DOJ Argues That Even If Case Against Megaupload Is Dismissed, It Still Can Hold Its Assets

from the well-of-course dept

As the fight over whether or not the US can even charge Megaupload under criminal law continues, the US Justice Department continues to make quite extraordinary claims. If you don't recall, the US filed criminal charges against Megaupload and a bunch of its execs. However, as a US judge noted back in April, under US law it might actually be impossible for the case against Megaupload to proceed, because criminal law requires "serving" the defendant, and the law also says you can only serve companies at their US address. Megaupload is not based in the US and has no US address. The DOJ is trying to tapdance around what the law actually says, but (as Megaupload points out) they can't point to a single real legal citation that supports their position. The DOJ is basically arguing that the law should be what they want it to be... because otherwise the DOJ wouldn't like it very much.

Tim Lee continues his always excellent reporting, by providing some details of the latest court hearings on the matter where the judge definitely seems to recognize that Megaupload may be legally correct:
[Judge O'Grady] noted that the "plain language" of the law required sending notice to the company's address in the United States. "You don't have a location in the United States to mail it to," he said. "It's never had an address" in the United States.
Perhaps even more interesting is the claim by the DOJ that even if the Judge rules against them on this issue, they should still be able to freeze Megaupload's assets, because the cases against the individuals will continue.
Not only that, but the government believes it can continue to freeze Megaupload's assets and paralyze its operations even if the judge grants the motion to dismiss. That's because in the government's view, the assets are the proceeds of criminal activity and the prosecution against founder Kim Dotcom will still be pending. The fact that the assets are in the name of Megaupload rather than its founder is of no consequence, the government claimed.
That's a trickier argument to make, though, not a totally crazy one. It's more or less based on the same controversial theory under which the Justice Department seizes and forfeits things like hip hop blogs because someone might possibly get some infringing music from them. But here it's even more complex, because there is supposed to be a separation between the corporation as an entity and the execs who work there as entities. It's part of the reason why "limited liability" corporations exist. There are, of course, ways to get past that, but the government would need to make that case, and they may have a hard time doing so. Either way, it does appear that they're legitimately worried about this rather massive error on their part in bringing the case.

Perhaps, next time, the DOJ won't rush into highly questionable lawsuits just because the MPAA is upset about a website.

Filed Under: assets, copyright, doj, frozen, jurisdiction, service
Companies: megaupload


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  1. identicon
    Jerimiah, 2 Aug 2012 @ 6:31am

    Re: Re: Re: Re: Re: Re:

    Carpatia is subject to Virgina law Megaupload is not.


    That was my thinking as well. Carpathia is the one operating their business within Virginia. Some (maybe all) of the servers they lease are physically located there and are their property, no one else's. Therefore the onus should be on Carpathia to make sure their servers aren't being used to break local laws. The power bills, taxes, equipment, maintenance, property, and myriad other details all fall on Carpathia since it's their operation. Megaupload doesn't have anything to do with those servers other than remotely saving users files there. As much as some folks would like 100% of the blame to fall on Megaupload, Carpathia is the one responsible for nearly everything having to do with running those servers and is earning money for all that effort.

    I've never rented a server before, but I'm assuming more than a few here have and so this question is directed at them. Do you know where all the servers you're renting are physically located, or is that simply not at all relevant to you, only the fact that you're getting the service you pay good money for (i.e. storage space, bandwidth, and the occasional tech support when a problem crops up)? What happens when the company you're renting from changes the physical location of the server(s) they own and/or switches you to a different server in a different location (perhaps because they have many servers located in lots of different places)? Would you even know? And would you allow yourself to be extradited by some foreign government if that was the result of being moved to a different server by your hosting company?

    On the user side of things, do the customers (and pretty much anyone who downloads) of a service like Megaupload know what servers their files are on and where they are in the world? Say I type in www.somewebsite.com and my browser connects to a server in the UK. Tomorrow I type in that exact same URL and this time my PC connects to a server in the US. The day after that, China. You see, there is just no way for the average person to know which server they're connecting to on any given day, for every URL they type in, and whether what their doing while connected to that server is legal where it's physically located. What was legal yesterday may be illegal today and legal again tomorrow depending on which server I get connected to. Heck it could even be my own ISP I end up connecting to seeing as they cache all the popular stuff.

    How is one to always know? You would have to use some tool to do a trace prior to typing any URL into your browser and do so for every URL you wish to go to. You would also have to pray the information you get back is accurate and not spoofed prior to figuring out what the laws are in that country. Who the hell even does that? And that's just http for goodness sake. It's completely unreasonable to expect someone to always know where the server they're using is physically located and whether it's legal for them to do what they want to do in that country/state.

    The only clue one might have that the physical location of a server has changed would be that the IP address changed from what it was the day before. Do any of you actually pay any attention to that? IP addresses are usually region specific, right? But what if the service provider uses forwarding and their main IP address and URL, the one you have no choice but to connect to first, never changes? You do a DNS lookup for the URL you want to type into your browser in order to get the IP address, then figure out what country owns that IP range, then figure out what the various laws are there, then type the URL into your browser to initiate contact only to get forwarded to some other IP address than the one you looked up. Now you have to check everything again to know the physical location you've connected to and whether what your about to do is legal there, etc, etc, etc...

    I hope you can see just how big of a mess this can get. It is utterly insane and that's just IPv4 I'm talking about! I can't imagine what it would be like to have to do that using IPv6 which tends to be a PITA for several reasons.

    Ok so one last question. If Megaupload is guilty of operating in Virgina unlawfully, what does that mean for Carpathia? Are they perfectly innocent of any wrong doing if all the blame falls on Megaupload? I think the copyright maximalists petty hatred and strong desire to see Megaupload pay, whether guilty of wrong doing or not, may be resulting in a whole lot of delusionally wishful thinking. As far as I know Megaupload was operating well within US laws, even obeying the DMCA even though they didn't really have to. Copyright complaints were dealt with swiftly, infringing material quickly taken down either my MU or via the automated service they provided copyright holders.

    The fact that those leaked IFPI documents show Megaupload is only responsible for a very tiny percentage of infringements leads me to believe these preventative measures were working as intended, meaning the copyright industry has no real right to be complaining and certainly no right at all to effectively destroy what was a very successful multi-million dollar business, all without any due process whatsoever. So much for the high and mighty ideals of the USA; innocent until PROVEN guilty and all that. I honestly believe certain vested interests were utterly scared of the new music service that was in development (and still is lol) and that said interests also may have chosen Kim Dotcom because they believed he was an easy target (due to being easily dislikeable it's been said). Wow, were they ever wrong on that one lol. A severe conflict of interest on the US Government side of things got out of hand and they're going to pay for it, or so one would hope. My guess is that this case will probably be dropped at some point and swept under the rug, with nobody held responsible (I'm looking at you DoJ).

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