The Executive Suite: Closing in on Massive Worldwide Copyright Infringement

Notorious Internet pirate Kim Dotcom suffered another legal setback last month in his fight to avoid extradition from New Zealand to the United States and hang on to his treasure borne of massive copyright infringement when the High Court of New Zealand rejected all of Dotcom's contested arguments against extradition.

The treasure was generated by Megaupload, Dotcom's brainchild and one of the world's biggest Internet sites when it was shut down by the Justice Department in 2012. Ostensibly a cloud-based storage system for large files, the site produced more than $175 million per year in revenue generated by its premium subscribers and third-party advertising attracted by the site's 50 million daily visitors.

However, the 2012 federal indictment of Megaupload [PDF], Dotcom, and his co-conspirators for running an international organized criminal enterprise responsible for massive copyright infringement, money laundering, and racketeering confirms that the legitimate storage aspect of the business was only a front. What really drew visitors to the site was the ability to download pirated movies, songs, software, video games, books, and the like. Megaupload made its fortune by actively encouraging monumental amounts of copyright infringement, rewarding its millions of users for uploading this pirated material. Legitimate usage of the site was not similarly rewarded.

The U.S. Supreme Court has held [PDF] that websites like Megaupload, which actively encourage copyright infringement through file sharing, can be held liable (see MGM Studios, Inc. v. Grokster, Ltd). Law-abiding websites and Internet service providers, on the other hand, are protected by the safe harbor provision in the Digital Millennium Copyright Act [PDF] (DMCA) , which was signed into law in 1998, so long as they "expeditiously" remove infringing material upon notice.

Because Dotcom was clearly on the wrong side of the law, his Megaupload profits and many of the expensive toys he bought with them were seized in a raid on his $24 million estate in New Zealand. He spent a month in a New Zealand jail then three months under house arrest.

The conspirators' criminal conduct cost the motion picture, television, and music industries more than half a billion dollars, money that comes out of the pockets of average citizens such as set designers, sound engineers, theater employees, struggling actors, and support staff more so than those of stars and moguls. Dotcom’s toys — yachts, fancy custom cars, and a personal helicopter to name just a few — were purchased at the expense of the millions of Americans whose livelihoods, health benefits, and retirement plans depend on these industries.

Nonetheless, Dotcom has wrapped himself in the banners of Internet freedom and consumer choice and would have us believe that he is the victim. But the First Amendment and other guarantees of Internet freedom no more protect the massive theft of online intellectual property than they do robbing a record store or committing online credit card fraud.

Nor does consumer choice depend on such piracy. As former U.S. Senator Chris Dodd pointed out, "Filmmakers and distributors are already using the Internet to offer more options than ever before for accessing online legal content, including over 115 such sites in the U.S. alone."

Dotcom is no freedom fighter, consumer champion, or innovative entrepreneur. What he actually is is a career criminal. His lengthy rap sheet includes prison sentences for embezzlement, fraud, insider trading, and data espionage - including hacking Pentagon computers - among other crimes.

The entertainment industry's anti-piracy efforts have focused on voluntary initiatives, including asking companies not to advertise [PDF] on pirate websites. Even civil litigation is generally reserved for the worst offenders, rather than the occasional downloader.

As the 191-page summary of evidence [PDF] makes clear, Megaupload and Dotcom had to work hard to join the tiny group of infringers charged criminally. Dotcom now faces years or even decades in an American prison.

Meanwhile, Justice Department attorneys are pursuing a parallel civil action for asset forfeiture against Dotcom and his colleagues. They are going after tens of millions of dollars of proceeds from Dotcom's crimes, much of which came from stealing the intellectual property of American artists and companies.

Dotcom argues that the United States does not have jurisdiction over his assets located in New Zealand and Hong Kong. However, American courts have rejected [PDF] his challenge. Because Dotcom is resisting extradition, he has been declared a fugitive and, as a U.S Court of Appeals for the Fourth Circuit ruling made clear, a federal statute disentitles fugitives from contesting government forfeiture actions.

Dotcom's argument that the statute violates his constitutional rights came to a dead end when the U.S. Supreme Court rejected [PDF] the petition for review this fall. American justice is finally catching up with Dotcom, who is learning that large-scale, intentional online piracy will not be taken lightly.

If you are a teenager illegally downloading a movie or a website operator making a good faith but imperfect effort to remove infringing content, you don't have to worry about American law enforcement coming after you.

But for those who conspire to steals millions of dollars through massive worldwide copyright infringement, even holing up halfway around the world in New Zealand will not serve as protection from the law.