Kim Dotcom: US Govt Is Protecting An Outdated Monopolistic Business Model

The dramatic shutdown of Megaupload and the US government's case against the operators of the service has the potential to alter the entire service provider landscape, not just in the United States but all around the world. Indeed, some observers believe that has already happened. After defeating attempts to put him back behind bars yesterday, Mega founder Kim Dotcom is back with more insights into the reasons behind the site's closure.

After speaking with TorrentFreak on Monday, Kim Dotcom has elaborated on his situation in an interview with 3news’ Campbell Live, which now gives us the opportunity to reveal a bit more detail about the current musings of the Megaupload founder.

Aside from the heavy-handed nature of the shutdown, the underlying shock in this case has its roots in the undermining of a previously presumed level of legal protection for service providers.

Earlier this week, Dotcom told us that in recent years Megaupload had spent millions of dollars seeking out the very best legal advice and the conclusions drawn were clear – providing the site did its part in tackling infringement it would be protected under the DMCA and could not be held liable for the actions of its users.

Towards achieving this protection, Dotcom told us that the company had developed relationships with 180 takedown partners – companies authorized to directly remove infringing links from Megaupload’s systems – and between them they had taken down in excess of 15 million links. Those companies included the major studios of the MPAA who, incidentally, in 7 years of the company’s existence had never tried to sue Megaupload for copyright infringement.

On the advice of Megaupload’s legal team, the company believed it had the same rights as YouTube in its case against entertainment giant Viacom. In that 2010 case U.S. District Judge Louis L. Stanton said service providers can not be held liable for infringement as long as they remove links upon copyright holder request – even if the provider knows that parts of their service are being used to host illicit content.

“[YouTube] won their lawsuit and I’m sitting in jail, my house is being raided, all my assets are frozen without a trial, without a hearing. This is completely insane, is what it is,” said Dotcom of his predicament.

Dotcom told TorrentFreak that the indictment left out many key facts, not least that Megaupload users enter into a binding legal agreement when they sign up to the file-hoster which included promising not using the service to commit crimes or infringements, a point tackled again today by 3news’ John Campbell.

“Of course, that is a romantic notion though, isn’t it, that just because we tick the box accepting the terms of service that we’re going to behave ourselves when we’re in there, right?” questioned Campbell, adding that Mega must’ve known that people would have inevitably agreed to the terms of service and then gone on and done whatever they liked.

“Well there are other laws that protect users and those are privacy laws. For example in the US it’s the Electronic Communication Privacy Act which prohibits us from looking into the accounts of users proactively and look for things,” responded Dotcom. “It’s like mail, it’s private, we cannot just go in there and police what these users are uploading.”

Although the company is clearly trying to distance themselves from comparisons to Megaupload, Swiss-based RapidShare made much the same point in a recent TorrentFreak interview. The file-hoster said that it would always respect customer privacy by never looking through their files without permission. Earlier this month, the EU Court effectively banned the practice after music rights group SABAM failed in its bid to force social networking site Netlog to proactively scan uploaded user files for infringement.

It’s not unusual for huge figures to be punted around in copyright infringement cases and in this one in particular Megaupload is accused of costing copyright holders half a billion US dollars. That figure has been repeated dozens of times but according to Dotcom, it’s just the tip of the iceberg.

“If you read the indictment and if you hear what the Prosecution has said in court, at least $500 million of damage were just music files and just within a two-week time period. So they are actually talking about $13 billion US damage within a year just for music downloads. The entire US music industry is less than $20 billion,” he explained.

So, with all of the file-hosting services out to choose from, why would the authorities single out Megaupload? We discussed this with Dotcom on Monday and in common with the Campbell interview, the name Mediafire came up.

Mediafire is a huge file-hosting operation – in July 2011 they were clocking up 34 million unique monthly visitors, just 3 million behind Megaupload. In the previous month, the term “mediafire” was even partially censored by Google as being a piracy-related term. There can be little doubt that either Hollywood or the recording labels asked Google to take this action.

But of course what Mediafire doesn’t have is the imagery generated by a figurehead like Dotcom, and if there’s one thing that Hollywood is all about after money, it’s image – and Dotcom believes he presents their perfect arch-enemy character.

“I’m an easy target. My flamboyance, my history as a hacker, you know, I’m not American, I’m living somewhere in New Zealand around the world. I have funny number plates on my cars, you know, I’m an easy target,” he told 3news.

“I’m not Google. I don’t have 50 billion dollars in my account and right now I’ve not a penny on my account. All my lawyers currently are basically working without a penny and they are all still on board and all still doing their job because what they see here is unfair, is unreasonable and is not justice.”

But when one cuts through all the drama of the past couple of months and even with the demise of Megaupload, a service painted as the worst of the worst by Hollywood and the authorities, piracy has not gone away. Despite everything it continues and Dotcom believes the reasons for that are obvious – it’s a service issue, with regional time delays providing a prime example.

“If the business model would be one where everyone has access to this content at the same time, you know, you wouldn’t have a piracy problem. So it’s really, in my opinion, the government of the United States protecting an outdated monopolistic business model that doesn’t work anymore in the age of the internet and that’s what it all boils down to,” he explains.

Yesterday, at the behest of the US government, a court in New Zealand considering revoking Kim Dotcom’s bail. In the event that attempt failed, with the Megaupload founder continuing to insist that he’s not going to flee the country as the prosecution has suggested.

For what it’s worth, we believe Dotcom’s claim. He is full of fight, genuinely optimistic that he can win this battle, and has exciting plans for the future – none of which appear to involve hiding in a cave or befriending Hugo Chavez.

“I’m no piracy king,” he concludes. “I offered online storage and bandwidth to users and that’s it.”

You can watch the full 3News show here, and read our earlier article here.

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