Megaupload lawyer Q&A on DOJ criminal case

January 20, 2012

Megaupload.com is going to fight the federal indictment against it and seven of its employees. The company, attorney Ira Rothkin says, wasn’t given due process and believes there are several legal precedents that will absolve it from the FBI’s criminal case.

Here’s an edited version of an interview late Thursday with Rothkin on the music and video file-sharing and storage site’s defense:

Q: Introduce yourself and what your initial reaction is to the criminal indictment.

A: I’m Megaupload’s outside litigation counsel. We heard about the indictment for the first time by reading the DOJ’s press release today. It was in the morning Pacific Time.

There was a complete lack of notice and opportunity to be heard by Megaupload. That raises some serious due process concerns that the government could shut down an entire series of Web sites without a court hearing the other side.

Q: Didn’t the FBI approach you about its concerns or its intention to file the indictment?

A: Never did law enforcement reach us. Megaupload has never been found to be [a] copyright infringer. There are no civil or criminal judgements against us. This was all done through a secretive process, an indictment process in Virginia where Megaupload was never able to bring up its side.

Q: They have much evidence in their indictment of illegal activity. They have seized not only the site but assets of employees. How will you defend yourself?

A: The allegations in the indictment appear very similar to the types against popular sites in civil cases like YouTube. YouTube ultimately prevailed in its case.

Megaupload will vigorously defend itself in this case, and we believe we will likely succeed.

Q: Did Megaupload know it was hosting the illegal transfer of copyrighted files?

A: It’s difficult if not impossible to know the answer to that question. But even if you assume that users are uploading infringing works, under the Supreme Court (opinion in a previous case), you could still pass substantial non-infringing uses and be immune from liability and process.

In a second case, Sony prevailed when sued over Betamax (video recording) with the Supreme Court saying it wasn’t liable for infringing copy as long as it was capable of substantial non-infringing uses.

So at a very minimum, the case is of first impression against a cloud storage company where there are robust defenses where the government has acted in what appears to be an aggressive and needlessly aggressive way.

Q: What about knowledge of illegal content, though?

A: Under the YouTube standard, in which YouTube prevailed, it’s not enough for an Internet service provider to have even a healthy knowledge that illegal files are stored on a site. It has to have specific notice by copyright owners before it is held responsible for it. Otherwise YouTube would only be as good as some hearsay on it. There would be no YouTube today if that was not the standard.

It seems rather curious that the government would act so aggressively especially given the risk that at the end of the day they could be wrong.

Q: What do you mean by the risk?

A: If they are wrong, given the fact that they have taken down a site completely, there is no way to unring the bell. If it ends up being that Megaupload wins its criminal case, the fact that the government acted to take down the site and dried up all traffic, it will be virtually impossible for the site to be resurrected.

Q: What next? How long will the site be down?

A: Can’t say. That will ultimately be decided by the court. Right now we are in the process of retaining criminal defense counsel.

Q: What about your employees that were arrested?

A: Four have been arrested in New Zealand and counsel has been retained in New Zealand in that issue and to communicate with them.

As for the others, we aren’t certain.

Q: What is the status of CEO Kaseem “Swizz Beatz” Dean?

A: In terms of CEO, my understanding is that there wasn’t actually a CEO of the company. He is almost a CEO.

Q: What does that mean?

A: I don’t think he was officially the CEO. He was still in negotiation on that.

Q: Has anyone in the U.S. been indicted?

A: Not to my knowledge.

Q: Why was this indictment in Virginia, for a Hong Kong based company?

A: Apparently there were some servers used by Megaupload sites in Virginia.

Cecilia Kang is a national technology reporter, writing about tech and Internet policies at the Federal Communications Commission and Federal Trade Commission and how regulations affect businesses and consumers.
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