The takedown of popular file hosting site, Megaupload, by the US Government on charges of copyright violations, has sent shockwaves throughout the online industry.  Here are six takeaways from that event.

Two weeks ago, on 19 January, the US Department of Justice seized and shut down file hosting website, Megaupload.com, and issued arrest warrants for some of its senior executives, including co-founders Kim Dotcom (also known as Kim Schmidt) and Mathias Ortmann. The website, which is registered in Hong Kong, and at one time was estimated to have been ranked the 13th most visited site globally, is now being alleged to have supported (and even encouraged) a broad range of copyright infringement activities.

While those accused are working towards securing bail and battling extradition to the US, and Megaupload’s lawyers are trying to have the site domain returned to its control, US servers for the website may start deleting the stored content as early as mid-February. It therefore means that a considerable number of the reportedly nearly 150 million registered users could irrevocably lose the data they have stored on Megaupload.

The fallout from Megaupload being shut down may be far from over, but here are 6 points of which we should take heed from this surprising but significant turn of events.

1.  SOPA and PIPA are not dead

It is perhaps no coincidence that the Justice Department’s action against Megaupload and its principals occurred the day after thousands of websites decided to “go dark” – on 18 January – in protest of the Stop the Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA). Those two bills had been tabled in the US House of Representatives and Senate, respectively, and just prior to the protest, both of them were withdrawn and were being revisited to address some of the problematic issues identified. However, the US Government’s action, mere hours after the protest, is indicative that it is prepared to pursue criminal prosecution, consistent with what was being proposed in SOPA and PIPA, rather than just allow persons alleging copyright infringements to sue the accused party:

Julie Samuels, an attorney for the civil liberties nonprofit Electronic Frontier Foundation, said it was unusual for the Justice Department to bring a criminal case for an alleged conspiracy over copyright violations, which are usually handled in civil court. (Source: Reuters)

2. Existing legislation may have far more teeth than envisaged

The basis of much of the criminal charges laid against Megaupload and its principals is under the current US Copyright legislation. The charges speak to online piracy, “including racketeering conspiracy, conspiring to commit copyright infringement, and conspiring to commit money laundering” (Source: CNET)

Unlike SOPA and PIPA, where the burden of proof for prosecution might be less than under US Copyright laws, the Justice Department had to gather considerable amounts of evidence in order to secure the desired indictments.  However, based on the fact that charges have been successfully laid against Megaupload, it  means that it is indeed possible to prosecute entities that are alleged to be engaging in online copyright infringement activities. Further, it might be instructive to note that following Megaupload’s shutdown, sites such as Google and Internet Archive voluntarily removed their cached and mirrored version of the site “to avoid legal concerns as they were technically hosting a site that has been taken down for infringement“(Source: Wordswith Meaning.org)

3.  Digital lockers could be targeted for more piracy investigations

Websites that allow their users to upload content may be feeling a bit more apprehensive following the Megaupload experience. Some online file storage properties, such as FileSonic, have disabled their sharing functionality, which typically returned URLs that could be used to access stored content and share with others. However now, users will only be able to upload and retrieve files that they have stored personally, which would limit claims that such website are perpetuating the unauthorised spread of copyrighted material.

Moreover, digital lockers are perhaps being seen as easier targets than peer-to-peer operations, such as BitTorrent, which run decentralised networks, although such sites might be more widely used to share copyrighted information. However, experts suggest that

…Megaupload and its ilk may be a bigger factor in video piracy because movies take much longer to download via peer-to-peer networks… Digital lockers allow anyone to upload, store and distribute links to most forms of electronic content… (Source: Reuters)

4.  Remember to read the fine print

As Megaupload’s 150 million-plus account holders wonder whether they might have their content returned to them, it might be instructive to note that in Megaupload’s Terms of Service does state that users

… have no proprietary interest in any of the files on Megaupload’s servers” and that “Megaupload can terminate site operations without prior notice. (Source: Wired)

In essence, having uploaded their content on the Megaupload, members lost their rights to their files, which means that strictly speaking, they might no longer be entitled to have them returned. Admittedly though, the terms of use and privacy policies of many websites make difficult and laborious reading, but perhaps had persons been more fully aware of such provisions, other choices might have been made.

5.  It may be near impossible to evade the long arm of Uncle Sam

US webhosting providers offer prospective users a broad range of hosting options, and the more reputable brands tend to be the most reliable and cost effective. In the Caribbean, where webhosting might be limited and expensive, the preferred choice is to have websites hosted in the US and/or hosted by US companies. However, it therefore means, as has occurred to Megaupload, the US is able to exercise jurisdiction on websites and content within its jurisdiction. More importantly, where the principals of a website are considered to have encouraged – tacitly or otherwise – the distribution of copyrighted protected material, the US government may be prepared to press criminal charges against them and to seek extradition to the US.

6. Do not rely solely on online storage facilities

Finally, over the past several months, there has been a marked shift towards cloud computing, where increasingly data, applications and computing resources are being used over the Internet. One facility that the average user frequently utilises is a digital locker to: store files; act as back-up storage; and facilitate file sharing. However, recognising that millions of Megaupload users lost access to their data when the US Government seized the website, and may permanently lose it when US webhosts deleted it in a few weeks, it might be wise not to keep important information in an online storage facility only. Secondary and more tangible forms of storage, which we as users can control, such as USB and optical drives, may need to be considered.

Images courtesy of Null Value and Prachatai, flickr.

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