On January 19, US authorities shut down Megaupload.com, a Hong Kong-based digital storage and file sharing company. Megaupload provided a cloud service that enabled users to easily share content, including hosting video and entire music libraries. The site is accused of illegally profiting from the distribution and reproduction of copyrighted work, including movies online before their theatrical release, as well as music, TV shows, e-books, and software. Seven people, including the Megaupload founder, were indicted and charged with engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering, and two counts of criminal copyright infringement. The Justice Department alleged that the accused generated more than $175 million and caused over $1 billion of harm.
The indictment alleges that Megaupload is different than other file sharing sites, and lists a number of points indicating criminal activity. Though Megaupload calls itself a file storage site, most users do not have long term storage capability, as continued storage is dependent upon regular downloads – files that are not quickly downloaded are removed, while popular downloads remain on the site. Megaupload used a rewards program providing financial incentives for uploading popular content that would drive more traffic to the site. Further, though the business is dependent on advertising for most of its revenue, advertisements are primarily viewed only when files are downloaded. Finally, Megaupload users commonly discuss how to find links to infringing content and many have indicated that they use the site primarily for that purpose. Though the Digital Millenium Copyright Act provides a safe harbor for sites that promptly take down infringing material, Megaupload had a procedure of only removing some links rather than the content itself, meaning its activity will unlikely be protected by the safe harbor provision.
After the seizure of the site, many users wondered what would happen to the data they had stored. Federal officials have finished reviewing the data they wanted to look at, and the fate of the stored files is now in the hands of two hosting companies in Virginia. Users, even those who stored legitimate files, are in danger of losing all their information (though Megaupload is currently in negotiations to preserve the data). This raises questions about users’ rights to data they have stored in the cloud and undermines the security many feel in having their files backed up online.
The takedown of Megupload has affected not only its users, but the internet community as a whole. The Megaupload takedown occurred immediately following the online protest of SOPA and PIPA, and internet activists retaliated once again. “Hacktivist” group Anonymous took credit for taking the Department of Justice’s website and others offline through denial of service attacks. The takedown has also shaken some members of the cyberlocker community, as similar sites began acting on their own in fear of being the next company under scrutiny by US authorities. Uploaded.to now refuses to accept traffic from the United States, while FileSonic, a popular file sharing website has suspended all file sharing on its site. However, other file-sharing services such as MediaFire and Dropbox have expressed confidence they won’t be targeted by law enforcement, despite the fact that those sites can also be used to download copyrighted material. As the Megaupload case plays out, we will see where the balance falls between harm to copyright holders and harm to society from the impact on the structure of the internet as we know it.