Disney, Movie Studios Sue Megaupload Over Copyright Claims

Disney Enterprises Inc., Warner Bros. Entertainment Inc. and four other movie studios accused the closed file-sharing service Megaupload.com of massive theft of intellectual property in a copyright-infringement lawsuit.

While billing itself as a private data storage provider, Megaupload.com functioned as a hub for uploading and downloading copyrighted movies and TV shows, according to the complaint filed today in federal court in Alexandria, Virginia, which names Megaupload Ltd., the owner of the Megaupload.com website, company founder Kim Dotcom, a second company and two other individuals as defendants.

Dotcom was accused in an indictment unsealed in January 2012 of belonging to a global criminal organization prosecutors called Mega Conspiracy that was involved in copyright infringement and money laundering and generated more than $175 million in illicit proceeds.

“When Megaupload.com was shut down in 2012 by U.S. law enforcement, it was by all estimates the largest and most active infringing website targeting creative content in the world,” Steven Fabrizio, senior executive vice president and global general counsel of the Motion Picture Association of America, said in today in a statement.

Megaupload.com had “a business model designed to encourage theft -- and make its owners very rich in the process,” Fabrizio said.

‘Bogus’ Claims

“The @MPAA repeats bogus DOJ claims that we induced copyright infringement. No. 1 reward rule published on MU site: ‘No copyright infringement,’” according to a post on Kim Dotcom’s Twitter feed.

The studios’ lawsuit is a meritless re-hash of issues raised in the criminal case, Ira Rothken, Dotcom’s San Rafael, California-based attorney, said in a phone interview. “We will vigorously defend against the claims,” he said.

Megaupload.com built up its library of illicit offerings by encouraging users to upload movies and other entertainment through an “Uploader Rewards” program. Amounts paid through the program were based on how often pirated material was downloaded for viewing by others, according to the studios’ complaint.

Megaupload.com made money by charging subscriptions enabling faster downloads and by selling advertising on the heavily trafficked website, the movie makers said in the filing.

Rewards Program

Rothken said the rewards program was limited to files that are far too small to transmit movies. The studios’ assertion the rewards program encouraged copyright infringement “wouldn’t pass the giggle test,” he said.

Dotcom and two others named in the complaint, Mathias Ortman, a German citizen, and Bram van der Kolk, a Dutch citizen, are fighting extradition from New Zealand, according to Peter Carr, a Justice Department spokesman.

Ortman and van der Kolk provided technological expertise to Megaupload and are part-owners of it, according to the suit.

In February, a New Zealand appeals court ruled that search warrants used in a 2012 raid on Dotcom’s home were valid, bolstering the U.S. effort to extradite him.

The suit also names Vester Ltd., a Hong Kong company of which Dotcom is the sole shareholder. Vester is majority shareholder of Megaupload Ltd.

Besides the unit of Burbank, California-based Walt Disney Co., plaintiffs in the case include Paramount Pictures Corp., Universal City Studios Productions LLLP, Columbia Pictures Industries Inc. and Twentieth Century Fox Film Corp.

The case is Twentieth Century Fox v. Megaupload.com, 14-cv-362, U.S. District Court, Eastern District of Virginia (Alexandria).

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