Techdirt. Stories filed under "cyberlockers" Easily digestible tech news... http://www.techdirt.com/ en-us Techdirt. Stories filed under "cyberlockers"http://www.techdirt.com/images/td-88x31.gifhttp://www.techdirt.com/ Thu, 30 May 2013 12:04:07 PDT Italian Court Overturns Seizure Of Cyberlocker Rapidgator Mike Masnick http://www.techdirt.com/articles/20130530/07591323252/italian-court-overturns-seizure-cyberlocker-rapidgator.shtml http://www.techdirt.com/articles/20130530/07591323252/italian-court-overturns-seizure-cyberlocker-rapidgator.shtml blocked over two dozen websites after the industry claimed they were responsible for copyright infringement. There was no trial, no adversarial hearing where the sites were able to defend themselves. Just: entertainment industry complains, law enforcement buys the complaints, tells a judge and boom, site gone. One of the cyberlockers blocked in this effort, Rapidgator, challenged this blockade, and it has quickly won a reversal. Rapidgator's lawyer, Fulvio Sarzana, was kind enough to send us the details, and it appears the court understood why the initial blockade was hugely problematic.

The court overturned the ruling that came out of the investigation, and made a few key points, according to Sarzana. He said that court ruled that cyberlockers are legitimate if they have a notice and takedown system, and that the owner of the site is not liable for infringements done by users (basic secondary liability protections). It also said that the seizure of an entire site goes "against the principles of reasonableness, proportionality and adequacy."

Unfortunately, the ruling only applies to Rapidgator, since it was the only one who hired a lawyer in Italy and appealed. In response to the ruling Sarzana issued the following statement:
The copyright holders contend that the only way in which they can obtain effective relief to prevent, or at least reduce infringements of their copyrights is by means of an order against ISPs. But this is stupid since the concerns about over-blocking, and ease of circumvention are widely recognized. Blocking through the ISPs is not a silver bullet to stop web copyright infringement. It is, in fact, a way to balkanize the web.
Having strong secondary liability protections, as well as basic due process before blocking access to sites would be a huge step in the right direction, so it's good to see an Italian court recognize these basic principles.

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]]> big-news http://www.techdirt.com/comment_rss.php?sid=20130530/07591323252 Tue, 21 Aug 2012 05:11:04 PDT RapidShare: It Ain't The Hosting, It's The Linking Mike Masnick http://www.techdirt.com/articles/20120820/11165420101/rapidshare-it-aint-hosting-its-linking.shtml http://www.techdirt.com/articles/20120820/11165420101/rapidshare-it-aint-hosting-its-linking.shtml won a series of lawsuits both in Europe and the US, that found its service to be legit. The company also went on something of a big time charm offensive, hiring a DC lobbyist to improve its image with politicians, as well as being much more proactive with the press. Finally, in the last few months, it's made even more efforts to stop its service from being used for infringing purposes.

The latest thing, though, seems particularly silly. At a conference, the company's Chief Legal Officer, Daniel Raimer, appears to be throwing links sites under the bus by claiming that they're the real problem, and storage sites shouldn't be lumped in with linking sites.

The thing is, both kinds of sites have both legal and illegal purposes, and it's silly and counterproductive for one kind to blame the other kind. Storage sites have perfectly reasonable uses, and RapidShare has been bending over backwards to be a good player in that space. But a user-generated site that includes links to content also can have perfectly legitimate and legal uses, and it seems particularly silly to assume otherwise. From a legal standpoint, both kinds of sites should have reasonable protections against infringement (though that doesn't always appear to be true once things get to court). But, even then, storage sites probably even have less of a reasonable claim under copyright law, because actual copies (reproduction rights) and distribution could potentially be attributed to them (though, clearly, they have reasonable claims of safe harbors). With links sites, they neither store nor transmit the content, and it's difficult to see how they infringe on any of the key rights associated with copyright, even outside of the basic safe harbors.

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]]> quick,-look-over-there! http://www.techdirt.com/comment_rss.php?sid=20120820/11165420101 Tue, 17 Jul 2012 05:14:47 PDT German Supreme Court Suggests Cyber Lockers Need To Filter Content If Alerted To Copyright Infringement Mike Masnick http://www.techdirt.com/articles/20120716/16050119718/german-supreme-court-suggests-cyber-lockers-need-to-filter-content-if-alerted-to-copyright-infringement.shtml http://www.techdirt.com/articles/20120716/16050119718/german-supreme-court-suggests-cyber-lockers-need-to-filter-content-if-alerted-to-copyright-infringement.shtml confusing, mixed ruling in one, there's now been another confusing and mixed ruling at the federal Supreme Court in Germany.

The ruling basically found that RapidShare is not liable for uploads directly, but if it's told of an infringing file, it should have a system in place to prevent that file from being uploaded back into the service. It sounds like the courts are magically deciding that if you host any kind of user-generated content, you have to have a filter in place that consistently blocks content once it's been indicated as infringing. That seems problematic for a few reasons. First, the context of a file being uploaded matters a great deal. As we've seen with Viacom, one person's infringing upload may be the same company's attempt at viral marketing. Doing a full-on block may block legitimate content. Furthermore, the context of the usage seems to matter quite a bit. A short clip with commentary could be fair use, but also could be blocked under such a system. Requiring a filter could also be quite expensive.

On top of that, Rapidshare is focusing more on personal backup, and there are lots of cases where a personal backup isn't infringing, but the system the court is requiring could block such uses. While the judge apparently dismissed this concern because of Rapidshare's name ("The service is called RapidShare and not RapidStore... and that says it all.") that's really troubling. Just because the company is called "RapidShare" it does not mean that's all the company can do. Lots of companies change over time, and it's a little crazy for a judge to hold them to exactly what their original name says.

Either way, the court has sent the case back down to the lower court to determine if Rapidshare had successfully blocked repeat infringement, so this case is far from over...

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]]> how-does-that-work? http://www.techdirt.com/comment_rss.php?sid=20120716/16050119718 Wed, 4 Apr 2012 09:40:00 PDT Hollywood Continues To Kill Innovation, Simply By Hinting At Criminal Prosecution Of Cyberlockers Mike Masnick http://www.techdirt.com/blog/innovation/articles/20120403/18090818360/hollywood-continues-to-kill-innovation-simply-hinting-criminal-prosecution-cyberlockers.shtml http://www.techdirt.com/blog/innovation/articles/20120403/18090818360/hollywood-continues-to-kill-innovation-simply-hinting-criminal-prosecution-cyberlockers.shtml shut down Megaupload, that it was creating massive chilling effects on all sorts of online cloud businesses -- leading some to already turn off useful services that consumers and businesses relied on.

