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New Mega file storage platform hopes to avoid copyright liability with encryption

By | Published on Friday 19 October 2012


Kim ‘Dotcom’ Schmitz and his business partner Mathias Ortmann have been talking to Wired about their plans for a new file-transfer platform to replace MegaUpload, the company they ran before it was shut down by the US authorities in January amidst allegations of money laundering, racketeering and copyright infringement.

Called simply Mega, the new file-transfer platform will include a new bit of technology that will automatically encrypt any file a user uploads to the system. Users will be given a unique key code for each file uploaded, and only someone with that code will ever be able to access the content that has been stored on the Mega server.

This will offer extra privacy protection to users uploading their own files, but, Ortmann reckons, will also protect the Mega business from liability for contributory copyright infringement, because there is no way the digital firm could know what is stored on its platform. So, if users were using the new Mega to distribute unlicensed music or movie files, liability would fall solely on said users.

Or so Dotcom and Ortmann’s lawyers reckon. It’s a grey area really, in all jurisdictions. In the big P2P file-sharing cases in the US courts, judges have generally ruled that if a tech company could theoretically install filters to limit the sharing of unlicensed copyright material (using meta data and/or fingerprinting technology to spot and block such files), then they should, however ineffective such filters might be. So a judge might rule that Mega’s encryption system should do such a check for known copyright material before locking content up.

Though Mega’s lawyers would probably counter that the encryption and subsequent upload to a server in the cloud of copyright material is not in itself infringement (in jurisdictions where a private copy right exists, which is most jurisdictions). Though rights owners might argue that adding encryption into the mix simply to circumvent liability for the infringement you are enabling is not in the spirit of the law. So, as we say, something of a grey area until it’s tested in court.

And even if the encryption plan did enable Mega to wash its hands of files uploaded to its servers, if a user then posted a link to an unlicensed file complete with unlock code, then under the American system the rights owner would have grounds for issuing a takedown notice against that file, and the Mega company would be obliged to remove it. And an allegedly shoddy takedown system was one of the key complaints from the content industries about MegaUpload v1.

And, of course, even if Mega is indeed legally protected, there is the issue as to whether the proposed new business could ever reach the scale of MegaUpload, especially if you buy the music and movie industry’s argument that the majority of the original Mega platform’s users were not interested in buying cloud storage of the digital firm, but in accessing unlicensed music and movie files stored in other users’ lockers. If accessing that content now comes with the added hassle of finding an unlock code, many might go elsewhere, leaving Mega in the more conventional cloud storage marketplace – a growing market nevertheless, but not on the scale of the original MegaUpload.

But whatever, it’s certainly true that the Mega team are not letting the tedious matter of the American government attempting to extradite them to face criminal charges in a US courtroom deter them from their entrepreneurial endeavours. And they’re learning from past mistakes. Mega will be hosted on two identical servers in two different countries, preventing any one government from taking the whole venture offline in one swoop, as the Americans did at the start of the year. Good call.

As previously reported, in addition to the new Mega storage platform, Dotcom has been developing a direct-to-fan service for artists called MegaBox. Meanwhile the US continues in its legal efforts to extradite the four Mega execs currently residing in New Zealand.