Data, more importantly its availability and ease of dissemination has been the key driver of the digital revolution that has swept the world over the past two decades. As with any other subject, the rapid expanse of data sharing brought with it a sea of conflicting opinions and ownership dilemmas. ‘How much freedom is too much freedom?’ is a question worth asking when ideas and creations that had an element of ownership attached to it started getting shared globally at the touch of a button. The case of Megaupload, a Hong Kong based online data sharing service, is just a mere link in the long chain of privacy invasion and copyright violation incidents that were driven by online data sharing.
As students of digital business, our group of four has delved deep into the events and background of the copyright infringement charges against Megaupload. The facts of the case are analysed in the light U.S Copyright laws under which the corporation was tried, and are then compared with similar charges raised against two other companies, VK.com and Kickass torrents. Following a brief background of the organizations, a comparative study helps us understand the various angles of copyrights and data protection laws and how it is practically applicable in the context of real world online businesses.
In the lines of international and prominent US laws, these offences are then put into context within the New Zealand copyright laws which helps the reader understand the implication of the actions in a national context. The study also undertakes a visualization of two aligned concepts in the data ownership dimension, namely the cloud based data storage and ownership of sensitive user data, an analysis that throws light on the hidden pitfalls and consequences that are involved in these new age concepts or practice.
The study has been conducted in the order of ‘event, findings, implications, comparison and related/aligned concepts. We believe that this helps the reader develop an understanding that is in line with the expectation from this exercise, which is to relate and balance the theory and practical implications of copyright laws in the light of the Megaupload case. All the information has been sourced from academic articles and public journals and have been cited for reference, and we hope it helps the readers grasp the concepts as well as we did.
Background of Megaupload & Prosecution of Megaupload by US DOJ for breach of Copyright Laws:
| Fig.1.0: Megaupload Website Business Services. Source: Managing Intellectual Property, 2011 |
Megaupload Ltd., established in 2005 by Kim Dotcom and is headquartered in Hong-Kong. Megaupload provides online services for file storage and viewing. The company’s website business includes multiple online services as depicted in the below table;
Two additional services—Megabackup and Megamovie—were in development before their closure.
Key Business Statistics of Megaupload:
- Megaupload was the 13th most visited site on the Internet with a Unique visitors count of 82,764,913 and over 1 billion Page-View History.
- During its peak, Megaupload had 180 million registered members and 50 million active users per day.
- Megaupload generated more than US$175 million since 2005 and the main source of income generation was from premium paid membership and online-advertising (Tsukayama, 2012).
- By February’ 2012, Megaupload was officially hosting 12 billion unique files with over 100 million users.
- Megaupload accounted 1% of the web-traffic in North America (Sandvine, 2012).
Did Megaupload breach U.S. copyright laws (copyright infringement)?
(Refer Appendix 1.0 Copyright Infringement Charges on Megaupload)
Copyright Infringement in the electronic format has been breached by numerous companies such as; Megaupload, Rapid Share, Hotfile, and 4Shared.
Megaupload self-claimed themselves to be “cyberlockers,” but that is a misnomer, as a true locker is private and secure (it is locked). To the contrary, Megaupload facilitate the distribution of files on a massive scale.
Megaupload was charged under 5 counts and 44 General Allegations but the charges rely either directly or indirectly to criminal copyright infringement (Megaupload Indictment, 2012);
| Fig. 2.0: Megaupload’s Legal Indictment. Source: (Megaupload Indictment, 2012) |
Megaupload business was considered unlawful for the following reasons:
- Megaupload’s business-model which offered ‘cash-rewards’ as incentives to users based on number of times other users downloaded their content, was against the business model of Data Locker.
- Megaupload did not obliterate the user’s account, contents or links which infringed intellectual property law (Telecommunication Report, 2012).
- Megaupload did not inspect neither hold accountability of any files being uploaded on its website (Managing Intellectual Property, 2011)
- Megaupload generated profits from the files stored on their web-server, also, deleted files which were not downloaded after 90-days of upload (Parloff, 2012).
- 91% of the users never uploaded any official or personal files and 90% of the download and upload was of illegal files and infringing materials (Parloff, 2012).
Latest Updates on Kim Dotcom and Megaupload’s Copyright Infringement Case;
Megaupload’s Kim Dotcom loses New Zealand appeal to avoid extradition to US. On 5th July’ 2018, NZ Court of Appeal dis-regarded Megaupload’s Kim Dotcom appeal to avoid extradition to US. Kim Dotcom, to appeal to Supreme Court for reconsidering his appeal (Bloomberg and Associated Press, 2018)
Vk.com Background:
Vk.com, previously known as ‘vkontakte.com’ – one of the largest Social Networking Website, headquartered in Saint Petersburg, Russia founded in 2004. As a social media website, Vk.com offered an online community platform to its users to interact with friends & relatives, co-workers and classmates.
