FILE STORAGE SHUTDOWN: COMPETING INTERESTS OF "INNOCENT" THIRD PARTIES (PART II)

MPAA

From a liability standpoint, the United States informed Carpathia that any access of the data by outsiders could subject the company to legal action by the MPAA.  The MPAA is a trade association that consists of the six major Hollywood studios.[1]  Their primary interest is in their copyrighted films on the servers.  They threatened civil-litigation against anyone who further distributed the data on the Carpathia servers.   In theory, such distribution would have furthered the losses of the movie studios due to people choosing to watch their content online for free instead of paying.[2]

United State's Defense

The United States claims that it has no say in what is to be done with Megaupload’s data, as it executed the search warrant and is no longer in possession of the servers.[3]  The Government claimed that it does not oppose Kyle Goodwin’s access to the servers, but claims Goodwin’s real problem is to get someone to pay for: “…the process of identifying, copying, and returning…” his data.[4]  Additionally, the Government disagrees that Goodwin’s property was subject to criminal forfeiture under 18 U.S.C. § 1963 (a)(3), because the United States never seized nor took physical possession of the servers.[5]  In addition, the United States claimed that Goodwin never had an: “…interest in the assets or real property that are subject to the court’s restraining orders…”.[6] 

Citing United States v. Reckmeyer, 836 F.2d 200,205 (4th Cir. 1987), the United States asserted that "interest" needs to exist in the property subject to forfeiture itself and not simply a “legal interest” in the matter.[7]  According to the Government, Goodwin’s property was never subject to seizure or court order in the Megaupload case.   

If Goodwin had legal interest in the property, the Government denied that there was any legal mechanism within the criminal court system for which he could compel a party to retrieve his data from the Carpathia servers.  The Government argues that even if the servers were eventually criminally forfeited, an “ancillary proceeding”, potentially a civil lawsuit, was the only way for Goodwin to receive his property.[8] 

The Government’s argument relies on physical definitions of property to shoot-down any of Goodwin’s pre-trial motions.  When addressing Goodwin’s claim that 41 (g) applies in this instance the Government argues that: “…the United States is not currently depriving the defendant of his property…Even assuming…the United States did at one time possess the property, the court lacks jurisdiction to award the requested relief, which is, at bottom, money damages”.[9] Carpathia, not the Government, was in current possession of the servers and thus the data.  In theory, Goodwin could have hired his own data experts to recover the data from Carpathia servers.  Goodwin, however, may not have been able to afford such expertise.  The United States attempted to steer the conversation towards civil damages rather than pre-trial procedures in criminal court. 

Feasibility of Goodwin's Request

This rhetoric was in contrast to Goodwin and the EFF’s attempts to pressure the criminal court to create a mechanism for the return of his legitimate files.  The EFF claimed that such an attitude on the Government’s part consisted of an:

…apparent disregard for the effects its increasing use of domain and other digital seizure mechanism may have on the innocent users of cloud computing services…this Court should establish procedures to ensure that such innocent users do not become regular collateral damage….[10] 

The EFF wanted to make the case less about Goodwin’s individual claims and more about the precedent.  It would have not been pragmatic or cost-effective to require every legitimate user of Megaupload to file a civil-lawsuit for monetary compensation. 

Furthermore, is monetary compensation truly quantifiable for every sort of file found on a file-sharing website?  Taking the Government and Goodwin’s arguments into account, the answer is far from clear.  Did the Government need to shutdown Megaupload via seizure of its domain name in order to carry out the search warrant?  Could the Government not have given users a time period to download files before the website shutdown?  A grace period could have problems of its own.  A possible scenario could transpire in which all the files on Megaupload were downloaded, to reappear as a new copyright-infringing site.  

