Friday, January 20, 2012

Feds Kill Megaupload (Updated)


Mixtape mecca and openair piracy expo Megaupload has a serious problem: it's just been shut down by the feds. The feds. And they didn't even need SOPA!

The federal indictment accuses Megaupload—which shocked the internet with the revelation that rap producer Swizz Beatz is for some reason its CEO—of over $500 million in lost media revenue from hosting pirated media. They had quite a run, though! Megaupload boasted "more than 150 million registered users, 50 million daily visitors and accounting for four percent of the total traffic on the Internet," according to the DoJ. And some famous friends.


Lucky for us, there are plenty of alternatives to Megaupload. And luckily for Swizz Beatz, he's still a super-successful rap producer, an NYU professor, and Alicia Keys' husband. Not so lucky? The crazily named MP3 baron and Megaupload founder Kim "Dotcom" Schlitz who is now in the slammer awaiting prosecution. Dotcom's had a busy past few years, racking up up embezzlement charges, multiple arrests, a lardy face, and most recently, ownership of one of New Zealand's most fabulous houses.

Let's also think about the timing of this bust. It's a pretty spectacular coincidence that the Department of Justice Task Force on Intellectual Property was able to destroy a copyright villain without any help from SOPA or PIPA the day after the internet's giant SOPA protest. Do you hear that, lawmakers? The law, as it stands right now was able to kill Megaupload.com, no draconian censorship powers required. The power you have now—with due process—is achieving the things you say you want to do. Your IP is protected. Online piracy was stopped, except for the dozens of Megaupload rivals like HulkShare and MediaFire. And I wouldn't be surprised if they're next. [AP]

Update: The WSJ says seven Megaupload employees are under arrest, with four already locked down—four of them in New Zealand! No word if one of them is Swizzy himself.

Update 2: As of 13 hours ago on Twitter, Mr. Beatz did not seem to give a shit about anything.

Update 3: The AP reports the following statement from Megaupload: "The fact is that the vast majority of Mega's Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch." Well, not really, no.

Update 4: The Department of Justice has issued a gleeful statement regarding the takedown, coordinated with police around the world, calling it "among the largest criminal copyright cases ever brought by the United States," and listed the individual charged with "racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering and two substantive counts of criminal copyright infringement."

Update 5: The Next Web shares the the full 72 page indictment. That's a lot of indictment.

Mega Indictment

SOPA, PIPA Blackouts Dominate Headlines, But What's the Impact?


The Internet blackouts to protest the Stop Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA) were big news yesterday, but what type of impact did they have?

Google on Wednesday blacked out the logo on its homepage, and linked to an anti-SOPA/PIPA petition that called on Americans to oppose the bills because they'd "censor the Internet and slow economic growth." Google said today that 7 million people signed its petition, which the search giant will submit to Congress.

Over on Twitter, the site recorded more than 2.4 million SOPA-related tweets between midnight and 4pm Eastern yesterday. The top five terms were SOPA, Stop SOPA, PIPA, and Tell Congress, the micro-blogging site said.

Wikipedia, meanwhile, was one of the sites that participated in Wednesday's blackout (much to some peoples' chagrin). In a statement, the site said that 162 million people saw Wikipedia's blackout message on its landing page, while others "shut down Congress' switchboards [and] melted their servers" with calls to stop the bills.

"Your voice was loud and strong. Millions of people have spoken in defense of a free and open Internet," Wikipedia said.

Throughout the day, there were reports of members of Congress dropping support for SOPA and PIPA, from Sen. John Cornyn, a Texas Republican, to Rep. Ben Cardin, a Maryland Democrat.

"Stealing content is theft, plain and simple, but concerns about the internet and free speech necessitate a more thoughtful, deliberative process," Cornyn said in a note on his Facebook page.

But while the blackouts certainly got some attention and scared off a few bill supporters, will they result in the end of SOPA and PIPA?

Though House Majority Leader Eric Cantor told Rep. Darrell Issa (sponsor of the rival OPEN Act) that he would not allow SOPA to hit the House floor, SOPA sponsor Rep. Lamar Smith said he would still markup the bill next month.

PIPA, meanwhile, is still scheduled to be addressed by the Senate on Jan. 24 at 2:15pm, though Senate Majority Leader Harry Reid said on Meet the Press this weekend that PIPA "could create some problems," so work needs to be done.