It appears that process is continuing. Last week, Paramount's VP of "Content Protection," Alfred Perry, made a ridiculous and childish presentation in which he effectively put criminal targets on the backs of five companies, and suggested that they were all no different than Megaupload, and that the government was coming for them next:
I find it amusing, by the way, that they've dropped RapidShare from the list. The company, which does offer the same basic services and gets a ton of traffic, has actually been one of the only cyberlockers who has hit back against Hollywood where it counts: with Washington DC lobbyists. RapidShare, of course, has also been found legal by multiple courts, because it follows the basic precepts of the DMCA and takes down infringing content when it discovers it. But the thing is, many (if not most) of the other sites on this list do the same thing.

The end result, however, is that the five sites on the list have been forced to go on the defensive hoping to avoid criminal prosecution with the federal government twisting everything they do to present it in the worst possible light.

MediaFire fired back at Perry, pointing out that the company is a large legitimate company run by reputable entrepreneurs, and one that has always worked with the MPAA and RIAA to stop the spread of infringing content. Similarly, PutLocker has fired back, telling TorrentFreak that Perry's comments were defamatory:
In any other industry, a person making this type of statement could be sued for libel. Funny how that works,” PutLocker Operations Officer Adrian Petroff told TorrentFreak.

“PutLocker takes a strong stand against copyright infringement and in the past year and a half we have taken down hundreds of thousands of infringing files and blocked the accounts of hundreds of repeat offenders,” adds Petroff. “PutLocker always cooperates with copyright holders and law enforcement agencies at home and abroad to uphold the rights of content producers and distributors alike.”
But the chilling effects here are very, very real. Two of the other five sites on the target list have now effectively made themselves useless for sharing legitimate files worldwide -- one of the key use cases for cyberlockers. FileServe and Wupload have turned themselves into pure backup services, rather than file sharing services, to avoid the risk of criminal prosecution.

Now, critics of these sites will rejoice in these two sites shutting down a useful feature. They'll insist that this proves either that they're "winning" the battle, or that these sites are somehow admitting that they were facilitating infringement. But that's a dangerous misreading of the situation. Were these sites used to infringe? Absolutely. But so was the VCR. So was radio. So were photocopying machines. So were DVRs. So were computers. The fact is that innovation leads to breaking down the old rules by enabling something new and useful.

And that's the real key here. Perry and the rest of the Hollywood legacy "content protection" crew freak out about 41 billion page views. What they ignore is that the reason there were 41 billion page views was because these sites were offering something useful that people wanted. But Perry isn't in the business of recognizing what the market wants. His very job title makes it clear that his job is holding back the tide. It's about "content protection" in a world where content can't be protected. If Paramount were run by execs who actually had vision and understood innovation, they'd see 41 billion pageviews and their eyes would light up at the massive opportunity. Just imagine what you could do with 41 billion pageviews? And, if you were a company like Paramount and could offer your content up legally, you'd have a huge head start over the cyberlockers. If anything is criminal here, it's the incredible shortsightedness of Paramount's execs, to spit in the face of consumers and a massive business opportunity for themselves.

Even worse, they're doing so by simply declaring innovative websites guilty of criminal charges, despite no actual charges being filed, no trial, no evidence and no chance for these companies to make their case. From a legal standpoint, this is despicable. It's standard operating procedures for a flailing, out of touch, anti-visionary company, however. It's just too bad that the world is letting a company like Paramount (and its parent company, Viacom) get away with such practices.

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]]> sickening http://www.techdirt.com/comment_rss.php?sid=20120403/18090818360 Wed, 28 Mar 2012 07:06:44 PDT Rapidshare Declared Legal (Again) In Germany, But With A Bizarre Requirement To Monitor Other Sites Mike Masnick http://www.techdirt.com/articles/20120327/18151218264/rapidshare-declared-legal-again-germany-with-bizarre-requirement-to-monitor-other-sites.shtml http://www.techdirt.com/articles/20120327/18151218264/rapidshare-declared-legal-again-germany-with-bizarre-requirement-to-monitor-other-sites.shtml ruled against Rapidshare, which some thought went against earlier rulings that had found the company's model legal in both Europe and the US. Considering that Rapidshare is quite frequently compared to Megaupload (despite some significant differences), these cases are pretty important. When I saw that announcement a couple weeks ago, I also heard from some people in Germany who said to wait until the full ruling was out before assuming that the news making the rounds -- which was being pushed by the entertainment industry -- was accurate. Indeed, now that the details have come out, the ruling is much more mixed, and is mostly a victory for Rapidshare. It effectively says that Rapidshare's business is legal -- and this comes from a German court that has a history of suggesting that service providers need to be copyright cops.

In this case, that is the one questionable part of the ruling. While the court does not say that Rapidshare needs to police uploads, it does say that the company needs to police external links to the site and then disable the files if they are obviously infringing. This doesn't make much sense if you think about it. It seems odd that Rapidshare should be forced to monitor what third party users on fourth party sites are doing, and then take action based on that. But, it appears the company may appeal that part. And, for the time being, a ruling that acting as a hosting provider/cyberlocker is legal is an important and useful ruling, in a court not known for handling copyright cases very well.

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]]> how-does-that-make-sense http://www.techdirt.com/comment_rss.php?sid=20120327/18151218264 Tue, 13 Mar 2012 13:10:52 PDT Megaupload Negotiating To Let US Gov't Officials (And Everyone Else) Retrieve Their Legit Files That Were Taken Down Mike Masnick http://www.techdirt.com/articles/20120313/04350018087/megaupload-negotiating-to-let-us-govt-officials-everyone-else-retrieve-their-legit-files-that-were-taken-down.shtml http://www.techdirt.com/articles/20120313/04350018087/megaupload-negotiating-to-let-us-govt-officials-everyone-else-retrieve-their-legit-files-that-were-taken-down.shtml go in and "rescue" their data. It sounds like, as part of that process, the Megaupload crew has been reviewing details of their users, and they note that many of their users appear to be in the federal government itself. That's really not a surprise, since there were plenty of legal uses for Megaupload (as well as infringing uses). But it does suggest just how widespread usage of the site was. It will certainly be interesting, however, to see if data on government users comes out as evidence in any possible trial.

