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The Department of Justice has just shut down cyberlocker Megaupload, arrested a number of its executives including founder Kim “Dotcom” Schmitz, and seized $50 million in assets. Megaupload was in the news last month for its spat with Universal over an allegedly fraudulent DMCA takedown of a promotional music video. Now the DoJ has announced it has been investigating the company for two years, and finally decided to move. Ars Technica reports:

The indictment charges that the "Mega conspiracy" has for more than five years operated websites that willfully distributed pirated movies, often before their theatrical release, and other illegal copies of copyrighted works, earning the company over $175 million in illegal profits through advertising revenue. Megaupload is also charged with money laundering by paying uploaders through an "uploader reward program," and paying other companies to host the pirated content.

Another Ars piece goes into a lot more detail on the charges and supporting evidence the DoJ brings to its case. The DoJ holds that the DMCA’s safe harbor provisions do not apply to Megaupload because the company’s employees were fully aware that they were illegally offering copyrighted content (including, of course, e-books)—and company email and chat logs prove it.

The company also charges that the DMCA file removal tools Megaupload offered didn’t really remove the files, just one of the (potentially many) links to its location. It paints the site as seeking a veneer of legitimacy by planning to file suits against its competitors while being fully aware of how bad its own behavior was.

Not necessarily all of what the DoJ accuses is actually illegal, however. Law professor James Grimmelman told Ars that many of the practices listed in the indictment were industry-standard promotional techniques, such as premium subscriptions and rewards for active users, that are used by many fully legitimate sites. Says Grimmelman:

"I hope that if this case goes to trial and results in convictions, that the court will be careful in sorting out just what Megaupload did that crossed the line of criminality."

Of course, the shuttering of Megaupload doesn’t just hurt pirates, as there were a lot of legitimate files shared through it. For example, mods for The Elder Scrolls III: Morrowind were hosted on a variety of cyberlocker sites, including Megaupload, and any Megaupload links will now no longer work.

It also calls into question whether any of the other user-upload cyberlockers, such as RapidShare and HotFile, are long for this world either. I can’t imagine that investigators would focus on only Megaupload to the exclusion of the others. Undoubtedly Megaupload was the rottenest apple of the bunch, but it didn’t seem to offer a markedly different service from the others.

Something else a lot of sites are pointing out is that this comes right after the anti-SOPA/PIPA blackout, and seems to demonstrate that we don’t need any additional laws to take down pirate operations—the DoJ is having no trouble knocking down Megaupload with the laws currently on the books.

Of course, not everyone is happy about this, and today we’re seeing a different kind of “blackout” as Anonymous attacks the websites of the Department of Justice, the White House, the MPAA, the RIAA, and various other entities. Way to make Megaupload’s defenders look good, guys. With “friends” like that, it’s doubtful Megaupload needs any additional “enemies”.

 
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