Public pressure did, however, result in Rep. Smith stripping DNS blocking from SOPA. PIPA sponsor Sen. Patrick Leahy has also voiced concern about DNS blocking, while Reid said a "manager's amendment" to PIPA might be necessary. Keep an eye on the Senate in the coming days to see if the bill actually makes it to the floor next Tuesday.

For more, see the Top 5 Objections to SOPA, PIPA and PCMag analysts' take on the bills, as well as the slideshow below, which features screen shots from Web sites that participated in yesterday's blackout.

Thursday, January 19, 2012

File-Sharing Site Megaupload Shut Down Over Piracy, Execs Indicted


One day after an extensive Internet blackout in protest of two pending anti-piracy bills, the Justice Department on Thursday announced that it had charged the owners of Megaupload with online copyright infringement.

Seven people and two corporations—Megaupload Limited and Vestor Limited—were indicted by a New York grand jury on Jan. 5 and charged with engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering, and two substantive counts of criminal copyright infringement. If convicted, those involved face up to 50 years in prison on all charges.

The accused generated more than $175 million and caused more than $1 billion in harm via megaupload.com and other sites, the DOJ said.

The effort was spearheaded by Megaupload Limited founder Kim Dotcom (aka Kim Schmitz or Kim Tim Jim Vestor), a 37-year-old resident of Hong Kong and New Zealand. Dotcom was arrested today in Auckland, along with Megaupload chief marketing officer Finn Batato, co-founder and CTO Mathias Ortmann, and programmer Bram van der Kolk.

Also named in the indictment were graphic designer Julius Bencko, head of business development Sven Echternach, and programmer Andrus Nomm.

More than 20 search warrants were executed in the U.S. and eight other countries today. About $50 million worth of assets and targeted sites where Megaupload has servers as well as 18 domain names were also seized. Megaupload.com is currently offline.

The group is accused of running Web sites that illegally profited from the distribution and reproduction of copyrighted works for more than five years. That content included movies that hit Megaupload before their theatrical releases, as well as music, TV shows, e-books, and entertainment and business software.


Megaupload used a rewards program that provided financial incentives for uploading popular content that drove traffic to the site, the indictment said. "The conspirators allegedly paid users whom they specifically knew uploaded infringing content and publicized their links to users throughout the world" according to the DOJ.

Megaupload did not include a search function; the owners used third-party linking sites to publicize content. In violation of the law, Megaupload failed to delete the accounts of those that contained infringing material.

"For example, when notified by a rights holder that a file contained infringing content, the indictment alleges that the conspirators would disable only a single link to the file, deliberately and deceptively leaving the infringing content in place to make it seamlessly available to millions of users to access through any one of the many duplicate links available for that file," the DOJ said.
Celebrity Link?

Not named in the indictment is Kasseem Dean, CEO of Megaupload, who is better known as hip hop producer Swizz Beatz and husband of Alicia Keys. As reported by the New York Post, Beatz asked high-profile friends like Sean "Diddy" Combs, Kanye West, and Will.i.am to participate in a video promoting Megaupload (below), which is not sitting too well with the artists' label, Universal Music Group. Last month, Universal had YouTube pull "Mega Song," prompting a lawsuit from Megaupload, according to TorrentFreak.

The song has since been reinstated and on the YouTube page for the "Mega Song," Dotcom said the Universal lawsuit highlights why bills like the Stop Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA) need to be stopped.

Both bills would allow the DOJ to go after overseas, "rogue" Web sites that traffic in counterfeit goods, from DVDs and MP3s to fake purses and prescription drugs. Detractors, however, argue that the bill is too broad and far-reaching and could hurt legitimate sites.

Both sides could likely make a case using today's Megaupload indictment. On the one hand, supporters could say that cases like this are exactly the reason why we need laws like SOPA and PIPA, but opponents could counter with the fact that the DOJ appears to be working fine without them.

7 Charged as F.B.I. Closes a Top File-Sharing Site


In what the federal authorities on Thursday called one of the largest criminal copyright cases ever brought, the Justice Department and the Federal Bureau of Investigation seized the Web site Megaupload and charged seven people connected with it with running an international enterprise based on Internet piracy.