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]]> funny-how-that-works http://www.techdirt.com/comment_rss.php?sid=20120313/04350018087 Fri, 9 Mar 2012 10:55:53 PST MPAA's Argument Against Hotfile Assumes Any Popular Content Online Must Be Infringing Mike Masnick http://www.techdirt.com/articles/20120309/03444518043/mpaas-argument-against-hotfile-assumes-any-popular-content-online-must-be-infringing.shtml http://www.techdirt.com/articles/20120309/03444518043/mpaas-argument-against-hotfile-assumes-any-popular-content-online-must-be-infringing.shtml surprised at just how weak the argument was. Honestly, we thought that for all the talk of how evil Hotfile was, they would have a stronger argument. As expected, the MPAA has now filed for summary judgment in the case (standard behavior at this stage in a case like this). What's interesting is how much the motion for summary judgement appears to match the US government's indictment against Megaupload, including the questionable interpretation of perfectly reasonable behavior. Basically, the MPAA seems to think that the only possible interpretation of certain facts is that Hotfile was heavily encouraging copyright infringement. While there are some points that may cause trouble for Hotfile (its failure to set up a DMCA agent is a big one), many of the claims are ridiculous and seem to exist in bizarro world.

The more you read, the more you shake your head. The MPAA's circular arguments can basically be summarized as "We shall prove that this tool is illegal. Exhibit A: People use this illegal tool." Very large segments of the motion are basically this tautology over and over again. "Oh my goodness, this is illegal, and our proof is that it's designed so people use it!"

For example, the motion focuses on Hotfile's affiliate program for uploaders, which is quite similar to Megaupload's. However, the MPAA interprets this in a bizarre way suggesting that it was designed to encourage infringement. Why? Because it was designed to encourage usage. Really. The affiliate program pays people more if more of their content is downloaded. According to the MPAA that alone is evidence of encouraging infringement. That seems crazy. As we pointed out, plenty of artists used such services themselves to distribute their own works free to consumers, while still getting paid for it at the same time. This is a business model that cuts out the legacy gatekeepers... but does that make it against the law? In the eyes of the MPAA, absolutely.
Hotfile’s Affiliate program affirmatively discourages users from uploading files that are not downloaded frequently, because those files consume Hotfile resources without generating premium subscriptions. SUF 16(a)(iv)-(vi); e.g., Yeh Ex. 61 at 13 (“some webmaster just . . . upload LOTS of gigabytes, but don’t promote their files. So these kind of webmasters use our server resources, upload resources, bandwidth, diskspace and at final they make our service to work slow”). Hotfile discourages unpopular files through a “ranking” system (Platinum, Gold, Silver, Bronze, and Copper), which governs how much Affiliates are paid. SUF 16(a)(iv). Hotfile assigns “rank” based in part on an Affiliate’s ratio of uploaded files to downloaded files....

Hotfile also uses its Affiliate program to encourage Affiliates to upload large files – because “free” users frustrated with downloading large files at slow download speeds are more likely to upgrade to premium accounts to get faster download speeds
Notice the implicit assumption here: encouraging people to post content that people want and is large must mean it's infringing. But that's a logical leap that the MPAA makes without anything to back it up. There is nothing that says a large popular file must automatically be infringing. Why would the MPAA even make such an argument?

Also, just like the Megaupload indictment, they use the lack of a search engine to suggest something damning.
Because Hotfile avoids having a search function, Hotfile depends on link sites to host, organize and promote download links to content stored on Hotfile. Hotfile’s Affiliate program encourages the development of pirate link sites that do nothing other than promote download links.
This is especially ridiculous because in earlier cases the entertainment industry has argued exactly the opposite: that having a search feature means that these file sharing services were inducing and encouraging infringement by not just being neutral content hosts. The obvious thing to do to remain in compliance with the law, then, is not to have a search engine. Yet, now, they're claiming that not having a search engine is evidence of trying to encourage infringement. So which is it? Is having a search engine illegal or is not having a search engine illegal?

Basically, the MPAA doesn't care. To them, either is illegal because they just can't handle that they're losing their position as a gatekeeper.

Similar to the Megaupload indictment, this motion assumes that encouraging the uploading of popular files and the deletion of unpopular files is proof positive of infringement -- but there are perfectly legitimate reasons for those features. It's fairly amazing to watch the MPAA interpret perfectly reasonable things like deleting files no longer being downloaded -- which plenty of legitimate file transfer services do -- as evidence of lawbreaking.

The MPAA then keeps pretending that if Hotfile isn't used for "personal storage", it must be used for infringement. But that's ridiculous. It's a service for distributing files -- nothing says those files are automatically infringing. That's the logical leap that the MPAA makes multiple times throughout the document.
Hotfile’s chiding of users on public forums puts to rest any suggestion that Hotfile based its business on personal storage: “To pay you just to upload? Why should we pay you then? … Why should we upload files that nobody wants to download? You may think your files are interest[ing] and most probably they are, but we must convince downloaders and convert them to premium users.”
I read this and I don't see the nefariousness. Nowhere do they encourage infringement. They encourage popular files. I know the MPAA would rather not believe it, but there are lots of content creators who no longer go through the gatekeepers, and they produce all sorts of popular content -- some of whom use services like Hotfile and Megaupload to profit from doing so. Why does the MPAA assume that encouraging legitimate activity is proof of contributory infringement?

Similarly, the MPAA jumps a over a clear logic gap by insisting that Hotfile support staff simply "knew" of infringement, because some people asked them how to download files that, according to the MPAA, were infringing. But from the examples given, it certainly sounds like the questions had little to do with the content, but merely the functionality of how you download. There's no indication there that Hotfile's support staff could have or should have known the content is infringing. Amazingly, the MPAA's "we're the center of the universe" attitude seems to assume that naturally anyone would recognize the name of some of its bad movies and immediately, magically know that it's infringing. But, based on what? That's not explained.

The MPAA's "smoking gun" of sorts is the fact that a study suggested a large percentage of downloads on the site were infringing, but I don't see how that, alone, is illegal. When the MPAA sued to kill the VCR, a large percentage of VCR usage was considered "infringing." But the market evolved. A large percentage alone isn't proof of anything, but the MPAA has to throw it out there.

Later, the MPAA goes so far as to pretend a part of the law that doesn't exist. They point out that Hotfile "failed to consider" filtering technology. I can see how that's frustrating to the MPAA, but the law here is pretty clear that there is no proactive duty to filter. So why would the MPAA even bring this up as a point?

There are redactions in the motion and perhaps the MPAA has some magic evidence -- but it's troubling that so many of these claims seem to have little connection to reality.

Also troubling, the motion tries to pin liability on the site's main developer because he programmed the software. That seems pretty crazy. Just because you make a tool, it shouldn't make you liable for how others misuse it.

The entire point of the motion (and the lawsuit) seems to be to prove that (1) Hotfile encourages users to use the site and (2) many users use it to infringe. For them to have a case they need to prove that Hotfile actively encourages infringement, but they can't actually do that, so they just keep trying to prove that Hotfile encourages usage (what site doesn't?!?) and then, entirely separately, that many users infringe... and completely and totally leave out the part where part (1) is connected to part (2). They just keep repeating part (1) and part (2) and saying See?!?!? See?!?!? as if there's a connection there... but which they fail to actually make. It's amazingly lacking in any direct connection.