If the element of surprise is the surest way to ensure that Megaupload does not replicate itself, is there any way to preserve the files of users ex-post facto?  Once the domain is seized and the servers are shutdown, the process is difficult.   While the Government did copy infringing files among other evidence from the Megaupload site, it did not copy nor catalog all the files that the website contained.  On its own admission, the Government simply could not catalog the vast amount of data, without incurring large expenses.[11]  For the Government or any party to attempt such a feat retroactively would have been even more time and resource intensive, not to mention that many of the hard drives were potentially unrecoverable.[12] 

Despite these obstacles, the EFF expounded the judiciary to create: “…procedures and standards for protecting the property [data] and due process rights of innocents…who use those services for legitimate purposes…”.[13]  The EFF additionally cited U.S. v. Chambers, 192 F. 3d 374, 375 (3d Cir. 1999), to the extent that a:

…motion for return of property does not become moot merely because the government no longer retains the seized property….[or] merely by stating that it has destroyed the property or given the property to third parties.”  Concluding, that if found to be the case, Goodwin “…should be entitled to appropriate remedies.[14]

From a pragmatic standpoint, it is difficult to see how these procedures could have been put into place, ex-post facto, by a court and still remedy Goodwin’s own situation.  While the court could say that Goodwin and other non-infringing users should have gotten advanced notice, now the “damage is done” so to speak. I do not see it in the scope of a criminal court to fashion pre-search and post-search procedure for digital sites, especially within a single case.  If the Government is found liable by a civil court, perhaps that will be the impetus for procedural change in digital search and seizure to avoid future liability. 

If somehow Goodwin was able to gain the ability to retrieve his data, Megaupload nor Carpathia would be unable to help him.  Carpathia claims that they do not have the passwords to access the data.  Megaupload, due to supposed lack of funds, was unable to turn the servers back on.  Thus, Goodwin claimed that the only solution was for the United States to give Megaupload its funds to access the data.[15]  The United States countered with a claim that they themselves did not have the passwords to the data during their search and hired security experts to decode the password for them.  Carpathia, they argue, could have foreseeably done the same for the Megaupload users. Such a move by a webhosting company could draw data-integrity issues with its current clientele, so it may be an option they refused to contemplate. 

If funds were released to Megaupload to bring the servers back to life, such an action would not be unprecedented, Goodwin states that in U.S. v. Pokerstars, et al., Case No. 11-2564 (S.D.N.Y.), the United States seized the domain name of an illegal online gambling website.  The U.S. Attorney allowed the parent company, Full Tilt, to continue operating the website to allow former players to withdraw funds.[16] Megaupload was a much larger site than Full Tilt, it was once the 13th most visited site on the internet.[17]   Thus, Megaupload had a lot more servers and files to deal with. Furthermore, Goodwin was not asking for money but files, data that is potentially more difficult to track than the amount of money on user accounts.      

To complicate matters, the United States was an advocate for the interests of the MPAA.  Digital copies of many of member studios’ high-grossing works were hosted on Megaupload’s servers.[18]  As a possible solution, Carpathia hoped that Megaupload would return the servers to an operational state and compensate Carpathia for continued hosting, sell the servers to Megaupload for one million dollars or transfer the data to Megaupload, relieving Carpathia from their hosting duties.[19]

This agreement would have given Megaupload users the ability to retrieve their files and potentially alleviate Carpathia of any further responsibility in regards to Megaupload’s defunct data.  The MPAA solidly rejected the deal fearing that Megaupload or a third-party would take the illegal data and use it to further exploit the MPAA’s works for profit.[20] The United States also made reference to potential child pornography on the Megaupload servers, making the data transfer unlawful.[21] Thus, Carpathia argued that the United States should take possession of the servers in order to best address each party’s interest, including their own.[22] 

In addition to the United States’ objection to the transfer of the servers to Megaupload, the MPAA served a civil preservation demand, on January 31, 2012, for the data on the Carpathia servers.[23]  Such a demand allowed the MPAA to potentially review the server data in the process of forming a civil-lawsuit against parties who infringed upon their copyrights.

