from the taking-it-up-a-notch dept
It is my opinion that the Superseding Indictment and Record of the Case filed by the DOJ do not meet the requirements necessary to support a prima facie case that would be recognized by United States federal law and subject to the US-NZ Extradition Treaty. An attempt has been made to extract facts from multiple sources and over a wide span of time, to organize a large number of otherwise disconnected facts by using systematic phraseology and to juxtapose phrases in order to create an impression of coherence and substance. However, the attempt fails to reach its goals and any impression of coherence or substance dissolves under examination. Insofar as they are alleged in the Superceding Indictment and the ROC, respondents’ actions were not prohibited by criminal statutes of the United States. Filings of the DOJ attempt to create a false impression of criminal guilt and are not reliable.Lessig's detailed analysis covers many of the same issues I raised just days after the raid on Dotcom's mansion and his arrest. Basically, it appears that the DOJ is trying to make up a form of criminal copyright infringement that is based on "well, Hollywood really dislikes him." A key issue, as we've discussed in the past, is that there is no such thing as secondary criminal copyright infringement. The Supreme Court, in the Grokster case, created a concept known as inducement for civil copyright infringement, but criminal copyright infringement cannot be expanded by the courts -- only by congress. Yet, the DOJ is trying to pretend that there is such a thing as secondary criminal infringement, despite it not being in the law.
... criminal copyright liability cannot be broadened by invoking civil concepts of secondary copyright infringement directly or under the guise of the general aiding and abetting statute, 18 U.S.C. § 2. See Sup. Ind. Counts Four, Five, Six, Seven, and Eight. The United States legislature previously removed “aiding and abetting” from the copyright act, evincing an intent to eliminate that form of liabilityHe further notes that the indictment and DOJ arguments repeatedly refer to the DMCA, but the DMCA is only for civil copyright infringement, not for criminal:
The DMCA is only a defense in the civil context because only civil indirect or secondary liability is possible under the common law. Common law liability principles cannot be extended to criminal liability, which must be specifically proscribed by statute. See Dowling v. United States, 473 U.S. 207, 213-214 (1985). Because there cannot be common law crimes under United States law, the DMCA further emphasizes that criminal indirect liability for copyright infringement does not exist by statute.And thus, Megaupload's "failures" to follow the DMCA cannot be the basis of criminal charges:
... allegations of defendant’s failure to maintain a DMCA policy or defects in a defendant’s DMCA procedures cannot be the basis of criminal copyright charges....And, of course, he points out that under the Sony Betamax case that confirmed VCRs were legal in the US, the standard the Supreme Court set up was if a technology had "substantial non-infringing uses," which Megaupload clearly had.
Lessig also points out something that should be pretty obvious, but is often forgotten: the US Copyright Act does not apply outside the US.
An important limitation on enforcement powers of the DOJ is the principle that the United State Copyright Act has no application outside of the territorial bounds of the US, and therefore there is neither civil nor criminal liability under United States law for acts of infringement taking place outside of US borders.And, yes, the DOJ points out that Megaupload had servers in the US, but as Lessig points out that's not enough under US law:
The Superseding Indictment does discuss the existence of Megaupload servers in the United States.... But the mere presence of data servers in Virginia does not establish that direct infringement took place there. See, e.g., CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544, 549-50 (4th Cir. 2004) (holding that direct infringement under the civil standard requires more than “mere ownership of a machine used by others to make illegal copies” and that there “must be actual infringing conduct[.]”); Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 131-32 (2d Cir. 2008) (direct civil infringement requires “volitional conduct,” not mere ownership of device used by others to infringe).That seems like a pretty big flaw in the DOJ's case.
The Superseding Indictment never states that any specific user, much less any of the criminal defendants, chose to upload or download any specific infringing work from within the United States.
