Four key questions from the 'Mega conspiracy'

I spent the weekend discussing the ramifications of the case with Shelston IP partner Mark Vincent, a globally recognised expert on cloud computing and the law, who by good fortune as well happens to be a New Zealand lawyer in Auckland.

The support of the Organised

Despite the support of the Organised and Financial Crime Agency of New Zealand, the Crown Law Office of New Zealand and the Office of the Solicitor General for New Zealand, the nationality and business address of the accused raise interesting questions around jurisdiction, namely: does United States territory now extend to cyberspace?

National jurisdiction has traditionally extended to activities that take place within a country, in its waters and airspace, even in its vessels and aircraft when they move beyond these borders. However it has not traditionally encompassed activities on foreign soil. To deal with international IP infringements on the internet the United States is going to be re-defining the boundaries of state jurisdiction.

What links each of the accused people

It is not clear what links each of the accused people and organisations have to United States territory. The Megaupload business had 25 petabytes of storage and 1000 servers leased in US data centres operated by Carpathia Hosting, plus a furthermore 36 servers leased from US-based Cogent Communications. It used Paypal to process transactions.

But that business model, from a legal sense, doesn’t appear dissimilar to the services of Google’s YouTube, Vimeo or any number of online content services. Many services provide financial rewards to users generating popular content, most pursuant to this agreement the assumption that the user owns the copyright in the work. The more hits a power user gets on YouTube, for instance, the larger the slice of revenue they are entitled to pursuant to this agreement Google’s reward program. Is that racketeering?

"Numerous parts of Google’s business model reward popular content," Vincent notes. "Isn’t it possible popular content might such as often be non-infringing?"

The content industry

It’s interesting to note that Google now shares some of that revenue with the content industry. Could Google executives be arrested for operating YouTube if the content industry turned savage on its rewards program? When Google bought YouTube in 2006 there was no solution to the problem of uploads which infringed copyright.

If data or transactions made on a server based in the United States are found to be a business activity that brings corporations and their employees in accordance with U.S. jurisdiction, the Megaupload case could have significant consequences for international users of US-based cloud computing services just as Microsoft Azure, Amazon Web Services, Rackspace or Google AppEngine.

It would evenly concern users of online storage services, just as DropBox or Mozy, even users of Apple’s iCloud service. Users of the former could lose significant troves of company data should their sites ever be shut down as Megaupload has.