June 29, 2012, 1:58 PM — A U.S. judge may hold an evidentiary hearing to determine whether the U.S. Department of Justice acted improperly in blocking Megaupload customers' access to their files when seizing the file-sharing service's domain name and servers in January.
Judge Liam O'Grady, of the U.S. District Court for the Eastern District of Virginia, also said Friday he will schedule a hearing for Megaupload's motion to dismiss the copyright-infringement charges against the site and its founder Kim Dotcom. Megaupload's lawyers filed the May 30 motion to dismiss on grounds that the DOJ lacks jurisdiction to prosecute the Hong Kong-based Megaupload.
Friday's hearing focused mostly on the petition of Kyle Goodwin, a video journalist who stored duplicates of his videos at Megaupload, to get his files back. If the DOJ seized the data "and rendered it useless, then the government can be held responsible for that, can't it?" O'Grady asked.
O'Grady told lawyers for the DOJ and Goodwin that he is considering a search-and-seizure hearing to determine if the DOJ improperly seized the files of Goodwin and other Megaupload users. O'Grady did not decide at the Friday hearing whether to move forward with a so-called rule 41 search-and-seizure hearing.
The DOJ didn't seize Goodwin's data, and for a rule 41 complaint to be justified, the DOJ would have to hold the property in question, said Andrew Peterson, an assistant U.S. attorney in the Eastern District of Virginia. The DOJ seized Megaupload's domain name and made copies of some of its servers, but Goodwin's data still resides on servers owned by Web hosting provider Carpathia Hosting, he said.
"The government does not possess the property at issue," he added.
Instead of a search-and-seizure hearing, the court should treat Goodwin and other Megaupload users as unsecured creditors who can ask for their data back when the DOJ's case against Megaupload is finished, he said.
In April, O'Grady encouraged lawyers for the DOJ, Goodwin, Megaupload and Carpathia to meet with a mediator and come to an agreement on a way Megaupload customers could recover their files. No agreement has happened.