The lead attorney for Kim Dotcom and Megaupload, Ira Rothken of San Francisco, says that Megaupload was a "cloud storage" business whose technology was "nearly identical" to that used by such legitimate businesses as Dropbox, Microsoft (MSFT) SkyDrive, and Google Drive. "Megaupload appears to be the perfect example of something protected under the Sony doctrine," Rothken says, referring to the landmark 1984 U.S. Supreme Court case Sony Corp. of America v. Universal City Studios. In that case, the court found that Sony, in selling its Betamax videotape recorders, could not be held liable for the fact that some customers might use them to infringe copyrights.
To a layperson, calling Megaupload "cloud storage" might sound absurd. At the time of the raid, 91% of Megaupload's 66.6 million registered users had never stored anything there, according to the indictment; they just downloaded or streamed what other people stored. In addition, legitimate cloud storage services have different features and business models -- for instance, limiting the number of downloads per day; having password-protected lockers; not paying people to upload popular files -- that render their systems poorly suited for mass distribution of copyrighted materials.
Megaupload founder and flamboyant bon vivant Kim Dotcom has had to give up Caribbean vacations and German nightclubs since his arrest in New Zealand for criminal copyright infringement. The U.S. government now seeks forfeiture of his bank accounts, Jet Skis, mansions, and 25 luxury cars.
Yet under existing law, Rothken is making an infuriatingly defensible contention. The fact that Megaupload could have easily been designed in ways that discouraged infringement is legally irrelevant. Unlike a lawn mower manufacturer, which is held liable for injuries caused by its products if they could have been cheaply avoided by a safer design, tech companies have no comparable duty to minimize the damage their products cause to copyright holders.
