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Florida State University Libraries Electronic Theses, Treatises and Dissertations The Graduate School 2013 Whose Rights Are Being Protected?: A Legal Analysis of the Conflicts Between Secondary Liability and the Digital Millennium Copyright Act in the Megaupload's Shutdown Kuo-Ting Huang Follow this and additional works at the FSU Digital Library. For more information, please contact [email protected] THE FLORIDA STATE UNIVERSITY COLLEGE OF COMMUNICATION AND INFORMATION WHOSE RIGHTS ARE BEING PROTECTED? A LEGAL ANALYSIS OF THE CONFLICTS BETWEEN SECONDARY LIABILITY AND THE DIGITAL MILLENNIUM COPYRIGHT ACT IN THE MEGAUPLOAD’S SHUTDOWN By KUO-TING HUANG A Thesis submitted to the School of Communication in partial fulfillment of the requirements for the degree of Master of Arts Degree Awarded: Spring Semester, 2013 Kuo-Ting Huang defended this thesis on March 29, 2013. The members of the supervisory committee were: Stephen McDowell Professor Directing Thesis Jennifer Proffitt Committee Member Andrew Opel Committee Member The Graduate School has verified and approved the above-named committee members, and certifies that the thesis has been approved in accordance with university requirements. ii ACKNOWLEDGEMENTS I would first like to thank Dr. McDowell for providing me many suggestions and advice for writing a thesis. This thesis would not be completed without his patient guidance. I would also like to thank Dr. Proffitt for encouraging me to complete my first conference paper in my first semester at Florida State University and providing me many suggestions for methodology of my thesis. I would like to express my gratitude to Dr. Opel for providing insightful opinions for my thesis prospectus, which reminded me to think of this legal issue in the right direction. Thank you all for helping me complete this thesis. iii TABLE OF CONTENTS Abstract ............................................................................................................................................v 1. INTRODUCTION ...................................................................................................................1 1.1 The Shutdown of MegaUpload ......................................................................................1 1.2 Purpose of Research .......................................................................................................3 1.3 Chapter Organization .....................................................................................................5 2. LEGAL CONCEPTS ...............................................................................................................7 2.1 Exclusive Rights of Copyright Owners .........................................................................7 2.2 Secondary Copyright Infringement ................................................................................9 2.3 The DMCA Safe Harbor ............................................................................................17 3. LEGAL FRAMEWORK & METHODOLOGY ...................................................................21 3.1 Legal Framework .........................................................................................................21 3.2 Methodology ................................................................................................................23 4. THE HISTORYOF THIRD-PARTY INFRINGEMENT ...................................................228 4.1 The Secondary Liability of Technology Service Providers before the DMCA ...........29 4.2 The Secondary Liability of Technology Service Providers after the DMCA ..............30 5. THE ANALYSIS OF MEGAUPLOAD’S SHUTDOWN ....................................................45 5.1 The Grand Jury Charges of the MegaUpload Indictment ............................................46 5.2 Kim Dotcom’s Defense ................................................................................................56 6. CONCLUDING REMARKS ................................................................................................64 6.1 Problems from the MegaUpload Indictment ................................................................64 6.2 Rights of Copyright Holders over Rights of Service Providers ...................................67 6.3 Limitations of the Study...............................................................................................70 6.4 Future Research ...........................................................................................................70 REFERENCES ..............................................................................................................................72 BIOGRAPHICAL SKETCH .........................................................................................................75 iv ABSTRACT This thesis examines the legal arguments of the U.S. government and Kim Dotcom in the shutdown of MegaUpload, which was the biggest file-hosting site of the time. In January 2012, the U.S. government shut down MegaUpload and accused that its owner, Kim Dotcom, and several executives of criminal copyright infringement. However, Kim Dotcom argued that his business was legal and qualified for The Digital Millennium Copyright Act (DMCA) safe harbor. Two arguments seem to conflict in the shutdown of MegaUpload. This thesis firstly reviews legal concepts related to secondary liability for third-party copyright infringement and finds that there are two different approaches to interpret third-party infringement. After the creation of the DMCA, third-party infringement is still evolving. Therefore, some inconsistencies were found between the DMCA and the doctrine of third-party infringement being applied. In Metro-Goldwyn-Mayer Studios Inc. v. Grokster (2005), the Court developed a new doctrine of third-party infringement: inducement. According to this doctrine, online service providers who purposefully encourage and abet infringement should be held liable even though they do not have specific knowledge of infringing activity. In the analysis of the legal arguments in the shutdown of MegaUpload, this thesis argues that the U.S. government interpreted third-party infringement in a relatively expansive way and contended that a service provider should be held liable for any infringement they are capable of controlling . In this case, the U.S. government even went further than its precedents and recommended that MegaUpload should be held for criminal copyright infringement rather than civil copyright infringement. However, Kim Dotcom argued that MegaUpload should qualify for the DMCA safe harbor and therefore he and his business should not be held liable. v This case raises at least three important questions. First of all, what are the priorities in applying the DMCA and third-party infringement principle; second, how should criminal copyright infringement and inducement be applied to a service provider; and third, how can a balance between exclusive rights of copyright holders and innovations in online services. In conclusion, the thesis suggests that future research should still pay attention to the developments in this case. Also, Kim Dotcom has started a new Mega service, which is operated as a cloud service. Future research can also focus on the potential liability for third party infringement of cloud storage service providers. vi CHAPTER ONE INTRODUCTION 1.1 The Shutdown of MegaUpload On January 19, 2012, one of the world’s biggest file hosting sites (FHSs) and online file- storage companies, MegaUpload.com, was shut down by the Department of Justice (Chow, 2012; Kang, 2012). The founder of MegaUpload, Kim Dotcom, was seized in New Zealand. Several executives of MegaUpload also faced related criminal charges, including racketeering, copyright infringement, and money laundering (Williams, 2012). The arrests were criticized by some non-profit organizations that aimed to protect freedom of speech online. For example, the Electronic Frontier Foundation (EFF) stated that these actions “set a terrifying precedent because the United States can seize a dual citizen of Finland and Germany in New Zealand over a copyright claim” (Perry, 2012, para.11). The EFF also spoke for more than 50 million users of the MegaUpload site worldwide who might lose their data in this shutdown. The EFF’s statement raised at least three ideas: First, the MegaUpload case is a precedent that will influence legal issues surrounding online storage services in the future. Second, there is a gray area between protection of copyrighted works and the innovation of the new technology. Third, the copyright owners’ rights are more important than the legal users’ rights in the case of MegaUpload. One user who legitimately stored his data on MegaUpload even filed a suit against the court in order to get his data back (Garrett-Walker, 2012). Therefore, the EFF argued that the balance between copyright protection and innovation in technology has already been destroyed in the shutdown of MegaUpload. After the shutdown of MegaUpload, the Recording Industry Association of America (RIAA) 1 and the Motion Picture Association of America (MPAA) contended that the U.S. Government “should take a more active hands-on approach” to online piracy, such as the alleged activities of MegaUpload and take action against such websites (Sean, 2012). Several file hosting sites either stopped their sharing functions, such as FileSonic, or claimed themselves to be cloud storage providers, such as RapidShare (Mohney, 2012). It seems to be a trend

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