Megaupload lawyers ask for judge to restore business

If the judge won't dismiss the case, he should require the DOJ to refile and release the company's assets, a lawyer for the site says

A U.S. judge should permanently dismiss a U.S. Department of Justice criminal case against file-sharing and storage website Megaupload or allow the company to try to resurrect its business until the DOJ serves the company with the charges, a lawyer for Megaupload argued Friday.

When Judge Liam O'Grady questioned Megaupload's motion to permanently dismiss the criminal copyright charges against it, Megaupload lawyer William Burck suggested the judge could require the DOJ to start over by refiling the charges after serving officers of the company with the complaint. In that case, the DOJ would have to release the Megaupload website and some of the US $60 million it seized from the company in January.

Until the DOJ can serve the company, Megaupload "should have the opportunity to try to rehabilitate itself," Burck said during a hearing in the U.S. District Court for the Eastern District of Virginia.

Lawyers for Megaupload have asked O'Grady to dismiss the criminal case because the DOJ seized the Hong Kong company's website and assets without serving it with the charges. O'Grady didn't rule on Megaupload's motion Friday, but said the case involved several "interesting issues."

Megaupload has argued that DOJ has violated U.S. rules for criminal procedure by not attempting to serve Megaupload, but O'Grady suggested the DOJ could serve the company through a mutual assistance law enforcement treaty with Hong Kong or when officers of the company are extradited to the U.S.

It's unlikely that Congress, when creating the rules for serving criminal charges, intended that a company could "violate our laws indiscriminately from an island on the Pacific," O'Grady said.

Megaupload founder Kim Dotcom is fighting extradition to the U.S. In early July, a New Zealand judge rescheduled an extradition hearing for him from August to next March.

The criminal procedure rules allow for alternative ways of serving companies in civil lawsuits, but not in criminal cases, Burck said. The rules of criminal procedure require service to be made to an officer of a company and by mail to the last known address to the company in the U.S., but Megaupload has no U.S. address, and the DOJ has made no attempts to serve the company, Burck said.

The DOJ could have filed a mutual assistance request with Hong Kong or brought a civil lawsuit -- in which case Megaupload could have continued to operate -- but it chose not to, he said. "We don't think it's a mistake they did this," he said. "We think they did it deliberately."

By seizing the website and assets of a company incorporated in a foreign country without serving it with charges, the DOJ is undermining the sovereignty of Hong Kong, Burck argued.

DOJ lawyer Ryan Dickey argued that there's no time limit for service of criminal charges. The DOJ intends to serve the criminal charges against Megaupload to Dotcom and other company officers when they are extradited to the U.S., he said.

Dickey discounted Burck's arguments that Congress hasn't allowed criminal charges to be filed against foreign companies. In recent years, Congress has made it "crystal clear" it intends to address a worldwide problem of copyright infringement, he said.

"The heart of the issue is weather a foreign defendant ... can commit crimes in the United States and in this district and never be brought to justice," Dickey said.

Dickey opposed Burck's suggestion that O'Grady require the DOJ to refile the charges after serving Megaupload. Getting a new indictment through a grand jury would be a "huge waste of resources," he said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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