Coming just a day after civil protests in the United States over proposed antipiracy bills, the arrests were greeted almost immediately with digital Molotov cocktails. The hacker collective that calls itself Anonymous attacked the Web sites of the Justice Department and several major entertainment companies and trade groups in retaliation for Mega-upload’s seizure. The Justice Department’s site and several others remained inaccessible for much of Thursday afternoon.

Megaupload, one of the most popular so-called locker services on the Internet, allowed users to anonymously transfer large files like movies and music. Media companies have long accused it of abetting copyright infringement on a vast scale. In a grand jury indictment, Megaupload is accused of causing $500 million in damages to copyright owners and of making $175 million through selling ads and premium subscriptions.

Four of the seven people, including the site’s founder, Kim Dotcom (born Kim Schmitz), have been arrested in New Zealand, the authorities said; the three others remain at large. Each of the seven people — who the indictment said were members of a criminal group it called “Mega Conspiracy” — is charged with five counts of copyright infringement and conspiracy. The charges could result in more than 20 years in prison.

As part of the crackdown, more than 20 search warrants were executed in the United States and in eight other countries. About $50 million in assets were also seized, as well as a number of servers and 18 domain names that formed Megaupload’s network of file-sharing sites.

Ira P. Rothken, a lawyer for Megaupload, said in a phone interview on Thursday that “Megaupload believes the government is wrong on the facts, wrong on the law.”

The case against Megaupload comes at a charged time, a day after broad online protests against a pair of antipiracy bills in Congress, the Stop Online Piracy Act, or SOPA, in the House, and the Protect I.P. Act, or PIPA, in the Senate.

The bills would give federal authorities expanded powers to crack down on foreign sites suspected of piracy. But technology companies and civil liberties groups say that the powers are too broadly defined and could effectively result in censorship. On Wednesday, Google and Wikipedia joined dozens of sites in political theatrics by blacking out some content and explaining their arguments against the laws.

Anonymous, which has previously set its sights on PayPal, Sony and major media executives, was more blunt in its response. The group disabled the Justice Department’s site for a time, and it also claimed credit for shutting down sites for the Motion Picture Association of America and the Recording Industry Association of America, two of the most powerful media lobbies in Washington, as well as those of the Universal Music Group, the largest music label, and BMI, which represents music publishers.

“Let’s just say, for #SOPA supporters their #SOPAblackout is today,” Anonymous wrote in a Twitter post. In an e-mail, a spokesman for the group said it was responsible for the Web attacks.

The Megaupload case touches on many of the most controversial aspects of the antipiracy debate. Megaupload and similar sites, like Rapidshare and Mediafire, are often promoted as convenient ways to legitimately transfer large files; a recent promotional video had major stars like Will.i.am of the Black Eyed Peas singing Mega-upload’s praises. But they have become notorious inside media companies, which see the legitimate uses as a veil concealing extensive theft.

Mr. Dotcom, a portly 37-year-old with dual Finnish and German citizenship, has made himself a visible target. He splits his time between Hong Kong and New Zealand and casts himself in flamboyant YouTube videos. His role as one of the most prominent Web locker operators has earned him a half-joking nickname in Hollywood: Dr. Evil.

According to the indictment, he earned $42 million from Mega-upload’s operations in 2010.

The indictment against Mega-upload, which stems from a federal investigation that began two years ago, was handed down by a grand jury in Virginia two weeks ago but was not unsealed until Thursday.

It quotes extensively from correspondence among the defendants, who work for Megaupload and its related sites. The correspondence, the indictment says, shows that the operators knew the site contained unauthorized content.

The indictment cites an e-mail from last February, for example, in which three members of the group discussed an article about how to stop the government from seizing domain names.

The Megaupload case is unusual, said Orin S. Kerr, a law professor at George Washington University, in that federal prosecutors obtained the private e-mails of Megaupload’s operators in an effort to show they were operating in bad faith.

“The government hopes to use their private words against them,” Mr. Kerr said. “This should scare the owners and operators of similar sites.”

Wednesday, January 18, 2012

SOPA Sponsor Calls Protests a 'Publicity Stunt' as Google Joins Up

 

The Internet blackouts to protest the Stop Online Piracy Act (SOPA) and the PROTECT IP Act (PIPA) were big news yesterday, but what type of impact did they have?