Perhaps an even bigger flaw? The lack of any showing that any of the defendants engaged in all of the required elements for criminal copyright infringement:
the DOJ fails to show direct criminal copyright infringement on the part of Megaupload personnel or on the part of Megaupload cloud storage users. The allegations in the Superseding Indictment and the Record of the Case do not match up to all of the elements of offenses. Importantly, there is no showing that any specific Megaupload representative or third-party user had the requisite mens rea to willfully violate copyright law. There is an even more fatal failure to show that Megaupload personnel agreed with a third party user to commit such violations. An agreement requires communications between defendants and the user, not just discussions among Megaupload personnel and a general “environment of infringement.” Attempts to juxtapose pieces of allegations do not succeed in making even a single whole, unified criminal charge.As Lessig details, criminal copyright infringement requires willful infringement for the purpose of commercial advantage or private financial gain. The complaint does not do a very good job of showing the "willful" part. Just showing that the company was slow to take down content is not enough. In fact, Lessig points out, charges of criminal copyright infringement need to list out the actual works infringed and then show all the other necessary elements:
proof of charges of both Criminal Copyright Infringement and also Conspiracy to commit such crimes must identify specific copyrighted works on a work by work, link by link basis, and describe the who, what, when, where, why, and how to meet all the elements for each such instance and to examine fair use, amongst other things. The “willfulness” requirement means that a person must have had the specific intent to commit copyright infringement as to each individual work.And yet, the Dotcom indictment fails to do basically all of that.
As for the attempt to get around the fact that there is no secondary infringement in criminal law by saying, "oh, well, it's just aiding and abetting," that doesn't fly either. Yes, users may have willfully infringed, but the evidence is lacking that the Megaupload team did the same, and just "aiding and abetting" doesn't work:
Aiding and abetting requires a showing of “double wilfulness,” which is lacking in the Superceding Indictment and ROC. A vague charge of “making available” a copyrighted work under a theory of “Aiding and Abetting Criminal Copyright Infringement,” is insufficient. In my opinion the government has failed to allege sufficient facts that the Megaupload defendants shared in any alleged infringer’s criminal willful intent. Gestalt allegations that the Megaupload cloud storage system brought about the arrangment that made the vague criminal acts of the alleged infringers possible is insufficient “willfulness” as a matter of law. As discussed above, Megaupload did not exercise volitional control over user uploads, link sharing, and downloads.Basically, he's calling out the fact that the DOJ is picking and choosing different actions by completely different actors and trying to tie them all together to create all the elements for criminal copyright infringement. But you can't do that.
The Supreme Court of the United States has stated that the aiding and abetting statute converts an accomplice into a principal, but that aiding and abetting is neither a separate crime nor is it relevant to the distinct crime of conspiracy. See Pereira v. United States, 347 U.S. 1, 11 (1954) (“Aiding, abetting, and counseling are not terms which presuppose the existence of an agreement. Those terms . . . mak[e] the defendant a principal when he consciously shares in a criminal act, regardless of the existence of a conspiracy.”) (emphasis added). Therefore, allegations that defendants aided or abetted a crime of copyright infringement do not amount to an extraditable offense. The crime, if it exists, must be specifically shown.A similar argument dooms all the "conspiracy" charges. End users may have willfully infringed, but that doesn't create a "conspiracy" between them and the Megaupload team.
United States v. Hickman, 626 F.3d 756 (4th Cir. 2010), a decision by the Fourth Circuit Court of Appeals is particularly instructive. In that case, the court was asked to decide if a store that sold thousands of glass vials was engaged in a conspiracy to distribute heroin, since it was well known that such glass vials were used primarily to package heroin for sale. Id. at 767-73. The Fourth Circuit explained that merely selling the vials was not sufficient to demonstrate the crime of conspiracy without something more. Id. The court would have required that the defendant possess explicit knowledge of specific plans to distribute heroin in order to be convicted of conspiracy. Id. This is consistent with other Fourth Circuit decisions which generally require a "showing that the defendant knew the conspiracy's purpose and took some action indicating his participation." Chorman, 910 F.2d at 109.Lessig notes that while the record in the case shows lots of communication between Megaupload staff, it shows none between the staff and the users of the site who are actually doing the infringing. That's a pretty weak conspiracy.
