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JAN
22
2 YEARS

Too Early To Say Whether Kim Dotcom's Mega Is Legal (Analysis)

Hollywood watches 500,000 users sign up in the service's first 14 hours, but Mega's fate in the courts rests on how they use the storage site.

Kim Dotcom Getting a Movie
Kim Dotcom

Over the weekend, Kim Dotcom launched his much hyped new file-storage service Mega. The site is being described by the flamboyant founder of the controversial Megaupload as a success so far, with 500,000 users signing up in the first 14 hours.

Hollywood is watching closely. Dotcom still awaits a hearing on whether he'll be extradited from New Zealand to face U.S. government charges of committing copyright infringement and racketeering. Law enforcement authorities are pointing to promises that Dotcom made at the time of being freed on bail that he would not relaunch Megaupload.

The new Mega certainly has some differences from the first iteration of Dotcom's file-sharing empire, but will it raise the hackles of copyright owners? The question has been hotly debated in some circles, yet it misses a larger point. It's hard to ascertain copyright infringement liability merely from the looks of a technology; rather, what's important is the human interaction around a technology. And so the legal fate of Mega all depends on what happens next.

EARLIER: Kim Dotcom's Letter to Hollywood

Some are now making the case that Mega 2.0 has solved some of Mega 1.0's copyright problems. The best argument we've seen on that end comes from Jonathan Bailey at the website Plagiarism Today, who has written a critique of the new service in reaction to some of the sentiment out there, including Gizmodo's advance word that it "could dismantle copyright forever."

The most noted feature of Mega is that, unlike other cloud storage services out there like Dropbox and Google Drive, the new service includes client-side encryption, which means that files are encrypted on a user's computer before being uploaded into the cloud. It also means that to download a file, one needs a decryption key, and while those keys might easily be published, Bailey believes that the system isn't particularly convenient to those who wish to use Mega for mass file-sharing. He writes:

"The problem is that this style of encryption is great for point-to-point file transfers. If you want to send a single file to a client or to a friend, all you have to do is securely give them the key and then provide them the link. However, this style of encryption is a major headache for sharing to a mass audience and easier/better tools are available for that end."

Bailey also points out an under-covered aspect of the new service -- bandwidth limits, which he estimates would mean that a "Pro 3" subscriber would only be limited to 12,000 DVD downloads before hitting the limit, short of torrents that facilitate multiples of that amount.

THR Cover: Inside the Life of MegaUpload's Kim Dotcom, the Nerd Who Burned Hollywood

All of that is well and good, but it assumes a static state of affairs where encryptions aren't cracked, where bandwidth limits aren't being worked around and where users obey the rules of the road. Recent technological history suggests those assumptions are naive and the way Mega is used will evolve.

At which point, the question becomes: What does Dotcom do?

By using encryption, Mega's executives say they won't have any idea what files are being circulated. There are two ways to look at this: On one hand, the expression seems to underpin a theory of secondary liability where if one can't see something bad happening, there's no responsibility. On the other hand, the expression could lead to a false sense of confidence that remedying actions for users' bad behavior aren't needed. After all, look no further than copyright owners still pushing courts to punish so-called "willful blindness" to see that argument won't provide the company with immunity from legal action.

Then, there's the issue of what Dotcom will do when takedown notices come in that alert the service to specifically infringing material on the network. Despite some word that Mega would only let Hollywood studios delete uploads if they agreed never to sue, the new service appears to have pretty standard takedown protocol. Here is how the service describes it.

Only time will tell how cooperative Mega will be in response to takedown demands.

RELATED: Kim Dotcom Touts New Site as Legal, 'Fresh Start'

By now, Dotcom has hit back with remarkable PR success at the criminal charges. He's portrayed the allegations as coming from an overzealous U.S. government under pressure from Hollywood interests and intent on stamping out innovation on the technological front. And while we'll leave others to decide the merits of that position, we will observe that there could be a reason beyond Dotcom's outsized personality that he was the one -- rather than, say, the chief of Rapidshare -- who became the target.

During its heyday, Megaupload wasn't simply a storage site. In fact, its visibility was off the charts. The site was one of the easiest -- perhaps the easiest -- site to index insofar as copyright infringing material went. Megaupload made itself rather accessible for a satellite sphere of thousands of other linking websites to point users to the good stuff. The company kept tabs on these linking sites. Dotcom, for better or worse, is a person who cares deeply about the impression that he and his ventures give out.

The other aspect for consideration, should it bear on the future, is how Megaupload once treated takedown notices. According to the government's indictment, Dotcom's former cyberlocker company would put limits on the number of takedowns in a given day, and when served with notices, would falsely represent that user accounts had been blocked and would take down URLs but leave the infringing material on the network.

The allegations await being tested in a criminal court. But what's clear from the government's indictment is that technology is just technology, and what's really important -- at least in the eyes of the law -- is how people interact with technology. There's nothing about the launch of some computer code that can predict where the Mega service goes from here, and how Dotcom and others perform in their user-supporting roles. That happens now.

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner