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Megaupload Loses Bid to Dismiss Criminal Copyright Charges

Oct. 9 (Bloomberg) -- Megaupload Ltd. failed to win dismissal from a criminal case accusing the internet company and its founder, Kim Dotcom, of running a massive illegal file-sharing service.

U.S. District Judge Liam O’Grady in Alexandria, Virginia, said in a ruling made public today that the U.S. has authority to bring copyright infringement charges against Megaupload even though it has no offices in the country.

“It is doubtful that Congress would stamp with approval a procedural rule permitting a foreign corporate defendant to intentionally violate the laws of this country, yet evade the jurisdiction of the United States’ courts by purposefully failing to establish an address here,” O’Grady said in his 5-page order.

The ruling was a victory for U.S. prosecutors who have faced legal challenges since shutting down the company’s file-sharing website and charging Dotcom and six other individuals in January. A judge in New Zealand in June threw out warrants used to seize the Internet entrepreneur’s property, delaying Dotcom’s possible extradition by at least seven months.

O’Grady said the company could seek dismissal again depending on how the case unfolds. He also said his ruling “leaves open” argument that the indictment should be dismissed until the government is able to hand Megaupload its charging documents in accordance with federal court rules.

‘Alter Ego’

“In this case, the government may be able to prove that at least one of the individually named defendants is an alter ego of the corporate parent,” O’Grady said. “If so, the corporation’s last known address within this district will be the address of the individual defendant, once extradited.”

William Burck, a lawyer for the company, said Megaupload is still considering its options.

“Although the judge deferred a final decision on whether the case should be dismissed permanently until after the extradition process in New Zealand is completed, he made it clear that he will consider dismissing the case now on a temporary basis,” Burck, a partner at Quinn Emanuel Urquhart & Sullivan LLP in Washington, said in an e-mail.

Peter Carr, a spokesman for U.S. Attorney Neil MacBride, said, “We’ll let the ruling speak for itself.”

‘Mega Conspiracy’

Megaupload and Dotcom, 38, were indicted in what U.S. prosecutors dubbed a “Mega Conspiracy,” accusing his file-sharing website of generating more than $175 million in criminal proceeds from the exchange of pirated film, music, book and software files. If convicted, Dotcom faces as long as 20 years in prison for each of the racketeering and money-laundering charges in the indictment, with the U.S. seeking his extradition for a trial in Virginia.

Investigators executed more than 20 search warrants in the U.S. and eight other countries and seized about $50 million in assets in connection with what they said was among the largest criminal copyright cases ever brought by the U.S.

More than 500 servers leased by Megaupload were located in Virginia, giving the U.S. jurisdiction to prosecute the company, the government argued in court papers.

The case is U.S. v. Dotcom, 12-00003, U.S. District Court, Eastern District of Virginia (Alexandria).

To contact the reporter on this story: Tom Schoenberg in Washington at

To contact the editor responsible for this story: Michael Hytha at

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