MPAA had more to lose than Goodwin had to gain with their respective videos on Megaupload.  While Goodwin certainly had incurred some losses due to his inability to access his videos, the MPAA would potentially have lost even more revenue if their videos were distributed online from the Megaupload servers.  But surely Goodwin was not the only Megaupload user who lost legitimate, stored files on the website.  He was, however, the only one that vocalized his concerns in court.  Attorney fees, among other legal costs, could have prevented other users from making a case about their business losses.  Say if a thousand former Megaupload users let the court know that they lost files crucial to their business, would the court proceedings on the matter be expedited due to the numerous affected businesses?   

Part of the allure of using Megaupload was that it was a convenient way to instantly see a video.  You did not need to go to the movie store or wait for the mail to arrive to see the newest movie.  All you needed to do is buy a premium subscription from Megaupload and you were permitted unfettered access to its video collection.  With the rise of legal and convenient streaming services such as Netflix and Hulu, there is less incentive to illegally stream content.  According to an English study of Finnish media pirates, movie pirates were more likely to not mind paying for movies, compared to those who pirated music.[24] 

If this survey is taken to be accurate, then the MPAA could have potentially converted a number of former Megaupload users into paying customers, whilst discouraging further illegal distribution.  By ensuring Megaupload is not reincarnated, the MPAA could encourage would-be copyright infringers to use these alternatives.  This scenario, however, came at the cost of users such as Kyle Goodwin, who have legitimate files on Megaupload’s servers.


[1] Encyclopædia Britannica Online, s. v. "Motion Picture Association of America (MPAA)", accessed March 13, 2016, http://www.britannica.com/topic/Motion-Picture-Association-of-America.

[2] Hearing on Motions, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 29, 2012), at 17:22-18:18.

[3] Hearing on Motions, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 29, 2012), ECF No. 51, at 12.

[4] Response to Motion for the Return of Property, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 29, 2012), ECF No. 99, at 3.

[5] Response to Motion for the Return of Property, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 29, 2012), ECF No. 99, at 2-3.

[6] Motion for Protective Order, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Mar 30, 2012), ECF No. 51, at 4.

[7] Response to Motion for the Return of Property, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 29, 2012), ECF No. 99, at 5.

[8] Response to Motion for the Return of Property, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 29, 2012), ECF No. 99, at 6.

 

[9]Response to Motion for the Return of Property, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 29, 2012), ECF No. 99, at 7.

[10] Motion for Return of Property, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. May 30, 2012), ECF No. 90, at 2.

[11] Response of the United States, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. June 6, 2012), ECF No. 99, at 2.

[12] QTS's Response to Court Order, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Nov 12, 2015), ECF No. 232, at 1.

[13] Memorandum in Support, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. May 25, 2012), ECF No. 91, at 2.

[14] Memorandum in Support, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. May 25, 2012), ECF No. 91, at 10.

[15] Memorandum in Support, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Mar 30, 2012), ECF No. 51, at 12.

[16] Memorandum in Support, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Mar 30, 2012), ECF No. 51, at 16.

[17] Indictiment, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Jan 05, 2012), ECF No. 1, at 2.

[18] Introduction and Summary of Evidence, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Dec 20, 2013), at 58.

[19] Hearing Transcript, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Apr 13, 2012), ECF No. 84, at 12.

Memorandum in Support, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Mar 30, 2012), ECF No. 51, at 16.

[20] Response by Warner Bros., USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Oct 30, 2012), ECF No. 134, at 2.

[21] Hearing Transcript, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Apr 13, 2012), ECF No. 84, at 10.

[22] Hearing Transcript, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Apr 13, 2012), ECF No. 84, at 8-9.

[23] Memorandum in Support, USA v. Dotcom et al, No. 1:12-cr-00003, (E.D. Va. Mar 30, 2012), ECF No. 51, at 8.

[24] Samuel Gibbs. "Piracy Study Shows Illegal Downloaders More Likely to Pay for Films than Music." The Guardian. May 6, 2014. Accessed April 9, 2016.