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Hollywood studios including Fox, Disney sue Dotcom’s Megaupload for providing copyright movies

Six major Hollywood movie studios are suing Megaupload founder Kim Dotcom and his associates, alleging they made more than US$175 million by running an online hub for stolen copyrighted movies and TV shows.

Megaupload and associated company Vestor are named in the charges alongside Auckland-based Dotcom, co-founder and chief technical officer Mathias Ortmann and Bram van der Kolk, who oversaw programming, according to charges filed yesterday in the US District Court in Alexandria, Virginia. The men operated the website until indicted on US Federal charges in 2012 when it was shut down.

The suit by Twentieth Century Fox Film Corp., Disney Enterprises Inc., Paramount Pictures Corp., Universal City Studios Productions LLLP, Columbia Pictures Industries Inc. and Warner Bros. Entertainment Inc claims the defendants earned about US$150 million from the sale of Megaupload premium subscriptions. It also says they earned more than US$25 million through online advertising on Megaupload and its associated websites.

The charges allege Megaupload's business model depended on attracting users to download high-value copyrighted content.

"By design, Megaupload functioned not as a private online storage locker, but rather as a hub for uploading and downloading infringing copies of popular movies and television shows, including plaintiffs' copyrighted works," the case alleges. "Defendants were responsible for the infringement of thousands of plaintiffs' copyrighted works, causing substantial harm to plaintiffs, who invested billions of dollars and enormous creative energies to produce their copyrighted works."

An "abuse tool" which purported to enable copyright holders to remove or disable access to copyright-infringing files on Megaupload's servers didn't function in the way the defendants represented it, ensuring the most popular infringing files would continue to be broadly available on Megaupload for download despite copyright owners' efforts to protect their content, the charges allege.

"Defendants did not take any of the simple, meaningful steps they could have taken to curtail infringement because they wanted and needed that infringement to make their illegal business profitable," the studios claim.

The claim was filed in Virginia because Carpathia Hosting Inc which provided internet hosting services for Megaupload, is based in Dulles, Virginia.

The studios are seeking profits, damages and costs.

Dotcom and his associates Finn Batato, Ortmann and van der Kolk last month lost a bid in the Supreme Court to access US government evidence against them ahead of an extradition hearing to the US to face charges of mass copyright infringement and money laundering of more than US$500 million.


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Comments and questions

Who cares? Im looking forward to partying at his mansion this sunday

I have to say it is strange that YouTube has not had the same attention from Hollywood as Kim Dotcom.
The video sharing site now features whole movies, and even whole series of many TV shows. Plus any song you'd care to name.
Just type in 'full movie', or any song title that comes to mind.

There's some validity to that point. But a key element is that Megaupload paid cash rewards for popular files, allegedly incentivising uploaders to break the law. More, the money went to the uploaders. When ad revenue is generated around copyrighted material on YouTube, Google cuts in the artist and the copyright holder (or if they don't want the revenue, takes down the material. Dotcom argues his site gave copyright holders faster and more direct access for take-downs. Dotcom also claims cash rewards only applied to files of 100MB or less - too small for a movie - at least as a single file).

And in intercepted Skype conversations, the Megaupload co-accused are, in the DOJ's view, attempting to build plausible deniability around the ability of pirates to search the site.

Again based on the intercepted Skype conversations, the DOJ also accuses the Megaupload crew of out-and-out, premeditated movie and software piracy, knowingly making a Hollywood movie (Taken) available on Dotcom's file sharing site before it was released, and tolerating software piracy on a large scale.

So I think there could well be a case to answer - but it's a civil case. Hollywood studios suing Kim Dotcom is a rational response in this commercial dispute over copyrighted material. Police storming a home is not.

More on the DOJ's evidence:

Prior to part way through 2012 Skype had a peer-to-peer network architecture and encrypted with the AES Algorithm. At some time in 2012 Microsoft changed the system and included a centralised server component.

If the calls where trapped pre-microsoft between a NZ resident and somebody in Germany or the Netherlands where did the DOJ get their hands on the call data? Did they trap the calls from within New Zealand with the aid of the GCSB / NSA or in Europe with the help of UK's GCHQ / NSA. Does the source of these calls need to be identified to confirm that there was not addition GCSB spying on NZ Residents which has not been disclosed?

The US DOJ has been found of recent to have been using a technique known as "Parallel Construction" of evidence, which means they get given it by the NSA but lie to the Judicial system about where it actually came from. This is very important in the Dotcom case because the GCSB/NSA has already been implicated in the gathering of data and some of their actions have already been proven to be illegal.

Hi Chris.
People uploading content to YouTube can also earn money by linking their YouTube account with their Google Adsense account.
There are a few stories around of people earning handsome sums from content on their YT channels.

A major difference is that Youtube will, and often does, pull copyright material from its site. A simple thing that Mega, apparently, never seemed to do. Not very cleaver that.

Mega did pull content from their sites - at least, links to content.

The reasoning made sense. If a file was a duplicate of another file, why store it twice (inefficient) when you can simply create another unique link to the file. Links themselves could be public or private - i.e. you as a user could control who had access to the link.

Lots of companies used mega for storage.

If you post some content to which you own the copyright, and another person posts the same content, you each have your own links with their own controls. If the other person is offending copyright, their link to the content is removed. But there is no reason to remove the file itself and have you lose access to it when you own the copyright.