In the end, one other thing strikes me about all of this. If the MPAA believes that it has such a slam dunk case here... why did it never sue Megaupload in federal court? Yes, Megaupload is based outside the US... but it has been sued in the US before and took part in the case. So why did the MPAA never actually sue Megaupload? If it believes this filing against Hotfile is such a slam dunk, surely we'd have heard about a similar case against Megaupload... and some details of how that effort was stifled. But that's not what's happened at all.

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]]> and-for-this-they-want-summary-judgment? http://www.techdirt.com/comment_rss.php?sid=20120309/03444518043 Mon, 30 Jan 2012 12:13:00 PST Megaupload Users Plan To Sue... As Their Files & Data Are About To Be Destroyed Mike Masnick http://www.techdirt.com/articles/20120130/07025717587/megaupload-users-plan-to-sue-as-their-files-data-are-about-to-be-destroyed.shtml http://www.techdirt.com/articles/20120130/07025717587/megaupload-users-plan-to-sue-as-their-files-data-are-about-to-be-destroyed.shtml planning to sue the US government. Perhaps even more troubling, however, is the fact that all of the Megaupload data may be destroyed, potentially by the end of the week, because the data center that was hosting Megaupload's servers isn't getting paid any more. TorrentFreak has the news:
“We received a letter very late Friday from the US Attorney that declared there could be an imminent destruction of Megaupload consumer data files on this coming Thursday,” MegaUpload lawyer Ira Rothken told TorrentFreak.

Rothken explains that MegaUpload is determined to protect the interests of its users, but that its hands are tied without help from the authorities. The looming data loss is linked to unpaid bills at Cogent Communications and Carpathia Hosting where MegaUpload leased some of its servers.
I have to admit that I'm a little confused by this. I would assume that that data is evidence -- and, in fact, I'm a bit surprised that it wasn't seized directly as well. Either way, it seems like, as some of the evidence in the case, the Justice Department would forbid its destruction, but here it appears to be supporting of it. Even if you believe that Megaupload is pure evil, and had every intention to destroy the entertainment industry... can't people at least agree that it is then wrong to simply destroy the content of legitimate users, without (at least) giving them a chance to retrieve their data?

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]]> this-is-sounding-tragic http://www.techdirt.com/comment_rss.php?sid=20120130/07025717587 Tue, 24 Jan 2012 11:17:54 PST Do Pirate Sites Really Make That Much Money? Um... No Mike Masnick http://www.techdirt.com/articles/20120124/04532617525/do-pirate-sites-really-make-that-much-money-um-no.shtml http://www.techdirt.com/articles/20120124/04532617525/do-pirate-sites-really-make-that-much-money-um-no.shtml knows these sites don't make that much money.

Researcher Joe Karaganis, who did the famed SSRC Media Piracy report, has just come out with a new report talking about just how little these so-called "rogue sites" actually make.

Now, some will immediately claim that this is ridiculous given the videos and photos we've all seen in the last week of police confiscating dozens of expensive luxury cars from the $30 million mansion owned by Megaupload founder Kim Dotcom (er... Schmitz). However, as Karaganis points out, it really doesn't look like Megaupload made that much money from infringement, and even if it was, it seemed that widespread competition and the growing commodity of online storage would make the company less and less profitable. Even so, the actual details of the indictment show numbers much, much lower than what the industry has been claiming, and simply gives much more credence to the fact that Hollywood's estimates of "losses" are complete bunk:
It’s easy to see how Kim Dotcom got rich by being an early entrant in the cloud storage market, in the only part of the business that required a lot of large file transfers. (Much the same is true of broadband adoption, for which piracy has always been the early killer app—especially outside the US where legal web services are still underdeveloped.) As a subscription business selling a scarce commodity, Megaupload’s revenues were many times larger than the largest torrent or link sites. In 2010, execs at Paramount Pictures estimated (in testimony to Congress) its profits at between $41 million and $300 million per year, with the range reflecting different assumptions about its subscription rate. The Justice Department’s recent indictment put the number below the low end of the range—committing to only $175 million in total revenues since 2005–under $30 million/year–and reflecting a roughly 7-1 split between subscriptions and advertising. There are no estimates of how much of this came from legal sources.

In contrast, it’s hard to see how this model remains lucrative. Storage costs are falling rapidly, and there are no barriers to entry or significant network effects. For a comparable market, look to the highly competitive web hosting business rather than search engines or operating systems, which have more characteristics of natural monopolies. Many companies–including Megaupload–already give large amounts of storage away. Many compete for “premium” users, either with inducements or bundling with other services.
$30 million a year is still decent -- but for one of the largest sites on the internet, it's actually pretty dismal, compared to what other sites of that size can earn. The fact that Dotcom was an egotistical show-off who loved throwing around money doesn't really mean that much. Hell, it's pretty easy to find any number of entertainment industry folks who are just as bad, if not worse, in just how ostentatious they are with their wealth. But people don't automatically assume that Jay-Z is a criminal because he spends $1.5 million to close off an entire floor of a hospital for the birth of his daughter. Megaupload may have broken the law, but to automatically jump from saying that because it made some money, to it's all because of infringement, is a leap in logic without facts. But, more to the point, if Megaupload was such a huge portion of the problem -- as the US Chamber of Commerce has insisted -- the fact that we're talking about just $30 million in revenue (some of which is from legit sources) really suggests that very few are making much money in the "piracy" business (despite the horror stories about pirates rolling in cash and funding terrorists and organized crime).

