The Court of Appeal has released its decision in the Kim Dotcom extradition case. The case has had a lot of resources thrown at it by both sides and I hope my brief description does the arguments and the judgment justice.
The decision can be read here. As befits the resources that have been poured into the case the decision is complex and will be considered authoritative. And the case is now off to the Supreme Court.
This is not meant to be a detailed dissection of the case. But there are some interesting aspects of the case that deserve comment.
First the business model used by Megaupload was described in some detail.
Dotcom maintained that his business was legal because there was a robust system in place to take down material stored on the Megauload se4rver that was in breach of copyright. There is legal protection for the innocent storing of copyright material if there is a robust take down procedure.
The Court thought that the system Dotcom put into place was, to use that legal phrase, a little too cute.
The basics were that Megaupload provided file storage for its customers. Its terms of service provided that users must not upload any files that infringed copyright.
A Megaupload user could upload a movie which had been ripped from a DVD or otherwise illicitly obtained. Megaupload would convert it and store it as a flash video (.flv) file.
A file in that format can be played directly or streamed in an internet browser without needing to be downloaded. Copies were stored on multiple servers around the world.
When the file was uploaded it would be given a unique identifier. The user would be provided with a URL link permitting the user to access that file. The user could share the link with anyone, but could not do so on a Megaupload site.
A movie stored on Megaupload could be viewed via Megavideo, a separate website that shared Megaupload’s database. Anyone who had the uploading user’s Megaupload link could view it via their browser, but they could not search directly for infringing movies on Megaupload or Megavideo.
Viewers could access files stored on Megaupload via third-party or ‘linking’ websites that Megaupload did not control.
Viewers could watch 72 minutes of a Megaupload stored movie for free. To watch the balance the viewer would have to purchase a premium subscription from Megavideo.
Until June 2011 Megaupload ran a rewards programme that paid users for uploading files that were much in demand for downloading. The United States says many of these files were popular because they were copyrighted and not otherwise freely available for online viewing or download.
A small proportion of users uploaded many files in exchange for rewards. One user uploaded that many infringing files he received reward payments of more than US $50,000. He was the subject of 1,200 take-down requests. In one six-month period links created by this user generated more than 10 million downloads.
At its height Megaupload earned revenues of more than US $175 million and accounted at one stage for four per cent of global internet traffic. The US government claimed that this was evidence of the systematic infringement of copyright and says that copyright owners lost more than US $500 million.
To save server space Megaupload engaged in a practice called deduplication. When a user uploaded a file identified by Megaupload as a copy of a file already held on its servers Megaupload would not store the file but would send the user a new link to the existing file.
The US Government claimed that files that MegaUpload treated as duplicates were usually uploaded by the same user and would be based off the same rip. Some users uploaded the same file many times in anticipation of take-down requests from copyright owners. Each upload would receive a new link which could be offered to the public on linking websites.
Copyright owners in the United States very frequently asked Megaupload to take down infringing files. The US Government contended that Megaupload did not respond by deleting or disabling access to infringing files but would delete the link nominated in the take-down notice, leaving the file accessible via other links.
The case features some Skype discussions between some of the defendants (not Dotcom) which look pretty incriminating including discussions between Ortmann and Van der Kolk where it is clear they knew that material in breach of copyright was being stored on the site. As the Court put it:
There is also evidence of several conversations between the appellants themselves which on the face of it constitute evidence of guilty knowledge and dishonesty.
The legal discussion is rather dense and brains better than mine can dissect it.
The proceeding was attacked on the basis that it was an abuse of process, the circumstances including …
… the unlawful interceptions of communications by the Government Communications Security Bureau, the failure to disclose to the District Court when applying for a provisional arrest warrant under s 20 of the Extradition Act that the information had been collected illegally, the military-style raid on Mr Dotcom’s home as well as unreasonable search and seizure.
 Mr Dotcom also alleged the prosecution was commenced against him in the United States for political reasons and that New Zealand granted him permanent residence so as to streamline his extradition.
The Court refused this application, stating that it did not come close to the very high threshold that must be met in these sorts of cases. The Court also thought that these were issues for trial rather than at the extradition hearing stage.
There was some discussion about double criminality. The Court held that this was a requirement but that the offences were extradition offences under the Act and the request was valid.
The case is bound for the Supreme Court. It looks like there is a distinct possibility it will hit Andrew Little’s desk at some stage in the not too distant future.