How The Megaupload Shutdown Has Put 'Cloud Computing' Business Plans At Risk

from the that's-not-a-good-thing dept

As you recall, last month's SOPA/PIPA protests were followed the very next day by the US government shutting down Megaupload. While there have been plenty of discussions about the wider implications of the January 18th anti-SOPA/PIPA protests, there's been less analysis about the wider impact of the Megaupload case. Lawyer Philip Corwin has a long (really, really long) article suggesting that the longer term impact will come more from the Megaupload shutdown... and not in a good way.
It is however the viewpoint of this article that the Megaupload indictment will likely be seen in the long run as having a more significant impact on Internet business models and innovation than the withdrawal of PIPA and SOPA — and this would be the case even if those bills had been enacted in some combined form.
The article covers a lot of ground (much of which you'll already be familiar with, if you read Techdirt regularly). But the gist of it is that the details of the indictment significantly blur the lines between what is civil and and what is criminal copyright infringement, and also rely on multiple, very common practices for various cloud service providers. While the US government cheers on the fact that other cyberlockers are changing how they operate, there's significant fear that this will massively alter the "cloud computing" landscape, in that it creates a tremendous amount of uncertainty, where services with perfectly legitimate intent can be accused of criminal activities based on very questionable claims. Perhaps the most ridiculous is the catch-22 situation in which Megaupload got blamed for trying to hide the infringing activity on its site. If it had left it up, it would have been accused of facilitating or inducing infringement, but by making it hard to find, it's accused of conspiracy to hide the activity.
Megaupload removed the search feature on its website, which had previously been of assistance to those looking for infringing content. The indictment alleges that this was done to disguise the company's willful infringement, much of which was purportedly facilitated by other "linking" websites operated by unrelated third parties. But if the search feature had not been removed, wouldn't that have been cited as evidence of facilitating infringement? Similarly, the indictment notes that "browsing the front page of does not show any obviously infringing copies of any copyrighted works; instead, the page contains videos of news stories, user generated videos, and general Internet videos in a manner substantially similar to", but then cites "the most-viewed videos in the Entertainment category on… has at times revealed a number of infringing copies of copyrighted works that are available from Mega Conspiracy-controlled servers" as evidence of knowing facilitation of commercial infringement.
Damned if you do, damned if you don't.

But the bigger fear is about the kinds of businesses that are put at risk under the vague standards used in the indictment. The article talks about popular services like Dropbox, which could be accused of many of the things in the Megaupload indictment. It also talks about YouTube, and how -- if these kinds of enforcement actions were popular five years ago -- we might not have had a YouTube any more:
A recent New Yorker profile of YouTube's evolution makes one wonder if the "YouTube Conspiracy" might not have been criminally targeted if this enforcement tactic was being employed when it launched in 2005, especially since e-mails between its principals indicated a deliberate toleration of infringing content to build traffic — e-mails that bear a distinct resemblance to some of those reproduced in the Megaupload indictment.
Instead, as Corwin points out, YouTube "has become a treasured piece of contemporary Americana."

For all the talk of how SOPA and PIPA were bad for changing the way the internet would have to work, it's worth noting the very very real impact of the Megaupload takedown on the potential development of various new services and business models. The risks and uncertainty increased massively on January 19th, and not in a good way for anyone.

Filed Under: business models, cloud computing, copyright, fraud, legal risk
Companies: megaupload

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  1. identicon
    Anonymous Coward, 17 Feb 2012 @ 8:52pm

    Re: Re:

    Where do I start?

    "And yes, while criminality is often hidden by becoming mainstream in some form or another it doesn't mean that the cloud or file lockers are automatically criminal or ought to be considered so."

    Yet, this is seemingly the most common use of a file locker. The places I am most likely to find links to a file locker is in a forum post on a movie fan site with the latest 5 part rip of a DVD.

    "Further it's a false equation to compare Megaupload to BitTorrent because how they function is entirely different. Yes, it may have had DVD rips, software and "the like" (and probably did) but to downplay the damage done to "the few" legit" users out there is another way the game gets played."

    I am away that the function and functionality of a file locker is different from torrents. I am not comparing mechanics, I am comparing usage. It has even been discussed here on Techdirt that attacking torrents was just driving people to file lockers. This of course when people here thought that file lockers were above the law. The net result is the same, the vast majority of the traffic (in volume) on Mega has been reported as pirated material. I have seen nothing to discount that.

    Playing the "legit user" card is the real crime here, as a percentage I doubt that legit users made it to even double digits, at least in volume. To quote the report " Cyberlocker traffic downloads from sites such as MegaUpload, Rapidshare, or HotFile is estimated to be
    7% of all internet traffic. 73.2% of non-pornographic cyberlocker site traffic is copyrighted content being
    downloaded illegitimately (5.1% of all internet traffic). " If you add in the pornographic stuff, it would probably be even higher.

    So you are faced with about 25% of their traffic being legit. That's not very good, is it?

    "Nice try bringing pedophiles into this. I recall someone else recently doing that. Name of Vic Teows. It was met, understandingly, with outrage. So let me be outraged with you. I AM a survivor or childhood sexual abuse, shithead. "

    Are you looking for pity? Are you looking to let out your anger? I can't really do either of those for you. What I can tell you is that my point wasn't to "play the pedo card", but rather to point out that everyone from pedos to software hackers and everyone in between would look at this as a perfect way to share their stuff. There is no "pedo card" here, just a statement. Sorry if you take it the wrong way, that is your issue and not mine.

    "Yes there is liability attached to everyone's actions. Even yours. Playing the "protect the children" card reveals you as someone who really doesn't have an argument or a position that can be defended. I wasn't someone's plaything when I was abused. I'm not yours either. You're a total and complete waste of space."

    No, actually, your sensitivity to the issue makes you a bit of a fuck when it comes to this issue. Sorry for what happened to you in the past, but stop hitting me over the head with it. It's not my problem.

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