Google on Wednesday blacked out the logo on its homepage, and linked to an anti-SOPA/PIPA petition that called on Americans to oppose the bills because they'd "censor the Internet and slow economic growth." Google said today that 7 million people signed its petition, which the search giant will submit to Congress.
Over on Twitter, the site recorded more than 2.4 million SOPA-related tweets between midnight and 4pm Eastern yesterday. The top five terms were SOPA, Stop SOPA, PIPA, and Tell Congress, the micro-blogging site said.


Wikipedia, meanwhile, was one of the sites that participated in Wednesday's blackout (much to some peoples' chagrin). In a statement, the site said that 162 million people saw Wikipedia's blackout message on its landing page, while others "shut down Congress' switchboards [and] melted their servers" with calls to stop the bills.


"Your voice was loud and strong. Millions of people have spoken in defense of a free and open Internet," Wikipedia said.


Throughout the day, there were reports of members of Congress dropping support for SOPA and PIPA, from Sen. John Cornyn, a Texas Republican, to Rep. Ben Cardin, a Maryland Democrat.


"Stealing content is theft, plain and simple, but concerns about the internet and free speech necessitate a more thoughtful, deliberative process," Cornyn said in a note on his Facebook page.


But while the blackouts certainly got some attention and scared off a few bill supporters, will they result in the end of SOPA and PIPA?


Though House Majority Leader Eric Cantor told Rep. Darrell Issa (sponsor of the rival OPEN Act) that he would not allow SOPA to hit the House floor, SOPA sponsor Rep. Lamar Smith said he would still markup the bill next month.


PIPA, meanwhile, is still scheduled to be addressed by the Senate on Jan. 24 at 2:15pm, though Senate Majority Leader Harry Reid said on Meet the Press this weekend that PIPA "could create some problems," so work needs to be done.


Public pressure did, however, result in Rep. Smith stripping DNS blocking from SOPA. PIPA sponsor Sen. Patrick Leahy has also voiced concern about DNS blocking, while Reid said a "manager's amendment" to PIPA might be necessary. Keep an eye on the Senate in the coming days to see if the bill actually makes it to the floor next Tuesday.


For more, see the Top 5 Objections to SOPA, PIPA and PCMag analysts' take on the bills, as well as the slideshow below, which features screen shots from Web sites that participated in yesterday's blackout.

What Is SOPA?


If you hadn't heard of SOPA before, you probably have by now: Some of the internet's most influential sites—Reddit and Wikipedia among them—are going dark to protest the much-maligned anti-piracy bill. But other than being a very bad thing, what is SOPA? And what will it mean for you if it passes?

SOPA is an anti-piracy bill working its way through Congress...

House Judiciary Committee Chair and Texas Republican Lamar Smith, along with 12 co-sponsors, introduced the Stop Online Piracy Act on October 26th of last year. Debate on H.R. 3261, as it's formally known, has consisted of one hearing on November 16th and a "mark-up period" on December 15th, which was designed to make the bill more agreeable to both parties. Its counterpart in the Senate is the Protect IP Act (S. 968). Also known by its cuter-but-still-deadly name: PIPA. There will likely be a vote on PIPA next Wednesday; SOPA discussions had been placed on hold but will resume in February of this year.

...that would grant content creators extraordinary power over the internet...

The beating heart of SOPA is the ability of intellectual property owners (read: movie studios and record labels) to effectively pull the plug on foreign sites against whom they have a copyright claim. If Warner Bros., for example, says that a site in Italy is torrenting a copy of The Dark Knight, the studio could demand that Google remove that site from its search results, that PayPal no longer accept payments to or from that site, that ad services pull all ads and finances from it, and—most dangerously—that the site's ISP prevent people from even going there.

...which would go almost comedically unchecked...

Perhaps the most galling thing about SOPA in its original construction is that it let IP owners take these actions without a single court appearance or judicial sign-off. All it required was a single letter claiming a "good faith belief" that the target site has infringed on its content. Once Google or PayPal or whoever received the quarantine notice, they would have five days to either abide or to challenge the claim in court. Rights holders still have the power to request that kind of blockade, but in the most recent version of the bill the five day window has softened, and companies now would need the court's permission.
The language in SOPA implies that it's aimed squarely at foreign offenders; that's why it focuses on cutting off sources of funding and traffic (generally US-based) rather than directly attacking a targeted site (which is outside of US legal jurisdiction) directly. But that's just part of it.

