'Mega'-Indictment Shows U.S. Already Has International Piracy Chops

The indictment reads like a shopping list for an MTV reality show: a Lamborghini, 15 Mercedes-Benzes, a Rolls-Royce Phantom, 65-inch big-screen TVs, and of course, a Jet Ski.

It was all part of the haul that international officials seized from Megaupload.com, one of the world's largest file-sharing websites, when the Justice Department accused it on Thursday of an international conspiracy to distribute stolen content.

The case described in the 72-page indictment as a "Mega Conspiracy" provided a fitting footnote to a week filled with unprecedented protests over controversial anti-piracy legislation.

Despite the timing, however, the potentially blockbuster case can't easily be used by either side to settle the heated debate over piracy and counterfeit goods.

When Justice Officials announced the charges, for example, proponents of the House's Stop Online Piracy Act and the Senate's Protect IP Act pointed to the case as proof that stricter rules are needed.

The only reason the Justice Department was able to go after Megaupload.com and its sister sites was because it was registered in the United States and some data were hosted here, argued Mike Nugent, executive director of Creative America, a coalition of entertainment providers.

And former Sen. Chris Dodd of the Motion Picture Association of America said "similar tools are needed to go after foreign-based websites."

But the case, which Justice officials call one of the "largest criminal copyright cases ever brought by the United States," may not be so clear-cut.

"This case shows that law enforcement is perfectly capable of securing international cooperation and taking direct action against large piracy operations overseas," Jerry Brito, director of the Mercatus Center's Technology Policy Program at George Mason University, wrote in a blog post. "The Megaupload principals were arrested and they now face extradition and trial. So why do we need due-process-free domain seizures or tinkering with the inner workings of the Internet to combat piracy?"

The argument comes down to what constitutes a "foreign" website. Sponsors and supporters of SOPA and Protect IP said the bills were designed to expand tools already available for use against U.S. websites to foreign websites that may be beyond U.S. jurisdiction.

Megaupload featured a domain name registered in the United States, and some of its data were stored by Carpathia Hosting in Virginia and Cogent Communications in Washington, according to the indictment. Officials also noted that PayPal was used to provide money-transfer services. Thus the site meets the current definition of a domestic website, which can be seized with a court order.

But the real-world company and the process to actually take down the site and its top leaders were anything but domestic. The company itself is based in Hong Kong, and none of the seven people indicted were citizens or residents of the United States.

It took international cooperation with New Zealand police to arrest four of the accused, including the site's founder, Kim Dotcom, also known as Kim Schmitz. The Justice Department cited "critical" assistance from 13 different agencies in locations such as the Netherlands, Britain, Germany, and Canada, in addition to New Zealand and Hong Kong.

All of that international effort can be brought to bear against foreign websites just as well, Brito argues. "If they are breaking American laws, then we work with other countries to extradite them and get rid of the operation itself," he said in an interview with National Journal. "We can already do that."

But that's not enough, argue proponents of piracy legislation.

Besides the jurisdiction issues, U.S. officials simply don't have the resources to go after thousands of smaller sites in the same way as Megaupload, said MPAA senior vice president Kevin Suh. "It's getting easier and easier to maintain infrastructure outside the United States," he said. "Megauploads was just one of the biggest."