Internet Piracy

Alleged ringleader Kim Dotcom, currently awaiting extradition hearing in New Zealand, made $42 million from website in 2010, according to documents

The U.S. Department of Justice unsealed evidence Friday in its case against Megaupload and the website’s principals that includes email excerpts showing they knowingly engaged in copyright infringement on a massive scale in order to make money.

The FBI shut down Megaupload.com in January 2012. U.S. law enforcement officials allege the website generated more than $175 million in revenue from piracy — including $150 million in subscription fees — and caused more than $500 million in damages to copyright holders.

The DOJ alleges Megaupload represented a “worldwide criminal enterprise” to reproduce and distribute infringing copies of movies, TV shows, songs and other copyrighted material. The 191-page summary of evidence spells out the government’s case against Megaupload; its alleged ringleader, Kim Dotcom, a.k.a. Kim Schmitz and Kim Tim Jim Vestor, who is currently residing in New Zealand; and several alleged co-conspirators.

SEE ALSO: Study Suggests Megaupload Shutdown Boosted Legal Movie Sales

According to the DOJ’s evidence, between at least June 2007 and December 2011, Dotcom received more than 280,000 e-mails with copyright-infringement alerts and other takedown notices. In 2009, in response to an email from a Megaupload employee that Warner Bros. was requesting removal of 2,500 files per day, Dotcom responded that the limit should be increased to 5,000 per day — but “not unlimited,” which the government argued shows the Megaupload conspiracy arbitrarily limited the ability of copyright owners to remove infringing content.

In another email exchange, a Megaupload staffer wrote that “we do have legit users,” to which another responded, “yes, but that’s not what we make $ with :).” And, during a Skype session in September 2007, a programmer said to Megaupload’s CTO, “We’re modern pirates.”

According to Ira Rothken, the California-based lawyer who reps Megaupload and Kim Dotcom, the email discussions the DOJ cited reflect efforts by the cloud-based storage provider to address copyright-infringement issues and do not represent criminal acts.

“We think it’s 191 pages of meritless criminal allegations,” Rothken said in an interview. “The allegations seem to revolve around Megaupload’s discussed policies related to user infringements, takedowns and things like reward programs. All those things are civil in nature and can never be considered criminal in the United States.” At most, he said, the evidence shows secondary copyright infringement, which is not a criminal matter.

The U.S. government said the evidence shows Megaupload repeatedly told copyright holders that the site would remove infringing files from its system upon receiving notice of them. But instead, Megaupload would only remove specific URLs, leaving in place the pirated content as well as multiple other links that pointed to the infringing files. The document also details Megaupload’s business model of paying users who uploaded popular pirated content.

According to an internal financial statement for Megaupload Ltd., Dotcom personally received more than $42 million from the site in calendar year 2010 alone.

The evidence in the case was culled from millions of e-mails the FBI obtained from individuals associated with Megaupload, spanning March 2006 through December 2011.

Dotcom and other alleged co-conspirators in New Zealand and in The Netherlands are “currently resisting extradition to the United States for trial on these charges,” the DOJ said. The extradition hearing for the defendants in New Zealand was originally scheduled for August 2012 but was postponed to July 7, 2014.

In January of 2013, Dotcom launched a new website called Mega, described as a cloud-storage service that uses encryption to shield users from being snooped on by governments or corporations.

The DOJ was ordered to unseal evidence in the Megaupload case by U.S. District Court Judge Liam O’Grady of the Eastern District of Virginia to provide notice to potential victims in the case as soon as practicable after Dec. 12.

As of Jan. 5, 2012, Megaupload.com publicly claimed to have had more than 180 million registered users to date and an average of 50 million daily visits, accounting for 4% of the total traffic on the Internet.

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