizure was unreasonable.

Separately, they note that there is tremendous public interest in revealing these details, and criminal cases should be done as publicly as possible. And, considering how frequently the US government is now seizing websites, the issue is of tremendous importance:

The public also has a strong interest in understanding the government process in executing search warrants on cloud computing servers that contain innocent third-party property. Seizures of domain names, and resulting searches of related servers, are tools the government is using with increasing frequency in criminal copyright enforcement actions. For example, the federal government has reportedly seized more than 800 websites so far under its Operation in our Sites campaign. The government has issued press releases and otherwise sought to publicize its efforts, obviously giving its own perspective on its actions. Legislators, the media, and the public are vigorously debating the very issue of these domain name seizures and related searches, even as a large percentage of Americans continue to use cloud computing services. Access to judicial records would ensure a more accurate and informed public debate, rather than one informed merely by the government’s press releases

Finally, they note that the government has already said it has no more need for the servers in question, so why would it make sense to keep the seizure warrant sealed? It seems difficult to argue with any of these points... but I have a feeling that the US Attorneys are about to try to do exactly that...

Filed Under: kyle goodwin, seizure, warrant
Companies: eff, megaupload

Megaupload Renews Request For Criminal Charges To Be Temporarily Dismissed; Reminds Judge Of Earlier Request

from the er,-we-did-ask-for-that dept

When we wrote about the US judge in the Megaupload case siding with the US government in saying that, even without being able to technically serve the company (since it has no presence in the US), the criminal case could continue, we assumed that Megaupload would appeal. But even before appealing, the company is asking the judge to reconsider, based on an earlier request and the judge's own comments. The issue is that the judge's ruling only focused on whether or not the charges against Megaupload (but not the individuals charged in connection with the company) should be permanently dropped over the lack of service (in legal terms, it would be about having the charges dismissed "with prejudice"). However, the judge did note that perhaps it would make sense for the charges to be dropped without prejudice -- meaning that they would be dropped temporarily -- until such time as Kim Dotcom was extradited to the US, and could then be served as an "alter ego" for the company itself. The judge did not rule on that, however, since (he claimed) Megaupload had not asked for such a temporary dismissal.

In response, however, Megaupload quickly filed a motion reminding the judge that they had, in fact, suggested dismissal without prejudice back in July, quoting the transcript during oral arguments, which also points out why due process suggests this is the only proper result for a company that has effectively been killed and has no recourse since it hasn't truly been charged yet:

THE COURT: Well, that—can I require them to serve the company on any particular date? There's no date in the rule—there appears to be no statutory limitation, and I understand your due process argument. So I—what if I, you know, would start with a premise that I don't control when the Government decides to serve the company. Where do we go from there?

MR. BURCK: Well, Your Honor, we would submit that if the Court were ruling—going in that direction as a reasoning matter, that the appropriate result would be to dismiss the indictment without prejudice.

Because the company, again, has already suffered all the consequences of a criminal prosecution, so the—even if there's a trial and the company is acquitted and the individuals are acquitted, of course the company is still done.

So, we think that the due process claims trump all the other issues, and we think that if the Court were so inclined, that the Government should take certain steps in order to effectuate service, then—or if the extradition proceedings would be the relevant time line for that, again, the company should have an opportunity during that period of time to try to rehabilitate itself, because there isn't currently a criminal case that is sufficient for purposes of service and they've suffered massive harm.

So, of course, that would not be our preference, and we do think that the Supreme Court has said you can't change the rules of service, et cetera, but the—that’s all in our brief—but we do think that the alternative would be dismissal without prejudice, allow the Government at the appropriate time to then supercede the indictment again, add the corporation into the indictment.

And at that point, a year down the road, two years, however long it takes and wherever the MLAT process or the extradition process takes, at that point we could have this argument as to specific individuals, corporations, entities. But, in the meantime, having the company subject to the burden of a—the incredible burden of a criminal prosecution with no ability to defend itself and no service is an extraordinary result and one that is unprecedented.

In other words, Megaupload is saying dismiss this case until Dotcom is extradited, at which point (if he's ever extradited) then the company can be charged. But in the meantime, it's only fair to not have the company held back -- and the company did make that suggestion many months ago, contrary to the judge's suggestion otherwise.

Filed Under: due process, kim dotcom
Companies: megaupload

Court Says Case Against Megaupload Can Continue, Despite Not Being Able To Serve The Company

from the moving-on dept

We've covered one of the sideshow issues in the larger Megaupload case: whether or not the US DOJ could get away with charging Megaupload (the company) without it being located in the US. This wouldn't have impacted the individuals who were indicted separately, but the case against the company entity itself ran into a problem. Since Megaupload has no corporate presence in the US, and the letter of the law is pretty clear that you have to serve companies accused of criminal law violations in the US, there were concerns if Megaupload could even be charged. The DOJ argued that none of this mattered, because in spirit, it should be able to treat foreign companies as if they're in the US. Megaupload hit back, noting that the DOJ shouldn't get to just make up what it thinks the law should be when the law says otherwise.

Unfortunately -- but perhaps not too surprisingly -- the court has sided with the DOJ, saying that the case against Megaupload, the company, can move forward, even though the company was not served in the US.

Judge O'Grady echoes the government's belief that the rules weren't intended to be interpreted for the evasion of foreign defendants. He writes, "It is doubtful that Congress would stamp with approval a procedural rule permitting a corporate defendant to intentionally violate the laws of this country, yet evade the jurisdiction of United States' courts by purposefully failing to establish an address here."

The judge goes onto to make his own interpretation of Rule 4, saying that mailing a summons to the address of corporation's alter ego is the same as mailing the summons to the corporation itself. Often, that means mailing it to the domestic subsidiary of the foreign company; here, it could mean Kim Dotcom if he's ordered to be extradited at a later point.

"So long as the government could prove that an individual defendant is an alter ego of the corporate defendant, the government could satisfy Rule 4's mailing requirement by mailing a copy of the summons to one of the individual defendants once that defendant is extradited to this district," writes the judge.

I can see the judge's reasoning here, but it seems like a pretty slippery slope argument, basically allowing some pretty broad powers to the US to go after countries all around the world. Imagine how the US government would act if other governments around the globe claimed the same thing? It seems that if Congress really intended the DOJ to be able to go after foreign companies, then it should have made that clear in the law.

It sounds as though Megaupload is planning to appeal this ruling, to get a higher court to look into this issue.

In the end, though, this still remains a tangential issue, and one that doesn't impact the case against the individuals. But, for now, the government's argument has won the first round.

Filed Under: doj, jurisdiction, kim dotcom
Companies: megaupload