Any Hollywood insiders who thought that President Obama and his Administration abandoned them during the Stop Online Piracy Act legislative debate should reconsider.  The President’s reluctance to support efforts to increase regulation and possibly alter the borderless architecture of the Internet was interpreted as a slight to some of the President’s most fervent supporters.  However, media moguls can rest easy, the arrest of Kim Dotcom in New Zealand demonstrates that the Obama Administration values the contributions of the entertainment industry to the United States economy and is willing to protect those contributions.

Police in New Zealand raided the house of Megaupload.com founder Kim Dotcom, the flamboyant millionaire who is not shy about demonstrating his wealth.  The New Zealand police responded to an indictment issued by the U.S. District Court for the Eastern District of Virginia to extradite Mr. Dotcom to face charges of copyright infringement in the United States.  Megaupload was a self-described cyber-locker.  Cyber-lockers allow users to store data on the website – even copyrighted material.  Despite advertising itself as a cyber-locker dedicated to private storage, many unique attributes of the website contradicted such claims.  For example, deleting material not loaded within twenty-one days, petitioning users to become premium subscribers to decrease download times, limiting non-premium users to seventy-two minutes of streaming video, and maintaining a “Top 100 files” list of popular files to download, all point to the site not functioning solely as a cyber-locker.

The indictment described the cyber-locker site as “mega conspiracy” because the website, allegedly, allowed users to store material anonymously and actively distributed copyrighted material.  Also, the “mega conspiracy” paid users to upload popular material and store it on Megaupload’s servers.  Although the website did not have a search function enabling individuals to search the material hosted by Megaupload, anyone could access hosted material by entering the correct URL.  Theoretically, users interested in accessing copyrighted information could find the links to Megaupload hosted material from third-party sites dedicated to directing users to the infringing material.  The indictment alleges that members of the “mega conspiracy” assisted users and third party sites to access copyrighted material.

The Eastern District was able to assert jurisdiction over the case because servers that hosted material of Megaupload were located in Virginia.  In the future, other websites could structure themselves outside the reach of U.S. law enforcement by locating their headquarters, servers, and infrastructure outside the jurisdiction of the U.S.  If this technique is employed, it may pose problems to Hollywood productions that rely on international distribution to continue to make the movies the world enjoys.

Open Internet advocates are concerned that similar actions by the United States Justice Department could chill development of cloud service providers.  Those advocates may be right. Other cyber-lockers including FileSonic and Upload.to have disabled file sharing devices on their websites.  Whether more popular cloud operators such as Dropbox or Amazon will be affected by the Government’s actions remains to be seen.  The U.S. legislature could not agree on a legal framework to protect copyright holders, but holders are not without legal options.  As exhibited in the recent Megaupload related arrests, the U.S. government will pursue and prosecute infringements to the other side of the globe.

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