U.S. Judge Denies Megaupload's Motion to Dismiss Copyright Case

Megaupload Logo - H 2012

Megaupload Logo - H 2012

U.S. District Court Judge Liam O'Grady has rejected Megaupload's attempt to escape prosecution for allegedly committing  massive copyright infringement.

Attorneys for Megaupload argued that the company was foreign-based and that the U.S. government was unable to satisfy the correct procedures to properly serve a summons.

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Federal prosecutors reacted to this argument by telling Judge O'Grady this "line of reasoning leads to the incredible conclusion that foreign corporations can commit crimes in the United States without risk of being brought to justice here."

Point goes to the U.S. government.

In a decision on Friday, the federal judge terms Megaupload's dismissal demands to be "extreme" and denies the request.

In January, federal prosecutors brought criminal action against seven Megaupload employees, including founder Kim Dotcom. Along with charging specific individuals with crimes including criminal copyright infringement, racketeering, money laundering and fraud, prosecutors are also attempting to hold criminally liable Megaupload as a corporation.

In asking for a dismissal, the company's lawyers pointed to Rule 4 of Criminal Procedure, which indicates that a summons be mailed to the company's "last known address within the district or to its principal place of business elsewhere in the United States."

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The U.S. government attempted to deliver summons to Megaupload's address in Hong Kong, and told the judge that Megaupload was clearly aware of the proceedings.

The criminal proceedings against Megaupload won't end because the judge doesn't think that the remedy for any defective summons service is dismissal.

"Rule 4 does not require a result so extreme as dismissal, and to this Court's knowledge, no court has ever dismissed an indictment for failure to meet Rule 4's secondary mailing requirement," the judge writes in his order.

Judge O'Grady echoes the government's belief that the rules weren't intended to be interpreted for the evasion of foreign defendants. He writes, "It is doubtful that Congress would stamp with approval a procedural rule permitting a corporate defendant to intentionally violate the laws of this country, yet evade the jurisdiction of United States' courts by purposefully failing to establish an address here."

The judge goes onto to make his own interpretation of Rule 4, saying that mailing a summons to the address of corporation's alter ego is the same as mailing the summons to the corporation itself. Often, that means mailing it to the domestic subsidiary of the foreign company; here, it could mean Kim Dotcom if he's ordered to be extradited at a later point.

"So long as the government could prove that an individual defendant is an alter ego of the corporate defendant, the government could satisfy Rule 4's mailing requirement by mailing a copy of the summons to one of the individual defendants once that defendant is extradited to this district," writes the judge.

The extradition hearing of Kim Dotcom is scheduled for next March.

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