Karaganis went looking for more detailed numbers, and in almost every case, it looked like being involved with such a service was not a particularly profitable endeavor:
  • The Swedish trial of The Pirate Bay trial in 2009 became an occasion for all sorts of competing estimates of revenues. Record industry group IFPI estimated the site’s revenues at $3 million per year. The MPAA described $5 million in revenues. But prosecutors endorsed a much lower number: $170,000 from advertising (against what the defense characterized as $112,000/year in server/bandwidth costs and $100,000 per year in revenue). This is for a site that appears consistently among the top 100 visited sites in the world.
  • NinjaVideo, a Brooklyn-based movie indexing site whose owners were arrested in 2011, was alleged by prosecutors to have made $500,000 in 2½ years. After the site began to make money, the four administrators split the revenue, netting around $33,000/year each after expenses. http://prospect.org/article/ninja-our-sites . Hana Beshara, the site’s primary owner, was sentenced to 22 months in prison under the US No Electronic Theft (NET) Act.
  • Brian McCarthy, the owner of Channelsurfing.net, a Texas-based sports streaming site, was alleged by prosecutors to have made $90,000 over five years. http://prospect.org/article/ninja-our-sites He also faces jail time and fines under the NET Act.
  • Immigrations and Customs Enforcement (ICE) made some partial revenue estimates for targets of its 2010 domain name seizure program, Operation In Our Sites, based on information from advertising network Valueclick. According to ICE investigators, Torrentfinder, a BitTorrent site, made about $15,000 in ad revenue from Valueclick over a year in 2008-2009. Onsmash, a music link site, made around $2,500 in 2009-2010.
From there, Karaganis reached out to a number of torrent sites, to see if they'd share some data on how much money can really be made. And the results, again, showed very little money to be made. The sites all had decent hosting costs that they had to pay... and the revenue really isn't that impressive:
The picture that emerges from the survey is one of financially fragile but low cost operations, dependent on volunteer labor, subsidized by users and founders, and characterized by a strong sense of mission to make work more widely available within fan communities. Few such sites make or seek to make money. Many are specialized communities exchanging media of particular types, genres, or languages. A site like NinjaVideo began this way, but grew into a larger, revenue-making operation.
The key point here is that all of these efforts to "follow the money" or cut off the money flow probably doesn't matter all that much to many of the people running these sites. They're not in it for the money, but for other reasons. All in all, it seems pretty clear that there just isn't that much money in running a "rogue site" -- contrary to what the supporters of these bills will tell you.

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]]> and-again http://www.techdirt.com/comment_rss.php?sid=20120124/04532617525 Tue, 24 Jan 2012 07:20:39 PST Megaupload Indictment Shows That Google Does Actively Police Against Its Ads Showing Near Infringement Mike Masnick http://www.techdirt.com/articles/20120123/04464117512/megaupload-indictment-shows-that-google-does-actively-police-against-its-ads-showing-near-infringement.shtml http://www.techdirt.com/articles/20120123/04464117512/megaupload-indictment-shows-that-google-does-actively-police-against-its-ads-showing-near-infringement.shtml On or about May 17, 2007, a representative from Google AdSense, an Internet advertising company, sent an e-mail to DOTCOM entitled "Google AdSense Account Status." In the e-mail, the representative stated that "[d]uring our most recent review of your site [Megaupload.com,]" Google AdSense specialists found "numerous pages" with links to, among other things, "copyrighted content," and therefore Google AdSense "will no longer be able to work with you." Note that this in May of 2007... way before the widespread claims by Hollywood folks began saying that Google turned a blind eye to any infringement it found. Seems like this part of the indictment suggests otherwise.

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]]> oh-look-at-that... http://www.techdirt.com/comment_rss.php?sid=20120123/04464117512 Mon, 23 Jan 2012 09:16:07 PST Megaupload Shutdown Means Other Companies Turning Off Useful Services Mike Masnick http://www.techdirt.com/articles/20120122/23343817505/megaupload-shutdown-means-other-companies-turning-off-useful-services.shtml http://www.techdirt.com/articles/20120122/23343817505/megaupload-shutdown-means-other-companies-turning-off-useful-services.shtml troubling parts of the Megaupload indictment, and how many perfectly legitimate companies did many of the same things that the US government used to suggest that Mega was a evil criminal conspiracy. On Saturday, the NY Times noted that plenty of legitimate companies were getting a bit nervous because of the language in the indictment:
But Megaupload was not the only such service on the Web. Many companies have crowded into the online storage market recently, most of them aimed at consumers and businesses that want convenient ways to get big data files out of their teeming in-boxes, off their devices and into the cloud — perhaps so that friends or co-workers can download them. They include MediaFire, RapidShare, YouSendIt, Dropbox and Box.net. And there are similar services from Amazon, Google and Microsoft.

All of these market themselves as legitimate ways to store content online. But they are inherently ideal for anyone looking to illegitimately upload and share copyrighted video and audio files. Most companies rarely, if ever, inspect individual files to see if the material they store on behalf of users violates copyrights, unless they are notified by someone claiming infringement.
And... by Sunday, reports started spreading of other companies that provide useful services to people who want to legitimately share files... shutting down or limiting those services. For example, FileSonic -- one of the most popular cyberlockers -- has basically killed itself by no longer allowing sharing, and only allowing personal backup. Another site, Uploaded.to, then blocked all access from the US. A bunch of other services, including FileServe and VideoBB have been killing their affiliate programs (again, which had been a good way for independent musicians to make money).

RIAA supporters are cheering this on -- believing that all of these services really focused on infringing content. But for the many, many artists, companies and individuals who used them legitimately, this is pretty troubling. Useful services are being shut down due to an overreaction on the part of the US government.

Again, this is exactly the kind of collateral damage that many of us were worried about. It's entirely possible (hell, perhaps probable) that the folks behind Megaupload went beyond the confines of the law. And, if that's true, I expect that they will lose in court. But many of us are quite worried about a few things: the fact that the entire site got completely shuttered despite substantial non-infringing uses... and that it's now creating massive chilling effects for legitimate and useful services within the US. Separately, as in the case of Uploaded.to, it's also splintering the internet, by having foreign companies put blocks on US internet users. These kinds of things were exactly what people have been warning about... and yet the US government ignored all those warnings (and probably still doesn't realize what it's kicked off here).

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]]> innovation? http://www.techdirt.com/comment_rss.php?sid=20120122/23343817505 Mon, 23 Jan 2012 08:18:07 PST Dan Bull Raps About How Megaupload Takedown Screws Indie Artists Like Him Mike Masnick http://www.techdirt.com/articles/20120122/23013017504/dan-bull-raps-about-how-megaupload-takedown-screws-indie-artists-like-him.shtml http://www.techdirt.com/articles/20120122/23013017504/dan-bull-raps-about-how-megaupload-takedown-screws-indie-artists-like-him.shtml number of times, is one of many independent artists who used Megaupload on purpose, to distribute his own album. All of the links out there to download his album -- which he wanted -- point to Megaupload. And, unfortunately, they now all point to nowhere, because the US government used questionable reasoning to completely shutter the site. So Dan did what Dan does best... he wrote and recorded a song and video about it. Check it out below:
My favorite line? "Make money giving away things for free? Ah! Why can't the majors do similarly?" It's a key point. As we explained on Friday, tons of artists have figured out that Megaupload and similar sites are a fantastic new business model, but they're a business model that the major labels hate... so they work double-time to make it look like some evil conspiracy. If anyone in the US government actually bothered to understand how music is distributed, marketed and monetized today, they would have realized that Megaupload isn't the problem -- it's one way to make things better for artists. But, as we know, the folks in the US government only get their information from the RIAA. So they end up making life much more difficult for indie artists by shutting down useful services for those artists. And, in the end, that is exactly what the RIAA wants.

