22 January 2012

Interwebs, Save Your Anger for Kim Dotcom

Dotcom Mansion.  Source: Google MapsFor the second week running, I find myself feeling compelled to stray from the core subject matter of this blog to express a personal view outside my area of professional expertise.

It seems likely that anyone who is interested in intellectual property and the internet would be familiar with the events which took place last Thursday just outside Auckland, New Zealand, involving a dramatic raid on ‘Dotcom Mansion’ (pictured), the arrest of Megaupload founder Kim Dotcom (nee Schmitz), and the seizure of various allegedly ill-gotten gains, including guns, millions of dollars in cash, and luxury cars worth around US$5 million.  If not, there is plenty of coverage to help you get up to speed, such as New Zealand Arrests Over Megaupload Shutdown and Kim Dotcom: Megaupload Founder Arrested In New Zealand from the Huffington Post.

Predictably, there has been a huge outcry from opponents of internet censorship, blaming everyone from the Hollywood movie studios, to an overzealous US Department of Justice, the US government, the FBI, the New Zealand authorities, and anyone else with a vested interest in not having their copyright works ripped off and distributed for free throughout the internet.

But if all of this ends badly for freedom on the internet – and it is entirely possible that, one way or another, it will – in my opinion the blame should be laid squarely at the feet of those actually responsible for the current situation, i.e. Kim Dotcom and his fellow principals at Megaupload.


There are two arguments generally put forward as to why the Megaupload indictments represent a threat to freedom on the internet.  The first is simply that they are somehow indicative of the power of copyright-owning lobby groups who will stop at nothing to stamp out illegal file sharing, and do not care how much collateral damage they cause in the process.

This amounts to an expression of disillusionment in the democratic process, however last week’s protests against the US Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA) demonstrate that democracy is alive and well in the internet age, and that elected representatives can be made to hear the voice of the people, if they shout loud enough.

The second argument is, in my view, more subtle, but also of greater validity.  It stems from the fact that when the authorities become aware of someone possibly being involved in illegal activity, there is nothing they can do about it without first building a case.  This involves identifying laws that are potentially being broken, and then building up the evidence to support the allegations of illegal conduct.

The purpose of a law relating to criminal conduct is to draw a line between legal and illegal activities.  In ideal world, the line would be sharp and bright.  None of us would be in any doubt as to what is ‘allowed’ and what is ‘forbidden’.

Of course, we do not live in an ideal world.  And in the real world, there is always an element in society which deliberately operates at the boundaries of legal conduct, trying to gain financial benefits comparable to those available outside the law, while avoiding the risk of prosecution.  This is commonly observed in relation to tax laws – most of us are fairly conservative, and stay well within the law, but there is also no shortage of people willing to dabble in various dubious investment schemes in order to further reduce their tax bills.

And, based on the content of the 72 page US Department of Justice (DoJ) indictment, it seems that whatever else Dotcom and his team may have been, they were not ignorant of the law.

The issues that this raises have been well summarised by Techdirt’s Mike Masnick in his article Megaupload Details Raise Significant Concerns About What DOJ Considers Evidence Of Criminal Behavior.  I disagree with Masnick that the indictment has anything to do with evidence – which is something separate that the DoJ will need to bring forward at trial in order to prove their case – but this is probably just semantics, and certainly the indictment raises concerns about where the dividing line is between legal and illegal conduct, and the impact this case may have upon the future powers of copyright holders to deal with alleged online infringements.

Masnick notes that a number of the elements of the DoJ case could be interpreted as the legitimate actions of someone endeavouring to comply with the law, rather than the duplicitous actions of someone attempting to conceal illegal activities.  These include the absence of a site search feature on Megaupload, the automatic deletion of files that have not been accessed for a period, and not listing infringing content in ‘top downloads’ lists.  All of these are features of many reputable sites, and have been found in the past to mitigate against liability by operators for infringing activities of their users.

There is a third interpretation, which is that Megaupload’s actions could have been deliberately taken in an attempt to stay within the letter of the law, while all along flouting its spirit for financial gain.  In any case, I suspect that Masnick’s article will prove to be a template for Megaupload’s defence when and if the matter comes to trial.

The risk, of course, is that if a court finds against Dotcom and Megaupload on any of these individual issues, it has the potential to create a precedent and a new basis for copyright holders to take action against the operators of sites carrying allegedly infringing user content.  And this could be the real threat that the Megaupload case presents to the internet.


The DoJ indictment alleges that Megaupload has generated more than US$175,000,000 in income, and caused over US$500,000,000 in harm to copyright holders.  It further alleges that in 2010 alone, Kim Dotcom personally received over US$42,000,000 from the activities of Megaupload.

However rubbery these figures may be in reality, there is no doubting the size of the Dotcom mansion, or that Dotcom has become a very rich man from Megaupload.

Now if (and these are still allegations, at this stage, of course) this massive wealth has come substantially as a result of rampant copyright infringement on the Megaupload and related sites, and if Dotcom and the other company officers were well-aware of this fact, and if the manner in which they operated the sites was intended to immunise them against liability and prosecution, then the rest of us who actually have to work to earn a far more modest living should be cheering on the sidelines to see these abusers of technology and the law brought to justice!

The fact that many are not perhaps proves only how blinkered some have become, in pursuance of their own self-interest, to the interests of others.  Copyright holders are people too, and most of them are not Rupert Murdoch!

