Hollywood studios sue Megaupload and Dotcom

Kim Dotcom. Photo / Brett Phibbs
Kim Dotcom. Photo / Brett Phibbs

Kim Dotcom's New Zealand lawyer says court papers regarding legal action by seven major Hollywood movie studios against the internet mogul are yet to be served.

Paul Davison, QC, told APNZ the only details available to Dotcom's camp about the copyright infringement lawsuit, spearheaded by the Motion Picture Association of America (MPAA) and announced this morning (NZT), were ones reported in the media.

Major studios 20th Century Fox, Disney, Paramount, Universal, Columbia Pictures and Warner Bros filed claims in the Virginia federal court.

Dotcom is personally named in the indictment, which claims Megaupload and its key operators "facilitated, encouraged, and profited from massive copyright infringement of movies and television shows" before it was shut down in 2012.

He is already facing extradition to the United States on criminal copyright and racketeering charges in relation to the now defunct file sharing website.

Mr Davison said Dotcom's American legal team would be defending the claim against him and Megaupload.

"None of the papers for the claim have been received. All that's known is what that's been in the media so far.

"The claim that there is civil liability is obviously contested.

"The fundamental position that's been adopted [is] that there is no liability by Mr Dotcom and his business to the copyright owners, that he wasn't a party to copyright infringement and his company has no liabilities to those parties.

"Obviously, the proceedings will be defended, but they're being commenced in the US and they'll be defended by US lawyers engaged by the company and by Mr Dotcom and the others," he said.

As well as Dotcom, Megaupload, majority shareholder Vester Ltd, chief technical officer Mathias Ortmann, and programmer Bram van der Kolk were named as defendants in the claim filed through MPAA.

Both Mr Davison and Prime Minister John Key said news of the lawsuit had not come as a surprise.

"The proposition that has underpinned the criminal proceedings is that there was a breach of copyright.

"So if that can be proven, you would expect liability to be sought to be established by the copyright holders themselves, and that's what's happening," Mr Davison said.

Mr Key said: "There's obviously been quite a dispute going on about intellectual property and whether that intellectual property's been paid for; that's the basis of the case that the Americans are taking against Dotcom.

"Essentially it's about whether people pay for intellectual property or whether it's ultimately used in what is claimed to be illegally. That's the whole issue about the internet and those sites," he said.

MPAA global general counsel Steven Fabrizio said in a statement Megaupload was "by all estimates the largest and most active infringing website targeting creative content in the world" when it was shut down in 2012.

"Infringing content on Megaupload.com and its affiliates was available in at least 20 languages, targeting a broad global audience. According to the government's indictment, the site reported more than US$175 million in criminal proceeds and cost US copyright owners more than half a billion dollars."

The companies are seeking profits and maximum statutory damages.

Megaupload was built on an incentive system which rewarded users for uploading the most popular content on the site, "which was almost always stolen movies, TV shows and other commercial entertainment content", Mr Fabrizio continued.

"Megaupload wasn't a cloud storage service at all, it was an unlawful hub for mass distribution.

"To be clear, if a user uploaded his term paper to store it, he got nothing ... But if that same user uploaded a stolen full-length film that was repeatedly infringed, he was paid for his efforts.

"That's not a storage facility; that's a business model designed to encourage theft - and make its owners very rich in the process.

Dotcom has criticised the lawsuit on twitter, saying: "Files above 100MB filesize did not earn rewards on #Megaupload. Hollywood claims that we were paying users to upload pirated movies. Stupid."

Dotcom's legal battles

Copyright accused:
Kim Dotcom and six others who worked on Megaupload face charges of copyright infringement, money laundering and racketeering in the US based on claims they encouraged users to upload popular content. The group deny the charges, saying they simply ran a cloud storage site.

Deportation:
To get Dotcom to the US, the FBI needs to have him deported from New Zealand. The hearing was initially set for months after his January 2012 arrest but delays mean it is now set for July.

Search warrant appeal:
The search warrant used to execute the January 2012 raid for the FBI has been found unlawful by two courts and then lawful by another. Dotcom's lawyers have asked the Supreme Court to review the decision. The Crown also wants it to review a finding FBI agents shipped cloned hard drives offshore in breach of a court order.

Damages:
The various blunders and bungles in the case sparked a damages hearing. Dotcom is seeking $6m. The hearing was meant to be happening this month but is now delayed until the end of the year.

Proceeds of crime:
The restraining orders which saw Dotcom's wealth and property in New Zealand seized are due to expire on Good Friday. A hearing next week will decide if they should be extended.

John Banks prosecution:
Dotcom is a key witness in the prosecution of Act MP John Banks under electoral law, which is being heard in May.

MPAA civil case:
The six major Hollywood studios are now suing Dotcom and Megaupload in a civil action which mirrors the allegations underlying the FBI charges.

- APNZ

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