As mentioned above, a member of the conspiracy must undertake some "overt act" which furthers the underlying offense of the conspiracy. Chorman, 910 F.2d at 109. Thus, in order to properly state a claim for conspiracy to commit felony copyright infringement, there must be an agreement between two individuals to commit that crime, and then one of the individuals, who is a party to the agreement, must commit an act in furtherance of that crime.
As discussed above, infringing acts are alleged to have been committed by unnamed Megaupload users. A crime of conspiracy requires an agreement with criminal infringers. No such agreement is shown.
there is no allegation of direct communication with the user, and no reason to believe that the Megaupload employees entered into a relationship with the user beyond a series of retail transactions regarding cloud storage space on the Megaupload leased servers.Lessig also rips apart the arguments for wire fraud, noting that they all seem to be based on the idea that Megaupload didn't abide by the DMCA (again a US law).
Alleged frauds revolve around Megaupload’s practices under the DMCA and around an “Abuse Tool” Megaupload provided to copyright owners or agents who wanted to deliver to Megaupload DMCA notices of infringing materials on the Megaupload site and automatically disable access to such materials. It is alleged that Megaupload made misrepresentations in connection with the Abuse Tool, promising to delete access to referenced materials while only deleting the referenced URLs and without deleting all other URLs in the database that pointed to such materials. It is further alleged that the Abuse Tool did not operate as represented, that deletions were delayed and that the site promised to terminate repeat infringers but failed to do so....Furthermore, Lessig notes that for there to be wire fraud, US law requires a scheme to defraud users and then the use of mail or wire in furtherance of that scheme. Yet the indictment is lacking in defrauded parties.
As mentioned above, the DMCA serves to explicitly limit the copyright liability of Internet service providers and to provide a “safe harbor” from copyright claims.... If an online service provider like Megaupload is noncompliant the result is loss of the civil safe harbor defense not a criminal fraud.
It is alleged that Megaupload received “advertising revenue as a result of the continued availability of files,” while never stating that the copyright holders themselves made any pay outs.... Thus, there is no allegation that the advertisers were ever lied to, deceived or misled; in other words, the party deceived and the party that lost property were two completely different individuals.And all of that dooms the wire fraud claims:
It is also alleged that Megaupload received money from users who purchased premium subscriptions.... However, as with the advertisers, there is no indication that the users were deceived or misled in any way.
Moreover, the DOJ must look at the monies actually received when charging the crime of wire fraud, and cannot look to any “intangible right” that may belong to the copyright holder. United States courts have explained that intangible rights cannot form the basis of a wire fraud charge. See United States v. Hilling, 891 F.2d 205, 208 (9th Cir. 1988) (reversing a mail fraud conviction based on intangible rights). Nor is a “license” a recognized property right. See United States v. Schwartz, 924 F.2d 410, 418 (2d Cir. 1991) (overturning wire fraud conviction because “[t]he  licenses given appellants were merely the expression of its regulatory imprimatur, and they had no other effect as ‘property’”).
In sum, the DOJ only alleges that one party was deceived: the copyright holders.... However, that party cannot lay a claim to a recognized property right that Megaupload is alleged to have taken; at best the rights claimed would be the right to license their works, or similar intangible rights which cannot form the basis of a wire fraud conviction.Lessig also attacks the idea that Megaupload even violated the DMCA in the first place. As he notes, the law says a service provider needs to "reasonably implement" a DMCA policy, but leaves the interpretation of "reasonably implements" up to the courts. And the standard interpretation, from the Perfect 10 v. ccBill case is that it's reasonably implemented "if it has a working notification system, a procedure for dealing with DMCA-compliant notifications, and if it does not actively prevent copyright owners from collecting information needed to issue such notifications." And Megaupload had all of that.