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]]> helping-the-artists? http://www.techdirt.com/comment_rss.php?sid=20120122/23013017504 Fri, 20 Jan 2012 15:44:05 PST Busta Rhymes Backs Megaupload, Says Record Labels Are The Real Criminals Mike Masnick http://www.techdirt.com/articles/20120120/15060817494/busta-rhymes-backs-megaupload-says-record-labels-are-real-criminals.shtml http://www.techdirt.com/articles/20120120/15060817494/busta-rhymes-backs-megaupload-says-record-labels-are-real-criminals.shtml shutdown happened yesterday, the company had recently named top producer (and husband to Alicia Keys) Swizz Beatz as CEO. Swizz knows tons of artists who respect him, and it seems that some of the biggest names in the business are pretty pissed off that the US government shut down Megaupload. First there's Diddy, who put out a couple tweets pledging support and telling him to never stop.

But what's a lot more interesting are the very direct statements from Busta Rhymes, who is clearly pissed off at the US government claiming that Megaupload is a criminal operation. Putting his tweets together, he states:
1st of all I am soooo proud of my brother @THEREALSWIZZZ 4 being apart of creating something (MEGAUPLOAD) that could create the most powerful way 4 artist 2 get 90% off of every dollar despite the music being downloaded 4 free...

With labels and companies doin' deals with Spotify and many other companies like it who doesn't give us shit continue 2 do what they do and blatantly show us how much they value the artist with doing deals of such disrespect and lack of value 4 our content...

I am proud 2 stand next 2 my brother @THEREALSWIZZZ and fight the good fight...Our freedom is truly being fucked with in a very significant way and I strongly suggest 2 all artist especially the 1's Swizz repped 4 comes out & reps 4 him!!!

Fuck that I say it again...I'M PROUD OF MY BROTHER @THEREALSWIZZZ #GREATMIND!!
You can see the tweets here (full version), here (full version), here (full version) and here.

There's a key point in all of this that we missed in our earlier analysis about paid accounts at Megaupload. In the indictment, the government seems to assume that paid accounts are clearly all about illegal infringing works. But that's not always the case. In fact, plenty of big name artists -- especially in the hip hop world -- use the paid accounts to make themselves money. This is how they release tracks. You sign up for a paid account from services like Megaupload, which pay you if you get a ton of downloads. For big name artists, that's easy: of course you get a ton of downloads. So it's a great business model for artists: they get paid and their fans get music for free. Everyone wins. Oh... except for the old gatekeeper labels.

In fact, this is part of the ecosystem, especially in the hip hop world. It's why the artists also support those hip hop blogs that the RIAA insists are dens of pure thievery. The artists release their tracks to those blogs, knowing they'll get tons of downloads -- and actually get money. If they do deals with labels, they know they'll never see a dime. Putting music on Megaupload is a way to get paid. Working with a gatekeeper is not.

And yet... Megaupload is the criminal operation? Seems like the actual artists know otherwise.

What Busta is pointing out is that services like Megaupload -- while it may be run by some sketchy individuals and probably crossed the legal line in some cases -- are actually a great new business model for artists, while also being the future of distribution. It's a great way to distribute, make money, and let fans get the works for free. And that's why the major labels are so freaked out by cyberlockers. It's not because there's so much infringement on there, but because it's a system whereby artists can get paid and can better distribute their own works to fans... without signing an indentured servitude contract with a label, which never pays any royalties.

Did Megaupload break the law? Perhaps. But it seems clear that the real fear on the part of the RIAA and the major labels is not so much about that. It's the recognition that such a distribution and payment system undermines much of their reason for existing, and takes away their ability to control artists. A smart label would learn to embrace these things. But we're talking about the major labels here, and so instead, they run to the US government -- who clearly knows nothing about the way modern artists monetize and distribute music -- and lets them try to paint a picture of just how "evil" services like Megaupload are.

But the artists know better.

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]]> who's-hurting-who http://www.techdirt.com/comment_rss.php?sid=20120120/15060817494 Thu, 19 Jan 2012 13:34:06 PST DOJ Gives Its Opinion On SOPA By Unilaterally Shutting Down 'Foreign Rogue Site' Megaupload... Without SOPA/PIPA Mike Masnick http://www.techdirt.com/articles/20120119/13052817473/doj-gives-its-opinion-sopa-unilaterally-shutting-down-foreign-rogue-site-megaupload-without-sopapipa.shtml http://www.techdirt.com/articles/20120119/13052817473/doj-gives-its-opinion-sopa-unilaterally-shutting-down-foreign-rogue-site-megaupload-without-sopapipa.shtml love to cite. However, it certainly appears that the US Justice Department and ICE don't think they need any new law to go after people in foreign countries over claims of criminal copyright infringement. As lots of folks are currently digesting, the Justice Department, along with ICE, have shut down the site and arrested many of the principles (with the help of New Zealand law enforcement) and charged them with massive amounts of criminal copyright infringement.

Of course, just last week, we had noted that Megaupload was immune from SOPA/PIPA because it doesn't apply to dot coms -- but this is still interesting and crazy for a whole variety of reasons:
  • ICE and DOJ have a pretty freaking dreadful record so far in bringing these kinds of cases for online copyright infringement. It's kind of amazing that they did this so soon after they totally screwed up and had to give back Dajaz1 (without an apology, by the way). Megaupload may be a different type of site... but, still...
  • Similar cyberlockers, like RapidShare, have already been declared legal in both Europe and the US. I don't know the details of Megaupload's situation -- and certainly its founder has a... um... colorful history... but it seems pretty extreme to totally shut down the site prior to any adversarial hearing.
  • In the last few days and months, Megaupload had announced plans to help artists make more money... and had announced that very successful and famous music producer Swizz Beatz had become CEO of Megaupload. Beatz is also married to recording superstar Alicia Keys and was responsible for getting all those RIAA artists to endorse Megaupload. All indications were that the company was clearly building a legitimate system for artists to make money and fans to get content. And it seemed that many artists clearly supported the site.
  • So why do we need SOPA/PIPA again? It seems like the DOJ/ICE just undermined the key argument of the MPAA/RIAA/US CoC for why they need these laws. After all, Megaupload was one of the key examples used for why the law was needed.
  • At the same time there are huge questions about why the government is involved here. Megaupload is currently engaged in a lawsuit in the US -- and contrary to claims of SOPA/PIPA supporters, the company seemed more than willing to appear in court to deal with civil copyright claims. Why leap to criminal claims?
  • Is this really the message the US DOJ and White House want to be giving the day after mass, widespread protests happened concerning a fear that this new law would be used to take down websites? Honestly, this is a big "fuck you" to the protestors, showing that the government already has this power thanks to the last law they passed: ProIP (which they promised they'd never abuse).
  • The indictment itself -- embedded below -- is so full of hyperbole ("Mega Conspiracy") it sounds like it was written by the entertainment industry itself...
Anyway, I'm sure we'll have much more to say about all of this... but wow is the timing dumb on the government's part. Not only does it undermine the argument for PIPA/SOPA, but it raises significant questions about whether or not the feds already have too much censorship power.