Unfortunately, as far as I can see this case has only two possible outcomes, and it may be that neither of them would be good for freedom on the internet.  If Dotcom and his Megaupload colleagues are found guilty, it will almost certainly result in some degree of further restriction to the legal defences available to operators accused of liability for their users’ infringements.  But if they are not found guilty, it will only strengthen the resolve of those who believe that existing laws are not strong enough, to push through even more draconian laws, such as SOPA and PIPA.

And if either of these outcomes eventuates, it will not be the fault of copyright holders with legitimate concerns, or authorities acting on those concerns.  The blame will lie squarely with those who have sought to exploit the blurry boundaries of legality for their own enrichment.


Last week I wrote about the plight of young British man Richard O’Dwyer, who is facing similar extradition proceedings in the UK as those Dotcom and his co-accused will now face in New Zealand (see UK Court Allows Extradition of Alleged Copyright Criminal).  Morally and technically, the magnitude of O’Dwyer’s offences in setting up a linking site are miniscule compared to the scale of Megaupload’s file hosting activities.  The same can be said for the relative financial gain obtained.  And yet both find themselves in substantially the same position.

The authorities in all countries involved may well just be doing their jobs, but it is clear that copyright law is a very blunt instrument for the task.  It is difficult for people to feel that the law provides an appropriate balance between different interests when it is unable to distinguish between a person such as Richard O’Dwyer and an operation like Megaupload. 

The law will never be perfect.  However the authorities could, if they so wished, show a little more discretion in its deployment.  Failure to do so can only result in respect for the law being further undermined.  And that is a bad outcome for everyone.


dk said...

People who are protesting against SOPA and PIPA appear to suggest that IP theft is an acceptable conduct...

Patentology (Mark Summerfield) said...

Actually, I think that the 'anti-copyright brigade' is a small minority. However it its disproportionately visible on the internet.

The reasonable protests against SOPA and PIPA are based on the fact that the legislation, as currently proposed, will give copyright holders too much power to shut down legitimate sites on the basis of allegations of copyright infringement.

Imagine if Patentology could be taken down because some other blog hosted on Google's Blogger platform was alleged to be infringing copyright. It is said that SOPA would allow that to happen.

dk said...

SOPA provisions do not need to be so rigid and restrictive. Perhaps the authorities could take abit more time to consider amending some of the provisions associated with the enforcement aspects of the law. 

Unknown said...

The Dotcom case has a more sinsiter undertone too. Regardless of the alleged conduct of Dotcom, in any criminal proceeding, there are procedural guidelines to be followed. If these are not followed, and evidence gained from them may be procedurally unfair, illegal and not admissible.

The US government, which appear to be so heavily in the pocket of the US content providers, have treated NZ territory and law as being a side issue (e.g. can a man be extradited from NZ for something which may not even be a criminal offence in NZ? Was their evidence obtained by illegal spying on permanent residents of NZ?), and have been so overreaching in their power to seize and destroy without first obtaining a court order therefor in their eagerness to arrest and convict Dotcom, they have overridden normal established criminal processes.

This may mean that they have shot themselves in the foot, probably delivering a fatal wound to their case and their evidence, and leaving themselvs open to being sued by Dotcom (and others) for loss of income.

I am not saying that what Dotcom did was good or even legal. But even the big boys of international copyright content providers cannot act outside the law.

Unknown said...

I heard an argument that said that technology (the invention of the vinyl record) changed the market to make it possible for managers of copyright content providers to make huge profits (as opposed to just playing live shows). Now technology has changed again, and they are struggling to come to terms with it. On one hand it makes it even easier for them to make money, since no actual expenses on vinyl or physical distribution is required, but on the other hand copyright infringement is likely to be more prolific.

Given the enormous revenues generated by copyright providers, it should be their duty alone to monitor and police the people actually infringing copyright (not those that just provide an engine for general sharing of files), by monitoring and challenging the actual infringers (i.e. actually doing some work, instead of sitting back and raking in cash).

The businesses that provide for sharing of information are useful to businesses and economies as a whole for other aspects than just copyrighted content sharing. many independent businesses were supported by Megaupload's sharing abilities, and went under when it was all frozen.

Also, the sheer scale of the numbers of files being shared and moved every day (in encrypted and unencrypted form) makes it almost impossible for the enablers to keep track of what is legal, and what is illegal. Who is to say a copyrighted work has not been shared on their sit legally after obtaining a license?. How can service providers be expected to check on this?

It is the job of the content providers alone to police infringement, since this is what the musicians etc PAY THEM FOR. Big Copyright are refusing to face up to what their new responsibilities are in this new technological landscape, and abrogating their responsibilities and duties to others, while raking in additional profits.

Unknown said...

I agree with you up to a point, but I don't think it is quite so simple as saying that sole responsibility for policing lies with the copyright owners.

The thing about copyright infringement is that there are some forms, i.e. large-scale piracy and counterfeiting, for which the wider social harm equals or even outweighs the damage to individual copyright holders (however large they may be). Bootlegging, piracy and counterfeiting have been linked to money-laundering, organised crime and even (perhaps less credibly) terrorist groups. It is self-evident that these activities can be at least as profitable, and far less hazardous to one's life and freedom, than more traditional forms of illicit money-making such as extortion and drug trafficking!

For these types of activities, it is pretty clear that state investigation and enforcement, and criminal sanctions, are entirely appropriate.

But for ordinary, run-of-the-mill acts of infringement by individuals, I concur that it is a civil matter, and responsibility for policing and enforcement lies with the copyright owners. In the vast majority of cases, of course, the economics of pursuing individual infringers do not add up, which is why "Big Copyright" keeps pushing for more ways to create liability for "facilitators", and to place responsibility on ISPs to police the activities of their customers.

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