By the end of November’ 2014, Vk.com;
- accounted 280 million active users base
- more than 70 million daily user-logins
- third most visited website after Facebook and Twitter (Marie, 2014)
Being a social media and social networking site, Vk.com provides a platform for its users to share multimedia files including photos, videos and audio recording. It also, allows access to its user to search and manage online friends and communities.
The reason for Vk.com being the most visited website in some of the Eurasian countries because it offers a large digital library of unlicensed sound recordings.
Copyright Infringement by VK.com
Sony Music & Universal Music Russia & Warner Music UK- the three largest company from the recording industry, filed a legal suite against VK.com in April’ 2014, demanding VK.com to remove the infringing contents from their file-sharing services (Marie, 2014).
Later, Sony Music withdrew from the case, following the signing of the confidential agreement with VK.com, in July’ 2014. However, Universal Music Russia & Warner Music UK, persuaded with battle and won the court case. The Court ordered VK.com to implement and install new technological measures which prevents the illegal copyright on its online file-sharing services (Cookson, 2015).
VK.com has been in news for the copyright infringement on many instances;
- RIAA placed VK on the US Trade Representative’s list of pirate websites, for four years since 2014 (RIAA, 2014)
- IIPA, labelled Vk.com as “major infringement hub for illegal film materials” (ERNESTO, 2018)
- In 2012, VK.com was declared guilty and had to pay a fine of $178000 to Russian music label SBA Gala Records (MPAAI, 2015)
- October, 2013, VK.com won a copyright lawsuit filed by record company Soyuz. This time the court considered that VK.com couldn’t be expected to know what will be uploaded by users to its servers (Marie, 2014).
Kickass Torrents Background
Kickass Torrents (KAT) is a file-sharing website and a provisional directory of torrent files and magnet links, using BitTorrent protocols. It was founded in 2008, using the domain names Kickasstorrents.com. KAT was flagged defunct by the U.S. government on 20th July, 2016 (Alexa, 2014).
Key Business Highlights:
- Over 1 million per day active user login as on August’ 2015
- KAT’s estimated net worth was more than $54 million, with estimated annual ad revenue in the range of $12.5 million to $22.3 million
- July’ 2016, U.S. DOJ seized KAT.cr domain and identified its alleged owner Artem Vaulin
- By mid-December 2016, some of the former KAT staff and moderators launched a website with a similar appearance as the original under the domain katcr.co. (Dwilson, 2016).
Copyright Infringement by Kickass Torrents
Like Megaupload, U.S. DOJ booked Kickass Torrent under 18 U.S.C. § 2 to 17 U.S.C. § 506, stating that Kickass Torrent- a website dedicated to hosting and distributing torrent files, however, Vaulin’s network purportedly downloaded and distributed protected content of movies and other copyright protected media resulting in criminal copyright infringement. (Gardner, 2017)
| Fig. 3.0. Legal Indictments against Kickass Torrents.
Source: (Kickass Torrent Indictment, 2016) |
| Fig. 4.0. 5 Facts about Kickass Torrents copyright Infringement case
Source: (Kickass Torrent Indictment, 2016) |
New Zealand copyright laws
The New Zealand Copyright Law is governed by the Copyright Act 1994 and amendments thereafter. The Copyright Act is regulated by the Ministry of Business, Innovation and Employment (MBIE) and administered under the Business Law Policy.
Section 21 of the Copyright Act 1994, amended in 2011 states that- ‘the person who authors the work is the copyright owner of the work’.
According to Section 37 of the Copyright Act 1994, copyright infringement by any person other than the author or the pursuant to the copyright license, who-
- either makes; or
- imports into New Zealand; or
- possess in the course of the business or otherwise sells or lets for hire; or
- otherwise in the due course of business offers or exposes for sale or hire-
any content which has been purposely adapted for making illegal copies of the work (New Zealand Legislation, 2014a).
New Zealand ‘‘Three Strikes Legislation’’ file sharing system:
The ‘‘Three Strikes Legislation’’ passed into law in 2010, the motive was to combat violent crimes or ‘strikes’ against people pleaded guilty. As per the ‘‘Three Strikes Legislation’’-
- the First Strike was a warning;
- the Second Strike- the culprit to serve his/her sentence without parole;
- the offender with Three strikes has to serve the maximum sentence without parole, unless the court considers it would be manifestly unjust (Galuszka, 2015).
New Zealand Copyright Infringement v/s Megaupload and Kickass Torrent/VK.com.