...to the point of potentially creating an "Internet Blacklist"...

Here's the other thing: Payment processors or content providers like Visa or YouTube don't even need a letter shut off a site's resources. The bill's "vigilante" provision gives broad immunity to any provider who proactively shutters sites it considers to be infringers. Which means the MPAA just needs to publicize one list of infringing sites to get those sites blacklisted from the internet.
Potential for abuse is rampant. As Public Knowledge points out, Google could easily take it upon itself to delist every viral video site on the internet with a "good faith belief" that they're hosting copyrighted material. Leaving YouTube as the only major video portal. Comcast (an ISP) owns NBC (a content provider). Think they might have an interest in shuttering some rival domains? Under SOPA, they can do it without even asking for permission.

...while exacting a huge cost from nearly every site you use daily...

SOPA also includes an "anti-circumvention" clause, which holds that telling people how to work around SOPA is nearly as bad as violating its main provisions. In other words: if your status update links to The Pirate Bay, Facebook would be legally obligated to remove it. Ditto tweets, YouTube videos, Tumblr or WordPress posts, or sites indexed by Google. And if Google, Twitter, Wordpress, Facebook, etc. let it stand? They face a government "enjoinment." They could and would be shut down.
The resources it would take to self-police are monumental for established companies, and unattainable for start-ups. SOPA would censor every online social outlet you have, and prevent new ones from emerging.

...and potentially disappearing your entire digital life...

The party line on SOPA is that it only affects seedy off-shore torrent sites. That's false. As the big legal brains at Bricoleur point out, the potential collateral damage is huge. And it's you. Because while Facebook and Twitter have the financial wherewithal to stave off anti-circumvention shut down notices, the smaller sites you use to store your photos, your videos, and your thoughts may not. If the government decides any part of that site infringes on copyright and proves it in court? Poof. Your digital life is gone, and you can't get it back.

...while still managing to be both unnecessary and ineffective...

What's saddest about SOPA is that it's pointless on two fronts. In the US, the MPAA, and RIAA already have the Digital Millennium Copyright Act (DMCA) to request that infringing material be taken down. We've all seen enough "video removed" messages to know that it works just fine.
As for the foreign operators, you might as well be throwing darts at a tse-tse fly. The poster child of overseas torrenting, Pirate Bay, has made it perfectly clear that they're not frightened in the least. And why should they be? Its proprietors have successfully evaded any technological attempt to shut them down so far. Its advertising partners aren't US-based, so they can't be choked out. But more important than Pirate Bay itself is the idea of Pirate Bay, and the hundreds or thousands of sites like it, as populous and resilient as mushrooms in a marsh. Forget the question of should SOPA succeed. It's incredibly unlikely that it could. At least at its stated goals.

...but stands a shockingly good chance of passing...

SOPA is, objectively, an unfeasible trainwreck of a bill, one that willfully misunderstands the nature of the internet and portends huge financial and cultural losses. The White House has come out strongly against it. As have hundreds of venture capitalists and dozens of the men and women who helped build the internet in the first place. In spite of all this, companies have already spent a lot of money pushing SOPA, and it remains popular in the House of Representatives.
That mark-up period on December 15th, the one that was supposed to transform the bill into something more manageable? Useless. Twenty sanity-fueled amendments were flat-out rejected. And while the bill's most controversial provision—mandatory DNS filtering—was thankfully taken off the table recently, in practice internet providers would almost certainly still use DNS as a tool to shut an accused site down.

...unless we do something about it.

The momentum behind the anti-SOPA movement has been slow to build, but we're finally at a saturation point. Wikipedia, BoingBoing, WordPress, TwitPic: they'll all be dark on January 18th. An anti-SOPA rally has been planned for tomorrow afternoon in New York. The list of companies supporting SOPA is long but shrinking, thanks in no small part to the emails and phone calls they've received in the last few months.
So keep calling. Keep emailing. Most of all, keep making it known that the internet was built on the same principles of freedom that this country was. It should be afforded to the same rights.