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MegaUpload rewarded top infringers, says prosecutor in extradition case

By Chris Cooke | Published on Monday 28 September 2015

The extradition hearing of Kim Dotcom and three other former managers of the long defunct but often controversial file-transfer service MegaUpload continues in New Zealand. The US wants to extradite the four men to its courts to face charges of racketeering, money laundering and rampant copyright infringement.

As previously reported, core to the case against the company that was forced offline in early 2012 is the allegation that it financially rewarded users who uploaded large quantities of copyright infringing material to its servers, because that content ensured a steady flow of traffic and therefore advertising and subscription income. It also meant, prosecutors allege, that as MegaUpload removed infringing material to comply with US copyright law, it knew that same content would be re-uploaded elsewhere on its networks.

That MegaUpload operated a takedown system for copyright owners, in line with US law, will be key to Dotcom et al’s defence. The prosecution want to show that MegaUpload only ever paid lip service to US copyright law, allowing users to continue uploading, and rewarding them for those uploads, even after multiple takedown notices had been issued against the uploading individual’s account.

Speaking on behalf of the US government in the extradition case, lawyer Christine Gordon said that one MegaUpload user was paid more than $50,000 for his uploading efforts between 2006 and 2011. Payments were made to the user, Gordon alleged, despite over 1200 takedown requests being issued against his account. No efforts were taken to restrict that user’s infringing activities, she added, and instead his server space was expanded to accommodate new unlicensed uploads.

However, the lawyer added, that particular uploader eventually fell out with MegaUpload, complaining that he wasn’t being paid enough for his ‘work’ for the company. According to the New Zealand Herald, Dotcom allegedly responded by writing in an email: “You and your friends are at most 1% of our traffic so please don’t overestimate your importance to us. We’re thankful of your support of MegaUpload in the past and I think we have been fair to you”.

MegaUpload’s rewards scheme was axed in June 2011, Gordon said, and Dotcom then became a critic of other file-transfer sites rewarding infringing uploaders, going as far as to report those rival services to Paypal. At that point the company described such payments as being “illegal” she claimed, “but Megaupload had done that [itself] for six years”.

The case continues.