Alexandria, Virginia: When Megaupload executives arrive in court to answer charges they orchestrated a massive online piracy scheme, they'll be backed by a prominent lawyer who has defended Bill Clinton against sexual harassment charges and Enron against allegations of corporate fraud.
Washington attorney Robert Bennett said Friday he will represent the company, which was indicted in federal court in Alexandria Thursday on copyright infringement and other charges.
The US government shut down Megaupload's file-sharing website on Thursday, alleging the company facilitated illegal downloads of copyrighted movies and other content. Seven individuals — including the company's founder, who had his name legally changed to Kim Dotcom — were also charged. Dotcom and three others were arrested in New Zealand, three others remain at large.
New Zealand police raided several homes and businesses linked to Dotcom and seized guns, millions of dollars and nearly $5 million (Dh18 million) in luxury cars, officials said.
In Hong Kong, where Megaupload is based, customs officials said they seized more than $42.5 million in assets. They said the company operated out of luxury hotel space costing more than $12,000 a day, and they seized high-speed servers and other equipment from the offices.
‘Grotesquely overblown'
The shutdown and indictment generated headlines around the world in part because of the size and scope of Megaupload's operation. Sandvine, a Canadian company that provides equipment to monitor internet traffic, said the website alone accounted for about one per cent of traffic on US cable and DSL lines. The site is even more popular in many foreign countries.
Bennett said that "we intend to vigorously defend against these charges" but declined to comment on the case in detail.
Megaupload was no stranger to accusations that its website existed for the sole purpose of mass copyright breach. Before its website was taken down, Megaupload offered a more detailed defence of its operations, claiming in a statement such accusations are "grotesquely overblown."
The company said it had a clear, easy-to-follow procedure if movie studios or other copyright holders saw that their products were being illegally shared on Megaupload, and said it responded to those "takedown notices" as required by law.
"Of course, abuse does happen and is an inevitable fact of life in a free society, but it is curbed heavily and efficiently by our close cooperation with trusted takedown partners. It is just unfortunate the activities of a small group of ‘black sheep' overshadows the millions of users that use our sites legitimately every day," the statement said.
Indeed, sites like megaupload.com, known as cyberlockers, can fulfil legitimate needs and are used every day by people looking for an efficient way to share or transfer large files that can't easily be sent by e-mail.
In their indictment, however, federal prosecutors offered a detailed glimpse of the internal workings of the website. They allege Megaupload was well aware the vast majority of its users were there to illegally download copyrighted content.
According to the indictment, in a 2008 e-mail chat session, two of the alleged co-conspirators exchange messages, with one saying "we have a funny business…modern days pirates:)" and the other responds, "we're not pirates, we're just providing shipping services to pirates :)".
In fact, prosecutors allege the entire website was specifically designed to encourage piracy. The website provided cash bonuses to users who uploaded content popular enough to prompt mass downloads — such content was almost always copyrighted material.
Federal prosecutors have made internet piracy a priority in the last decade, especially in the Eastern District of Virginia, which can claim jurisdiction over many such cases because large portions of the internet's backbone — servers and other infrastructure — are physically located in northern Virginia's technology corridor. The vast majority of those cases have resulted in guilty pleas and prison time.
Evidence is strong
Stefan Mentzer, an intellectual property partner with the White and Case law firm in New York, said it's likely Megaupload will try to argue at least two defences: One is that its service qualifies as a so-called "safe harbour" under the Digital Millennium Copyright Act — the federal law governing copyright infringement — if they can show, for instance, they had no actual knowledge that infringing material was on their system. Another possible defence would be jurisdictional — specifically, a case can't be brought in the Eastern District of Virginia against a Hong Kong-based company like Megaupload without evidence they directed criminal activity related to the district.
But Mentzer said both defences would be a challenge, given the evidence that prosecutors appear to have collected. "The Department of Justice doesn't just cavalierly file these lawsuits," Mentzer said.
