Megaupload Demands Return of Millions of Dollars From U.S. Govt.
of dollars in assets it seized from the company and its operators in
January. The newly-filed and eye-opening motion slams the U.S. for
holding the defendants liable for alleged offenses that aren’t even a
crime, ignoring laws designed to offer them protection, failing to
provide any detail whatsoever on alleged infringements, and pushing U.S.
law far beyond its borders.
In addition to filing a general motion to dismiss the criminal case
on the basis that the company was never properly served, Megaupload and
defendants Kim Dotcom, Mathias Ortmann, Bram Van Der Kolk and Finn
Batato are demanding the return of some, if not all, of the assets
seized by the United States.
The motion, which “challenges the scope of pretrial restraint of
assets”, is running in parallel with yesterday’s general motion to
dismiss, just in case the former should be declined. It also gives us an
interesting flavor of the nature of Megaupload’s defense should the
case go to full trial.
As previously reported, the US indictment claims that Megaupload
caused $500m in losses to copyright holders while generating revenue for
itself in excess of $175m. In addition to $67m already seized, the U.S.
Government is seeking criminal forfeiture of at least $175m, an amount
challenged by Megaupload.
“This represents the total revenues generated by Megaupload during its entire corporate existence,” the motion begins.
“Thus, the premise of the Government’s forfeiture request is that
Megaupload never earned a single penny that was not criminal
under U.S. law — whether, say, from a non-infringing use of its
service, or from use that occurred wholly outside the United
States and beyond reach of U.S. law, or even from an infringing
use within the United States as to which Defendants nonetheless
qualify for a statutory safe harbor or lacked requisite criminal
Considering the high probability that at least some of the money generated by Megaupload was from entirely legal means (unless every single Megaupload user
was engaged in criminal copyright infringement), assets should be
released so that the defendants can pay to mount a defense, their legal
team argues. Currently, no-one conducting Mega’s expert defense is
The motion continues by detailing what the defense believes is the
key to undermining the whole case – claims of secondary copyright
infringement against Megaupload (i.e holding the company responsible for
the actions of its users) can’t lead to criminal liability.
Indeed, only this week New Zealand Judge David J. Harvey made his opinion
known, stating that in lacking “statutory support for its
unprecedented effort to criminalize secondary copyright
infringement, the Government has reached beyond the pale of the law.”
The motion adds that federal criminal liability is created by
statute, and no statute imposes criminal liability for secondary
“Congress did not contemplate that service providers such as
these Defendants might be imprisoned based on uncodified theories of
secondary liability that are still evolving in the civil context, as
though those amounted to established federal crimes,” Dotcom’s lawyers
In addition to being held secondarily liable, there are various
allegations of direct infringement being leveled at the defendants. For
example, one involves Kim Dotcom allegedly uploading a single 50 Cent
track, another with Finn Batato doing the same with a Louis Armstrong
However, Dotcom’s lawyers note that these allegations contain zero
factual information from which the defendants could prepare a defense.
Whose copyrights were infringed? How and when did the alleged
infringements occur? The list goes on.
“The Government has attempted to make out an all-encompassing
case of an alleged criminal copyright conspiracy without bothering
to allege concrete specifics of the actual
infringement allegedly committed,” the lawyers write.
“It has attempted to build one of ‘the largest criminal
copyright cases ever brought by the United States’ out of conclusory ipse dixit, reciting statutory verbiage and nothing more.”
In the indictment the U.S. makes much of the “rewards program”
operated by Megaupload, claiming that such rewards encouraged users to
upload infringing material. The defense see things somewhat differently.
“Particularly in the context of this case, where it can be stipulated that Megaupload’s
business was designed to appeal to its users and facilitate
uploading and downloading of files, such allegations say nothing
“If the Government believes that every such business model is
inherently and pervasively criminal because it may enable
copyright infringement along with other misuse, then it should say as
much, so that everyone is on notice and this Court can take due
If, on the other hand, the Government believes that this
business and these Defendants specially set out with intent to
perpetrate copyright infringement, it is conspicuously bereft of
The motion continues by stating that Megaupload had “substantial
non-infringing uses” and had protections under the DMCA since it
complied with copyright holder takedown requests by removing millions of
links to allegedly infringing material.
“Megaupload negotiated with numerous major rights holders,
including the Recording Industry Association of America, the
Motion Picture Association of America, Disney, Warner Brothers,
and Universal Pictures, to grant them full access to directly remove
any active link to infringing material,” Dotcom’s lawyers note.
Furthermore, even if the claims against Megaupload had merit, they
would still be geographically restrained, Dotcom’s team writes.
“Megaupload was a non-U.S. company whose activities mostly occurred
overseas and whose users were mostly located overseas. The laws of the
United States do not apply to overseas locations and operations absent
contrary prescription by Congress.”
The motion, which runs to 45 pages, is somewhat of a tour de force
from a legal team co-ordinated by Ira Rothken of the Rothken Law Firm in
California. Its contents could yet provide the biggest
copyright-related upset the U.S. has ever seen.
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