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]]> screw-you-all----we're-the-doj http://www.techdirt.com/comment_rss.php?sid=20120119/13052817473 Fri, 9 Dec 2011 12:22:28 PST A Bunch Of RIAA Label Artists Endorse MegaUpload... As RIAA Insists It's A 'Rogue' Site Mike Masnick http://www.techdirt.com/articles/20111209/11491817023/bunch-riaa-label-artists-endorse-megaupload-as-riaa-insists-its-rogue-site.shtml http://www.techdirt.com/articles/20111209/11491817023/bunch-riaa-label-artists-endorse-megaupload-as-riaa-insists-its-rogue-site.shtml trotting out stats about how much traffic these sites get. Yet, as we noted recently, a huge percentage of the traffic that bill supporters keep insisting is "rogue" is from the sites MegaUpload and MegaVideo. So, it seems noteworthy, as TorrentFreak has revealed, that a large group of the biggest RIAA music stars have all performed on a song/video endorsing MegaUpload and how useful it is:
Among the stars taking part: P Diddy, Will.i.am, Alicia Keys, Kanye West, Snoop Dogg, Chris Brown, The Game, Mary J Blige , Kim Kardashian, Floyd Mayweather and Jamie Foxx.
“When I got to send files across the globe, I use Megaupload,” declares Will.i.am, an artist signed to labels owned by RIAA-members Warner and Universal.

“When I’m sending my hits out I use Megaupload, ‘cos it’s fast. I can receive hits and I can send ‘em out,” declares P Diddy, an artist signed to Interscope, a label owned by Universal.

Kanye West, signed to Universal-owned Def Jam, likes to use Megaupload “…because it’s the fastest and safest way to send files – period.”

Alicia Keys, who is signed to Sony-owned RCA, says she uses Megaupload “….because I know that I can get my music safely and quickly -and you know that I’m serious about my music.”

Snoop Dogg, signed to EMI-owned Priority, uses it “…because it keeps the kids off the street,” and The Game (Universal) says that even his lawyers know he uses it, “…and I got plenty of them.”
And yet the RIAA, the MPAA and the US Chamber of Commerce are still insisting that MegaUpload is "rogue" and must be shut down? How's that work now?

TorrentFreak's article also reveals some other info about MegaUpload's plans -- some of which may be pretty controversial in other areas. For example, they want to get people to use a product called Megakey, which basically gives them access to "premium" services for free... but in exchange for having ads you see on other sites replaced by ads sourced from Mega. That's a lawsuit of a different nature waiting to happen. Replacing ads on other sites has resulted in lawsuits in the past. The details of how that actually work would be interesting, but I don't see how it doesn't end up tied up in court at some point.

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]]> how's-that-working-out-for-you? http://www.techdirt.com/comment_rss.php?sid=20111209/11491817023 Mon, 26 Sep 2011 15:42:06 PDT House Version Of PROTECT IP To Cover Cyberlockers Too Mike Masnick http://www.techdirt.com/articles/20110923/03111716063/house-version-protect-ip-to-cover-cyberlockers-too.shtml http://www.techdirt.com/articles/20110923/03111716063/house-version-protect-ip-to-cover-cyberlockers-too.shtml will include provisions for attacking cyberlockers. For whatever reason, the MPAA (in particular) has had an infatuation with cyberlockers as the next big "evil," so this is hardly a surprise. Of course, there's a big problem here: cyberlockers are nothing but online storage, and they have tons of legitimate uses as well. It's difficult to see how any legislation can be crafted that won't have massive unintended consequences and liabilities for all sorts of perfectly legitimate online storage providers. How do you distinguish things like Dropbox or Box.net from one of the cyberlockers that the MPAA loves to hate, such as Hotfile? And as cloud storage continues to grow, the issue only gets worse. How about Amazon.com's S3 offerings? In some ways that's a cyberlocker as well. The fact is that the MPAA is playing a silly and pointless game of whac-a-mole. All this new effort will serve to do is piss people off. It won't lead to any more purchases, but will make it clear that the MPAA has no problem trampling innovation when it can't figure out how to use it properly. Cyberlockers have perfectly legitimate purposes -- as did VCRs before them... but the MPAA tried to kill that, and is now seeking to do the same for lots of other services, just because the MPAA can't comprehend how they're useful.

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]]> of-course-it-will http://www.techdirt.com/comment_rss.php?sid=20110923/03111716063 Thu, 7 Apr 2011 13:29:18 PDT Cyberlocker Responds To MPAA Lawsuit Which Tries To Give Hollywood A Veto On Tech It Doesn't Like Mike Masnick http://www.techdirt.com/articles/20110407/01180113808/cyberlocker-responds-to-mpaa-lawsuit-which-tries-to-give-hollywood-veto-tech-it-doesnt-like.shtml http://www.techdirt.com/articles/20110407/01180113808/cyberlocker-responds-to-mpaa-lawsuit-which-tries-to-give-hollywood-veto-tech-it-doesnt-like.shtml Grokster decision, in which it made up a non-legislative "inducement" standard for copyright infringement (a standard, it should be noted, that Congress had a chance to put into law, but declined), the entertainment industry has tried to expand what "inducement" actually means. In the entertainment industry's general definition, it appears to mean "anything we don't like" or "anything that challenges our existing legacy business models." Case in point: cyberlockers. The MPAA has been screaming about "cyberlockers" as this new horrible piracy scheme for a couple years now, ignoring (of course) that cyberlockers serve important and useful legitimate functions in allowing people to share large legal digital files. Like many people, I've used cyberlockers to share PowerPoint presentations, photos and videos I've taken. They're incredibly useful and have significant non-infringing purposes.

However, obviously, those tools can (and perhaps frequently are) used for infringement as well. But, we already have laws to deal with that. The DMCA's notice-and-takedown provision allows copyright holders to alert service providers, who then need to takedown the content. A couple months ago, however, the MPAA went after Hotfile, one of the larger cyberlockers out there, with what struck me as a surprisingly weak case. It was as if whoever wrote the filing didn't quite understand how cyberlockers work, made a bunch of (mostly really bad) assumptions, and then twisted the facts in the most ridiculous possible way to make a case that Hotfile "induces" infringement.

