The recent raids on Kim Dotcom's Coatesville mansion and his bail hearings have created considerable public interest. Until recently, most New Zealanders had never heard of Kim Dotcom or what he does for a living. Now everyone has an opinion on the so-called "Mega Conspiracy", which he is said to have masterminded and set copyright owners back more than $US500 million.

Kim Dotcom's main commercial vehicle "Megaupload" asserts that it has had more than 1 billion visitors; has over 150 million users and receives about 50 million daily visits. This is a lot of Internet traffic, however you look at it. How did such a big fish, alleged to have masterminded such a sophisticated and successful online pirating operation, end up in the North Shore District Court of New Zealand fighting the US's efforts to get him extradited?

A grand jury in the Eastern District of Virginia indicted Kim Dotcom on charges of racketeering conspiracy and conspiring to commit copyright infringement. This followed the execution of search warrants in the US and eight other countries and the seizure of approximately US$50 million in assets. The indictment says that the alleged conspirators acquired over US$175 million in criminal proceeds by distributing millions of copies of copyrighted works. Essentially, it is alleged that over the past five years the accused ran websites that provide unlawful copies of films, music and copyrighted content.

There has been a lot of debate in New Zealand about this attempted extradition, including claims that the US is bullying us and interfering in our national sovereignty. However, the Extradition Act 1999 allows New Zealand to extradite wanted persons to any country, regardless of whether a formal extradition treaty exits or not. The Extradition Act specifically covers countries with which we have a formal extradition treaty, which as it so happens includes the US -- a formal treaty signed in 1970.


At a practical level, even though Kim Dotcom is alleged to have broken US (rather than New Zealand) law the Extradition Act requires that any request for extradition from New Zealand must relate to an "extraditable offence". This is defined as an offence that involves conduct that would be regarded as criminal had it occurred in New Zealand and would have carried a similar penalty.

Some may be surprised to know that the recent Copyright Infringing File Sharing provisions (which provide a purely civil remedy) will have no bearing on this matter. Neither will they make it any easier for him to be prosecuted or extradited. It is more likely that the criminal provisions of the eighteen year old New Zealand Copyright Act 1994 will come into play, specifically Section 131(1), which makes it an offence for a person to undertake a range of unlawful dealings in copyright works.

The issue of principle here is purely about property rights. If I prefer your house to mine, does that give me the right to squat in it without paying rent? If I prefer your car to mine, should I be able to get in it and drive away without hiring it? Extending the analogy to creative assets, should I be able to listen to a CD without buying it, or read a book without buying it or paying to download it on my Kindle?

Is Megaupload a facility like Youtube, where people take advantage of the site to post the products of their own creativity for others to share, or is it like Pirate Bay, where copyrighted material is made available to users at no cost? That is the crux of the legal issue that Dotcom's lawyers are arguing.

The dilemma facing lawmakers and judges around the world is just how to treat people who are not straight-out pirates but who facilitate or enable pirates to operate, sometimes with impunity. According to the Herald editorial on January 31, 2012 apparently one of those arrested with Kim Dotcom stated in an e-mail: "We're not pirates, we're just providing shipping services to pirates". Those types of statements could prove to be unfortunate. Those who turn a blind eye to what is happening can, according to the law, be just as liable as the primary offender.

It is unclear to me why Kim Dotcom chose to set up operations in New Zealand, being a country with a formal extradition treaty with the US. It is also unclear what ramifications his arrest will have for other similar operators in New Zealand. It is reported that FileSonic, an offshore website providing online data storage, has very recently halted its file-sharing services, suggesting that the industry is sitting up and taking notice.

Is New Zealand is regarded as a safe haven and perceived as "soft" in terms of online infringement? Much is at stake here and the world is watching.

* Clive Elliott is a Barrister at Shortland Chambers specialising in Intellectual Property and Media Law. He is also the President of the Intellectual Property Society of Australia and New Zealand.