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Copyright Infringement Cases on the Rise in Federal Court

Recently, the U.S. government seized and shut down the website megaupload.com, which it accused of illegally distributing copyrighted materials to users all over the world. On the same day, authorities in New Zealand arrested the site’s founder and 3 others involved with the site. According to the Department of Justice, Megaupload was an “international organized criminal enterprise allegedly responsible for massive worldwide online piracy of numerous types of copyrighted works….” The government claims that intercepted emails from the defendants show that they not only allowed users to download copyrighted material, but that they did so knowingly, and sought profit from the illegal activity.

According to the grand jury indictment, megaupload.com and the company’s other websites have illegally generated over $175 million in profits and cost copyright holders more than $500 million. In addition to arresting 4 individuals—out of 7 named in the indictment—the New Zealand government has seized $50 million of the company’s and defendants’ property and other assets. Each of the defendants face up to 20 years in prison if convicted of conspiracy and copyright infringement charges.

On the same day, one of the co-founders of ninjavideo.net, a file-hosting website shut down by the government in 2010, was convicted on criminal charges of copyright infringement and sentenced to 14 months in prison, plus fines, forfeitures, and a period of supervised release. Matthew David Howard Smith, as well as four other administrators of Ninjavideo, were indicted based on allegations that their website was used to distribute high-quality copies of copyrighted music and movies to millions of visitors, making them hundreds of thousands of dollars from advertising in the process. The Ninjavideo prosecutions took place in the Eastern District of Virginia, the same district in which Megaupload is being prosecuted.

Megaupload was a type of website known as a “cyberlocker,” where users would upload their own files and make them accessible for other users to download. Cyberlockers have been claimed to generate as much as 7% of all internet traffic, megaupload.com being one of the largest among them. Other web services were used to search the contents of cyberlockers and to retrieve files, so the website administrators are not actively sorting through the files that users upload. The sites are typically free to use but charges fees for advanced features and easier accessibility. Ninjavideo.com was not a true cyberlocker, but was rather a site that allowed its users search for and retrieve content from the cyberlockers that actually hosted copyrighted materials.

An attorney for Megaupload recently spoke on behalf of the company and claimed that the company’s actions were in compliance with existing law and the seizure and shutdown of the website was illegal and violated the defendants’ rights. He pointed out that the company has never been successfully sued or prosecuted, and was not even contacted about potential criminal violations before the indictment was signed. He compared the website to Youtube, which the Supreme Court has held has a legally valid use, even though it is also used by individuals to distribute some copyrighted content.

Online piracy of copyrighted materials has made headlines in recent months with attempts to pass anti-piracy legislation in Congress and massive online protests against the laws, which many consider to be too broadly written and to give the federal government to seize and shut down websites without judicial hearings or any type of due process of law. Such powers, they claim, are authoritarian and could be easily used to censor web content. Supporters of anti-piracy legislation claim, on the other hand, that broad grants of authority like those contained in the Stop Online Piracy Act (SOPA) are necessary because copyright pirates are primarily located abroad, outside the normal reach of U.S. law enforcement. However, the New Zealand-based Megaupload may now show that current laws are actually sufficient to stop and prosecute online piracy.

With mounting pressure from the entertainment industry, Congress is likely to continue aggressively prosecuting online distributors of copyrighted works, and sometimes individual users as well. As these cases show, copyright infringement can carry enormous penalties and substantial jail time. The legal issues involved in both criminal and civil copyright cases can be extremely complex and, if you have been accused of copyright infringement, it is essential to seek representation from an experienced federal criminal attorney to protect your rights.