Stefan Mentzer, an intellectual property partner with the White and Case law firm in New York, said it's likely that Megaupload will try to argue at least two defenses: One is that its service qualifies as a so-called "safe harbor" under Digital Millennium Copyright Act — the federal law governing copyright infringement — if they can show, for instance, that they had no actual knowledge that infringing material was on their system. Another possible defense would be jurisdictional — specifically, that a case can't be brought in the Eastern District of Virginia against a Hong Kong-based company like Megaupload without evidence that they directed criminal activity related to the district.
But Mentzer said both defenses would be a challenge, given the evidence that prosecutors appear to have collected.
"The Department of Justice doesn't just cavalierly file these lawsuits," Mentzer said.
Federal prosecutors have made Internet piracy a priority in the last decade, especially in the Eastern District of Virginia, which can claim jurisdiction over many such cases because large portions of the Internet's backbone — servers and other infrastructure — are physically located in northern Virginia's technology corridor.
The vast majority of those cases have resulted in guilty pleas and prison time. On Friday, a day after announcement of the Megaupload case, a federal judge sentenced Matthew David Howard Smith, 24, of Raleigh, N.C., to 14 months in prison for his role in founding a website called NinjaVideo. That site was one of many shut down in 2010, at a time when it facilitated nearly 1 million illegal downloads a week.
NinjaVideo was what prosecutors called a "linking site" to Megaupload. Casual users of Megaupload would be unable to find popular movies and TV shows on the site without the proper links. Sites like NinjaVideo allowed users to easily search for the desired movies or music and provided the links that enabled them to download the content from Megaupload.
The other co-founder of NinjaVideo, Hana Beshara, was sentenced earlier this month to 22 months in prison. While she admitted guilt, she portrayed herself as a sort of Robin Hood of the online world, stealing from greedy movie studios to provide entertainment downloads to the masses in the form of free films, TV shows, videogames and music.
While the legal defense for piracy may be difficult, accused Internet pirates clearly have their supporters, as evidenced by the millions of people who use their sites as well as the response to Thursday's Megaupload shutdown. Within hours of the indictment being unsealed, the loose affiliation of hackers known as Anonymous caused temporary shutdowns of the Justice Department website as well as the websites of the Motion Picture Association of America and other industry groups that support a tougher piracy laws.
It could be months before the criminal case against Megaupload gets underway. The four defendants arrested in made an initial appearance in a New Zealand court Friday and are scheduled to make a second appearance on Monday. Authorities have said it could take a year or more to bring them to the U.S. if they fight extradition.
AP Business Writer Daniel Wagner in Washington contributed to this report.
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