Movie studios sue Dotcom, Megaupload for copyright infringement

A civil suit alleges that the now-defunct file-sharing site made over US$175 million illegally

Six major U.S. movie studios have sued Megaupload, the Hong Kong company running the now defunct file-sharing website of the same name, and its founder Kim Dotcom for allegedly encouraging and profiting from copyright infringement.

The civil suit filed in the U.S. District Court for the Eastern District of Virginia in Alexandria charges Megaupload and Dotcom, among others, of encouraging its users to upload infringing copies of popular entertainment content, including from the Hollywood studios.

An "Uploader Rewards" program, for example, is alleged to have paid Megaupload users to upload popular unauthorized and unlicensed content to Megaupload's servers.

The website benefited by selling premium subscriptions for unrestricted downloads and online advertising space, according to the complaint. It made about US$150 million from subscriptions and another $25 million from advertisements on Megaupload and associated websites, it added.

The complaint filed Monday comes on top of an indictment by a grand jury in the Eastern District of Virginia in January 2012, which charged Dotcom and colleagues, and two companies including Megaupload with engaging in a racketeering conspiracy, conspiring to commit copyright infringement and money laundering, and two substantive counts of criminal copyright infringement, according to the U.S. Department of Justice. The Megaupload site was shut down and the homes in New Zealand of Dotcom and his colleague Bram van der Kolk were raided as part of the 2012 operation.

Dotcom and his colleagues, who are in New Zealand, are fighting a bid by the U.S. to extradite them to the U.S. to face the 2012 charges.

"Megaupload wasn't a cloud storage service at all; it was an unlawful hub for mass distribution," said Steven Fabrizio, general counsel for the Motion Picture Association of America in a statement.

In the complaint, the studios claim that Megaupload was not designed to be a private data storage service. Any content users uploaded would be deleted if it was not also downloaded after 21 days in the case of unregistered, anonymous users and after 90 days in the case of registered users who were not premium subscribers, according to the complaint. Only the 1 percent of users who were premium subscribers were allowed to use Megaupload for long-term file storage, it added.

The complaint lists 30 movies released by the six major studios that were among the titles pirated, including Ghostbusters and Forrest Gump.

An "abuse tool" provided to allow copyright holders to remove or disable access to copyright infringing files on Megaupload's servers did not function in that way, according to the complaint. If an infringing file on the servers had more than one URL link associated with it, the reporting and deletion of one URL did not result in the deletion of the file which continued to be accessible through other URLs, according to the complaint.

The studios filing the complaint are Twentieth Century Fox Film, Disney Enterprises, Paramount Pictures, Universal City Studios Productions, Columbia Pictures Industries and Warner Bros. Entertainment.

"MPAA studios' civil lawsuit against #Megaupload is a desperate attempt to concoct cover for the DOJ's weak criminal allegations @KimDotcom," wrote Dotcom's lawyer Ira Rothken in a Twitter message. Referring to the charge that Megaupload was encouraging users to upload pirated movies by paying them to do so, Dotcom wrote in a Twitter message that "Files above 100MB filesize did not earn rewards on #Megaupload."

The studios claim they are entitled to unspecified damages as well as the profits of Megaupload.

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