In context to Megaupload, Kim Dotcom and his team offered a clear path to all its users into infringement of copyright content. Megaupload business started as a web-hosting service allowing its user the convenience of online file sharing. Illegal e-contents from outside New Zealand is not considered infringement until any individual-based in New Zealand legally-sues Megaupload and demanded for inspection.
Megaupload’s business model provided cash-based incentive as rewards to all its users based on how many times other people download their contents. This was the copyright infringement and a straightforward contradiction to the ‘cyberlockers’ business model. Megaupload website allowed its user to share links to illegal contents. Copyright Infringement is considered to be a crime in New Zealand as well as in US and this has been the sole reason for Kim Dotcom’s extradition in New Zealand in Megaupload copyright Infringement case (Parloff, 2012).
Also, any user from New Zealand, who downloads a file from VK.com or from Kickass Torrent is considered to be an illegal act for users whose name is on the internet bill- Universities, schools, cafes and even holiday homes (Torrie, 2011).
Ownership of Data- Who owns the Data?
The defunct of Megaupload website lead to the alarming situation in the digitalised world. Many began to raise concern about the files which were uploaded on the website server by multiple users. Users had serious ambiguity on the ownership of the data stored on Megaupload’s web-server.
The Megaupload policy statement clearly mentioned that users need to maintain copies of all/any files which were uploaded by them on to the website. Further, it states that, no user at any given time and under any circumstances cannot hold any ownership rights on the data or files being uploaded on the Megaupload’s Website and that the website-services can be terminated with or without prior notice (PC Magazine, 2012). The only situation in which the users can have an access to their files was, if, Megaupload wins the case in future, but still there was no guarantee or any assurance to file access (L. Chris, 2012).
Same was the case with VK.com users. All users of VK.com were supposed to upload personal information and data which is a legal content. In case, if any of the content was copied, downloaded or shared, the final responsibility lies with the user and not with VK.com. As per VK.com policy, the website had no-control over the content uploaded or created by its users, but VK.com holds the authority to remove illegitimate contents, either by its own inspection or by request of any of the certified author/s. Currently, VK.com has been exercising the required protocols necessary towards copyright issues for instance, VK.com has removed the online-streaming options of music tracks on Apple devices (Kozlov, 2015).
However, it is difficult to draw a clear bifurcation on the ownership of data. There still prevails higher degree of ambiguity on who will be the owner of the data and what will be the implications of the cloud storage being defunct.
Important recommendations which can be considered to retain to the ownership rights of your data while using cloud-based file-sharing servers;
| Fig. 5.0: Steps to Retain Ownership of Data. Source: (Techradar, 2014) |
Implication on Apples Cloud
The defunct of Megaupload had a negative impact on the cloud-storage business worldwide. Prominent service providers like iCloud, Rapid Share etc. have adopted the ‘prevention is better than cure’ policy and have been implementing and installing the necessary policies and features into their websites which will help them adhere to the governance of their business in the ethical direction avoiding any legal implication which may arise (Cohn, 2012). Many of the known cloud servers including iCloud have permanently removed certain file-sharing features from their web-servers to avoid legal-turmoil like Megaupload (PC Magazine, 2012).
iCloud has been successful in creating a goodwill and brand of its own and holds a great reputation of conducting ethical business even during difficult tides (Leonhard, 2012). The Apple copyright act, clearly mentions in section (V) under “Content and Your conduct” (F. Copyright Notice -DCMA), that iCloud, at its sole discretion has the authority to suspend or terminate services of infringer’s account. Moreover, under section (VI) (B)” illegal use of apple software or unauthorised use of any part of the iCloud services under the copyright law may lead to civil and criminal penalties.
iCloud’s legal policy further emphasizes on the legal terms and conditions which govern the online file-sharing services and all users must agree and accept the terms and conditions before accessing the iCloud host (iCloud Terms and
Post the defunct of Megaupload, people did become sceptical of using cloud storage, but did not stopped using it. The went a step forward and choose the best available alternatives in the market making iCloud and 4shared.com, the largest online file-sharing web-servers (Van, 2012).
Further, the launch of Mega- online file sharing web-server is considered to be the comeback of Kim Dotcom in the cloud sharing business. It is more law-proof and more than just a flimsy ‘term and conditions’ page. Mega, follows the process of encryption of data before uploading and further generates a second unique encryption before the download. Also, the user’s data can be accessed only by the file’s subscriber and not by anyone including Mega (Booker, 2013).
Conclusion
General cloud storage service providers and Megaupload in particular has raised a controversial issue on the ownership of data uploaded by users. In today’s digital era it is an irrefutable fact to maintain a balance between author copyright and users’ creativity on file uploads. These service providers must have a responsibility to protect copyrights and rights of the author.