For example, the MPAA claimed that because Hotfile charges fees for premium service, that's a sign of inducement. But that makes no sense. Plenty of online services charge for premium accounts, and since there are real marginal costs here, it makes basic economic sense for cyberlockers to charge premium users for additional services. That has nothing to do with infringement. Separately, the MPAA tries to spin the fact that Hotfile encourages people to use it to share widely, claiming that no legitimate "backup" service would do that. But, the MPAA is (incorrectly) assuming that Hotfile is a backup service. It's not. It's a tool for sharing digital files. None of that adds up to inducement.

The Supreme Court tried to dance around the earlier Betamax ruling, in which it allowed the VCR to exist because it had "substantial non-infringing uses," by creating a specific "standard" for inducement, which (as standards go) is pretty vague:
"[O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties . . . [but] mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct . . . ."
Basically, the Supreme Court says that you have to do something to specifically purposely encourage infringement. Just because your service is used for infringement, that doesn't cut it. Grokster and others lost because there were signs that they advertised or marketed their services specifically for infringement. In the Hotfile case, the MPAA didn't seem to be able to show that at all.

So it's not surprising that Hotfile is fighting back pretty hard on the lawsuit, pointing out that (1) it meets the Betamax standard of significant non-infringing uses, but (2) doesn't come anywhere near the inducement standard of purposefully inducing infringement. The company notes that it promptly responds to DMCA notices and is quick to take down content, once made aware that it's infringing. It notes that providing a legitimate data storage business is not against the law, and it doesn't appreciate the MPAA's insinuations. It goes through the specifics of the Grokster ruling, which clearly don't apply to Hotfile. In fact, they note that one of the reasons Grokster ran into trouble was because it didn't receive revenue directly from users -- and now the MPAA is trying to use the exact opposite argument (that Hotfile does get money from users) to argue it's the same as Grokster?

Similarly, it points out how the fact that Grokster, Isohunt, Limewire and others have had a search function has been one of the key points used against those services to "prove" inducement. The courts have reasoned that since they allow searches for any file, they're "inducing" infringement. Yet, with Hotfile, there's no search. That should settle the issue... but this is the MPAA we're talking about, and so they twist the lack of a search engine into a charge that Hotfile "concealed" the content its users uploaded.

Sued if you do. Sued if you don't.

This seems like a pretty strong filing in response to a clear attempt by the MPAA to twist and extend "inducement" theory way beyond what was intended by the Supreme Court. Hopefully the courts recognize this, but you never know when it comes to these kinds of cases. As Professor Eric Goldman is fond of pointing out, there's regular copyright law, and then there's file sharing copyright law, in which the judges creatively reintepret the law to make activities they don't like illegal, rather than following the actual law.

Either way, this case could become important in determining the boundaries of what really is "inducement." If the MPAA gets its way, it will effectively erase the Supreme Court's Betamax ruling, because it will mean that even if you have substantial non-infringing uses, if there are a lot of people using it for infringement, even if you did not push them to use your service for that particular reason, you automatically become liable. This is a complete fabrication by the MPAA who appears to effectively want to overturn the Betamax ruling here by suggesting that if enough people are infringing, you're automatically guilty of inducement, because any action you do (have a search engine? yes! don't have a search engine? yes!) is interpreted as inducement.

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]]> it-shouldn't-be http://www.techdirt.com/comment_rss.php?sid=20110407/01180113808 Tue, 8 Feb 2011 13:48:00 PST MPAA Files Surprisingly Weak Billion Dollar Lawsuit Against Hotfile Mike Masnick http://www.techdirt.com/articles/20110208/13165613006/mpaa-files-surprisingly-weak-billion-dollar-lawsuit-against-hotfile.shtml http://www.techdirt.com/articles/20110208/13165613006/mpaa-files-surprisingly-weak-billion-dollar-lawsuit-against-hotfile.shtml attacking it as one of the more popular cyberlockers. It appears that the MPAA and its whole content protection staff finally decided to go beyond complaining and actually sue Hotfile, asking (of course) for the maximum $150,000 in statutory damages for each infringing file it found on Hotfile.

The full lawsuit is embedded below, but what shocks me is how weak the case appears to be. Nearly the entire lawsuit is based on innuendo and insistence that perfectly reasonable practices couldn't possibly have legitimate purposes. Hotfile acts as a cyberlocker -- a service that has perfectly legitimate purposes for sharing large files. The MPAA tries to spin the fact that Hotfile charges subscription fees for premium services as nefarious, but that's ridiculous. Hotfile -- like other cyberlockers -- is offering a service in which it pays for all of the bandwidth and storage costs upfront. Offering premium accounts for faster/better service is the very basis of the whole "freemium" model. It does not automatically imply, as the lawsuit suggests, that the company is inducing infringement. The MPAA also tries to make it sound nefarious that Hotfile encourages people to upload stuff that is downloaded more widely, but again that's the whole point of the service. No one ever said that cyberlockers are for personal backup, but they're designed to act as a service for distributing content. And, of course, encouraging people to use it in a way that gets more attention makes perfect sense, but does not automatically imply inducement to infringe.

The most ridiculous section, of course, is where the MPAA lists out all the things that Hotfile could do to reduce infringement -- such as only letting people with accounts download. But the MPAA ignores how that would defeat the legitimate purpose of a service that allows anyone to distribute legal content quickly and easily. It also notes that Hotfile does not use any copyright filters, but there is no law requiring that it has to.

And that's really the biggest problem with the lawsuit. Basically, the MPAA and the big studios it represents have decided they don't like the fact that Hotfile isn't protecting their business model and have decided that, therefore, it must be illegal. But that's not how the law works. It's entirely possible that a court will get blinded by the "but... but... piracy" aspect of this lawsuit. But looking through the details, I'm really shocked at the lack of any actual evidence for direct or contributory infringement. Instead, the crux of the entire lawsuit seems to be: (a) Hotfile makes money (b) people use Hotfile for infringement (c) Hotfile doesn't do the things we want it to do to stop infringement. What the MPAA glosses over is the fact that it appears that Hotfile does, in fact, respond to DMCA takedowns and removes the files in question.

Frankly, I'm surprised. I knew that the entertainment industry would get around to filing lawsuits against cyberlockers, at some point, but I figured they'd have at least something more compelling than "but... but... piracy."

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]]> you'd-think-there'd-be-a-bit-more-'there'-there http://www.techdirt.com/comment_rss.php?sid=20110208/13165613006