There's no reason to store two copies of the file when the link management achieves all the aims of having two copies of the file anyway.

There's no comparison. If you "Report" copyright to Youtube it gets removed. If you used the reporting process at Megaupload it didn't.

Why is it apologists for Dotcon can't provide a rebuttal to anything without resorting to some element of anti-Americanism in everything. New Zealand films ARE Hollywood. Ever heard of LOTR? Narnia?

So what's your point?

Say NO to New Zealand being a safe haven for organised crime and residency by bribery.

Someone bring up the fact Megaupload has thousands of peoples (eg my own) priceless photo memories still stuck on their servers (eg my life from 2004ish - 2012), because it was a great cloud storage provider!

I know several businesses that were using the service for convenient exchange of large files and archiving. The engineering and architectural trades in particular. Megaupload was ahead of its time. Everyone forgets these genuine victims of the FBI jackboot actions. Collateral damage I guess they wouldn't care.

To be honest, I'm actually starting to feel a bit sorry for Kim the old Charlie Brown song sez, "Why is everybody always pickin' on me?"

Absolutely, the DOJ and the FBI have not seem concerned that hundreds of thousands or more likely millions of legitimate files were lost as it seized control of Megauploads; servers. US PC World included Megaupload in a comparison of mainstream file sharing sites, and it was used by everyone from small businesses to people sharing wedding invites online.

The US government's hardline on access to Megaupload files smacks of an "all file sharing is bad" mentality. I find that ridiculous in the age of cloud computing, and Megaupload competitors like Dropbox now firmly in the mainstream.

Personally, I find it really annoying when those representing movie, music and other copyright holder and content distributors use the Megaupload episode as an excuse to rail against all online content. Often, there's a strong element of self-interest involved, and a desire to protect old-world regional distribution monopolies at the expense of the consumer. I don't want to wait months for a movie to arrive in NZ - assuming a studio even deigns to make it available via iTunes etc here - when all the technology is in place for commercial downloads.

Kim (and an awful lot of freeloading NZers) need to learn that other peoples property is not theirs for the free use of. End of story!

If Dotcom and his co-accused pirated material, or facilitated piracy, then they should pay. See more of my thoughts on the case against him in my first comment on this thread.

My concern though is that lots of people want to download content on demand these days. They're willing to pay for it, but commercial options are thin on the ground in NZ (for example, iTunes NZ features no TV series, and limited movies compared to Australia, the UK and the US).

People want to pay. Give them the option. Sky TV and others can stand in the way of iTunes, QuickFlix etc and starve them of content. But it's a commercial tussle to protect a regional content distribution monopoly, not about copyright.

Good to see you make a clear distinction between the commercial challenges of content distribution models on one hand and copyright on the other.

There are actually seven digital movie services available in New Zealand. These include iTunes, Sky's VOD service, Quickflix, Google Play,Vodafone, X Box Live, Ezyflix. Telecom has announced its intentions So there are already options. The issue is not really about lack of willingness to supply content but more about the lack of digital "retail" and/or awareness of what is in fact available.

There are a number of reasons none of the commercial download services available in NZ have a decent selection of movie and TV content.

Sky TV doesn't want to cannibalise its decoder business.

QuickFlix and Ezyfix have nowhere near the capital required to bid against Sky TV.

Telecom does have the dosh, but is not willing to bet he farm on over-the-content at this stage (its FY2015 budget for its broadband TV service, which will be open to customers of all ISPs and aim to make content available on regular televisions via a dongle, is $20 million. Sky TV, by contrast, last year spent $289 million on programming, of total expenditure of $666 million. $220 million of that was on rights to overseas programmes; the balance on local programming costs).

I'd love to see Apple or Google or Amazon take a global approach to content deals (Google, with YouTube, has already dipped its toes in the water with the Indian Premier League cricket rights). But at this point they're doing things country-by-country. And on that level, I guess it doesn't make economic sense at this point to take on Sky in NZ.

Netflix has had a sniff at NZ, but says it was put off by our data charges and data caps.

Agree that if consumer awareness of online options was raised - including how comparatively easy it is to view broadband content on a regular telly - then demand for over-the-top content would grown. UFB companies and ISPs have a role to play here, along with the govt, which has put so much money into the fibre rollout, but so far done so little to promote its everyday business uses, or potential for new content delivery options.

I can find a TV series episode and download it using Google alone. Google profits because they show me adds while I use Google.

It's therefore time that Google's businesses are confiscated and done away with, without due process, because of their massive copyright infringement.

One does have to feel slightly sorry for Kim Dotcom. He was obviously selected as an example to others, at the behest of certain lobbyists.

His problem is he lacks the requisite connections in the USA to get a nice result from their "Justice system" - if only he were a lecherous Du Pont heir with a trust fund he'd have a much better chance. Or if he'd just limited himself to financial shenanigans on the right street in New York...

Could be worse, I guess - as a German citizen he could have simply been abducted and tortured, as the USA did to Khalid El-Masri. At least the USA has refrained from torture - whoops, "enhanced interrogation" - to this point.

Well at least the cowards have come out and done what should have been done from the start ... instead of hiding behind tax-payer funded vendettas and corrupting LE actions by the State agencies.

This demonstrates it is after all a business matter and black balaclava-clad anti-terrorist thugs have no place helicoptering into people's houses on behalf of a cartel who have had their questionable business models threatened.