Another defect in the DOJ approach is that it is contrary to the DMCA. The Fourth Circuit has repeatedly upheld the principal of statutory interpretation which holds that courts “must give effect to every provision and word in a statute and avoid any interpretation that may render statutory terms meaningless[.]” Scott v. United States, 328 F.3d 132, 139 (4th Cir. 2003). Here, in order to give proper effect to the DMCA, the wire fraud statute cannot be interpreted to criminalize Megaupload’s conduct.
The DOJ, instead, is rather incredibly arguing that because Megaupload did not immediately delete 100% of infringing files, it violated the DMCA and thus is guilty of criminal copyright infringement. That's stretching the laws way past breaking points in multiple directions.
The DOJ does not allege that Megaupload had no policy at all, nor does the DOJ allege that Megaupload “actively prevent[ed] copyright owners from collecting information[.]” Instead, the DOJ charges a much lower standard: that Megaupload failed to terminate 100% of all repeat infringers, ... and moreover, that this failure, in the face of Megaupload’s stated policy, was a misrepresentation sufficient to sustain a charge of wire fraud....Lessig also points out that the DOJ is just wrong on its argument that after receiving a notice on a file, Megaupload must delete all versions of that file. That's not what the law says at all.
The purpose of the DMCA is to prevent liability where a defendant has stated a policy and reasonably implemented it—not where a defendant has failed to terminate each and every repeat infringer. Indeed, the statute recognizes that service providers are not required to terminate all repeat infringers in order to comply with the DMCA (17 U.S.C. § 512(I)(1)(A)) or to remove their posted content. See e.g. Perfect 10, Inc. v. Giganews, Inc., 2014 WL 8628034, at *9 (C.D. Cal. Nov. 14, 2014) (“Giganews had no obligation to indiscriminately remove every post a repeat infringer ever posted and Perfect 10 may not shift its burden of policing copyright infringement to Giganews in the guise of a claim for direct infringement.”).
Were the DOJ able to simply charge defendants with a separate crime (in this case wire fraud) then the liability safe harbor becomes meaningless, and Scott v. United States is thus violated. As a result, it is improper to interpret the wire fraud statute as criminalizing Megaupload’s actions, and the proper interpretation is to give effect to the DMCA’s stated safe harbor provisions.
The DOJ appears to be asserting that an online operator who receives copyright take down notices identifying one URL must search for and delete all duplicate files in the system or be subject to a copyright or fraud claim. In my opinion the DOJ’s theory of copyright or fraud liability is erroneous.As he notes, the US courts -- particularly in the Lenz case -- have said that takedowns require looking at fair use. And if the DOJ's theory was accurate, that would be wiped out, because notices would be sent for files without any idea if they were fair use or not.
Megaupload reduced operating loads by “deduplication,” namely maintaining only a single copy of a file in its database and generating multiple pointers to such file. Each pointer identified an uploader of the common file. It is possible for one uploader to have a right to fair use of a copy of a file, e.g., a purchaser uploading a backup or an educational organization offering critical commentary, while other uploaders might have no such fair use right. It is contrary to the purpose of the DMCA that a fair use right would be violated though a take-down notice directed at another person’s wrongful use. If such a violation were to occur, the provider of the take-notice would be subject to liability under the DMCA (17 U.S.C. § 512(f)).
Such an approach can lead to mass DMCA 512(f) misrepresentation claims against the DMCA noticing parties.
There's a lot more in the document, but it basically picks apart the entire DOJ indictment, and points out that they're making up new criminal theories that they're not allowed to, and misrepresenting other claims at the same time. Thus, not only is it not clear that Dotcom did anything deserving of extradition, it's not even clear that he broke any laws at all.
Of course... whether or not the New Zealand court pays attention to any of this, remains to be seen -- but it is a strong argument from a well respected and knowledgeable source.