The copyright infringement charges against Megaupload and the other co-defendants including Kim Dotcom still going on outside U.S. Government borders. This showcase the gaps in the legal framework of copyright infringement between countries. The Megaupload case reveals the fact that the conflicting cross-border laws of copyright, provides higher scope for infringement.
The Web-surfers attitude and the lack of understanding on the intellectual property rights; which are the root problems leading to infringements is over-looked by many countries.
As a responsible world-citizen, its high-time that we raise our levels of self-awareness and working knowledge on the ongoing copyright infringement issues and became more ‘Ethical Web-surfers’.
References:
Alexa. (2014). Top 500 Global Sites. Retrieved from https://www.alexa.com/topsites/global;0
Booker, L. (2013). How to use Megaupload’s successor, Mega. Lifehacker. Retrieved from http://www.lifehacker.com.au/2013/01/mega-megauploads-successor-is-open-for-business-heres-how-it-works/
Cohn, C. (2012, October 31. Megaupload and the Government’s attack on cloud computing. Electronic Frontier Foundation. Retrieved from https://www.eff.org/deeplinks/2012/10/governments-attack-cloud-computing
Cookson, R. (2015, September 29). Universal and Warner groups win case against VKontakte. Retrieved from http://www.ft.com/cms/s/0/9c8a32aa-669a-11e5-97d0-1456a776a4f5.html#axzz3nNzRVb5o
Copyright Council of New Zealand. (n.d.). Retrieved from http://www.copyright.org.nz/basics.php
Copyright Law of the United States. (2017). DMCA designated agent directory, Service provider designation of agent to receive notifications of claimed infringement. Retrieved from https://www.copyright.gov/dmca-directory/
Department of Justice. (2012, January 19). Justice Department Charges Leaders of Megaupload with widespread Copyright Infringement. Retrieved from http://www.justice.gov/opa/pr/justice-department-charges-leaders-megaupload-widespread-online-copyright-infringement
Department of Justice. (2016, July 08). Justice Department Charges Leaders of Kickass Torrents with widespread Copyright Infringement. Retrieved from https://www.justice.gov/opa/file/877691/download
Dwilson, S. (2016). Kickass Torrents Sued by United States: 5 Fast Facts You Need to Know. Retrieved from https://heavy.com/tech/2016/07/kickass-torrents-sued-lawsuit-us-mpaa-shut-down-copyright-infringement-domains-broken-kickasstorrents-com-kat-ph-artem-vaulin/
Galuszka, J. (2015, June 2). Three-strikes law changes unlikely after five years. Retrieved from http://www.stuff.co.nz/national/politics/69006542/threestrikes-law-changes-unlikely-after-five-years
Gardner, E. (2017). Judge Rules Kickass Torrents Founder Properly Charged With Criminal Copyright Conspiracy Retrieved from https://www.hollywoodreporter.com/thr-esq/judge-rules-kickasstorrents-founder-properly-charged-criminal-copyright-conspiracy-1026890
Gross, D. (2012, January 21). What’s the controversial site Megaupload.com all about? Retrieved from http://edition.cnn.com/2012/01/20/tech/web/what-is-megaupload/
iCloud Terms and Conditions. (2017). Legal, Internet services. Retrieved from https://www.apple.com/nz/legal/internet-services/icloud/en/terms.html
Kozlov, V. (2015, February 16). Russia’s Vkontakte Takes Baby Steps Toward Copyright Respect. Retrieved from http://www.billboard.com/articles/news/6472992/russias-vkontakte-takes-baby-steps-toward-copyright-respect
L, Chris. (2012, December 9). Seizure of Megaupload. University of San Fransisco – School of Law. Retrieved from http://lawblog.usfca.edu/internetjustice/2012/the-seizure-of-megaupload/
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Marie, A. (2014). The court battle begins for vKontakte (VK.com) against Russia Sony, Warner and Universal. Retrieved from http://www.slyck.com/story2453_The_Court_Battle_Begins_for_vKontakte_VKcom_Against_Russia_Labels_Sony_Warner_and_Universal
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Parloff, R. (2012). Megaupload and the twilight of copyright. (cover story). Fortune, 166(2), 130-140.
Parloff. (2012). Megaupload and the twilight of Copyright (cover story). 166(2), 133-140.
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Torrie, B. (2011, September 4). Where you stand under new copyright law. Retrieved from http://www.stuff.co.nz/technology/digital-living/5558008/Where-you-stand-under-new-copyright-law
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White, K. (2012). More notes on Federal Criminal Law and the Megaupload case. Retrieved from https://popehat.com/2012/01/24/more-notes-on-federal-criminal-law-and-the-megaupload-case
Appendices:
Appendix 1.0 Copyright Infringement Charges on Megaupload
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