US files charges against Megaupload in 'largest copyright case'

US prosecutors say that the video-sharing site Megaupload.com cost the US entertainment industry $500 million. Online activists worry the US case could stifle Internet freedoms around the world.

In New Zealand, police had to cut through an iron door of a safe room to get their fugitive, Kim Dotcom, the founder of an Internet-based video sharing site called Megaupload.com.

Mr. Dotcom (a German citizen born as Kim Schmitz), along with six of his colleagues, has been charged with criminal copyright infringement, racketeering, and money laundering.

Meanwhile, a worldwide network of hackers took up the battle on behalf of Megaupload.com, launching a massive denial-of-service attack on several entertainment websites, as well as on the US Department of Justice website.

The mayhem and legal proceedings are just the opening shots in what US prosecutors are calling the largest criminal copyright case ever, and involves $500 million in damages to the entertainment industry, as well as complex legal issues of what constitutes copyright infringement in the age of YouTube, Facebook “liking,” and DVD burners. And the legal battle is likely to reverberate around the world, as countries contemplate their own laws over intellectual property rights.

If found guilty, Dotcom and his Megaupload associates – who are thought to have earned up to $175 million by selling advertisements on their website –could face 20 years in prison.

The Washington Post quoted Sen. Patrick Leahy – author of the controversial Protect IP Act (PIPA) – praising the arrest of Dotcom.

“Today’s action by the Department of Justice against the leaders of Megaupload.com shows what law enforcement can do to protect American intellectual property that is stolen through domestic Web sites,” the Post quoted Leahy saying.

The New York Times quoted Ira P. Rothken, a lawyer for Megaupload, as saying in a Times phone interview, “Megaupload believes the government is wrong on the facts, wrong on the law.”

Supporters of the PIPA and Stop Online Piracy Acts (SOPA) going through Congress argue that those who create entertainment, from novelists to hip-hop artists to movie directors, deserve the legal protective environment that allows them to be paid for their work. Online activists worry that the SOPA and PIPA bills, if enacted, take things too far and would stifle the sharing creativity that is the very essence of the Internet.

US prosecutors accuse Dotcom of running a virtual mafia, and the Paris paper, Le Monde, quotes an e-mail by a Megaupload employee, showing that the company knowingly skirted the law, creating an environment for law-breaking on an industrial scale.

“We are not pirates,” Le Monde quoted the e-mail as saying. “We provide boats to pirates.”

Following massive online campaigns, several former supporters of new anti-piracy laws had begun to back away from SOPA and PIPA, but the new arrests indicate that US officials feel they have strong enough legislation in place to take action against companies such as Megaupload, even if those companies operate overseas.

The online hacking community, meanwhile, has responded in its own way, effectively shutting down the websites of the White House, the US Department of Justice, as well as the websites for entertainment companies Warner Brothers and Universal Music.

The Guardian quoted a statement from a hackers’ group known as Anonymous explaining their actions in support of Megaupload, posted on the collective’s website.

"We Anonymous are launching our largest attack ever on government and music industry sites. The FBI didn't think they would get away with this did they? They should have expected us."