Hollywood’s War on Kim Dotcom Will Hurt Online Innovation

Kim on his giant property. Photo by Patrick McGuire.

In January 2012, the powers that be in Hollywood bagged one of their most sought-after targets with the help of their friends in the White House: Megaupload and Kim Dotcom. 76 police officers and two helicopters swarmed a private residence in Auckland, New Zealand and arrested Kim Dotcom, a man once known as “Dr. Evil” in elite Hollywood circles. To those powerful movie-making types, and now among the public at large, Kim has been positioned as a criminal pirate mastermind, and his power struggle with the old guard of the entertainment industry over alleged copyright infringement has captured global attention.

Last night, 60 Minutes profiled Kim Dotcom in a segment titled “Kim Dotcom: Hollywood’s Villain” that included such gems as Eriq Gardner from the Hollywood Reporter stating that each and every one of Megaupload’s 50 million users represented lost revenue for the entertainment industry. The segment concluded with the MPAA providing a canned statement that plainly called Kim Dotcom a thief. 60 Minutes fairly profiled Kim’s dodgy past as a computer hacker, who claimed to have once broken into NASA, but they barely discussed the various legal uses for Megaupload and services like it. Also omitted from the 60 Minutes segment was Kim’s buddy-buddy relationship with the artists he allegedly steals from, like Swizz Beatz.

Oftentimes, Kim’s wildly flamboyant lifestyle is the focal point of most conversations surrounding the Megaupload case. It’s not hard to see why, given that any search of the man’s name brings up videos of parties on yachts, hang seshes with rap illuminati like Diddy and Bun B, and sports car races as part of the Gumball Rally, a cross-continent mega-race for rich men only. All of that happened before Hollywood pushed American authorities into seizing Kim’s company and all of his funds. Today, thanks to the legal restrictions placed upon him, he is a slightly more modest man.

In case you’ve never used the internet before, Megaupload was, at one time, responsible for 4% of internet traffic. It was by far the fastest and most reliable file locker service for sending large files across the internet’s various tubes and fiber optic cables before it was seized by the USA. Megaupload was widely beloved, but ultimately it provided a far-too-easy solution for piracy—and as the old Japanese proverb goes, the nail that sticks up the most gets hammered down first.

In October 2013, I was invited to visit Kim Dotcom in Auckland. This digital entrepreneur, once living the very definition of lavish excess, is now at the center of history’s largest copyright case. Unsurprisingly, it’s drained him financially and emotionally, and he hasn’t even set foot in an American courtroom as of this writing. Kim still rents an extravagant compound that sits on 60 acres—it’s the most expensive home in New Zealand—but his dreams of purchasing it have been squashed by the draining legal battle he continues to fight.

Kim Dotcom: The Man Behind Mega. Our documentary about the man in question.

I arrived at the Dotcom estate with Tim Pool, another VICE staffer and the host of our short documentary. I was excited, nervous, and completely unsure about what I would see and hear during my time with Mr. Dotcom. After driving through the New Zealand countryside for about twenty minutes—gawking at strange birds and occasionally swerving into the wrong lane of traffic, thanks to our North American conditioning—we arrived at the gates of Dotcom Mansion.

As we pulled into the driveway, a security guard—who works out of a little hut on the front lawn, beside a massive “MEGA” logo that’s singed into the grass—approached our car to ensure we weren’t agents of Hollywood, then waved us past the gates. As we drove along the winding driveway towards the main house (there is an eight bedroom guesthouse on the property that’s a four-minute golf cart ride away from the primary residence) we passed a metal giraffe that towered over us from atop a nearby hill. Later, Kim told us the giraffe was left there by the previous tenants.

Arriving at Kim’s home feels like escaping into a film that’s equal parts Jurassic Park, Batman, and Pirates of Silicon Valley. For the first few minutes, Tim and I had little to say to each other besides “this is crazy” and “it feels like we’re in a movie.” Jars of candy were everywhere and a beautiful aquarium full of tropical fish served as the backsplash to Kim’s pristine kitchen. Outside, where we waited for Kim to finish a meeting, we sat at a long communal table beside a Ping-Pong table, a hedge maze, a swimming pool, and a 60” television hanging within eyeshot—one of many screens operating in the Dotcom estate. This beautiful, giraffe-friendly mega-home is where Kim and his wife Mona, who was pregnant with twins at the time, bunkered down during his arrest inside a panic room he was unable to show us because his people were widening the door.

***

January 2012 was a tough month for internet freedom. The day before the raid on Kim’s compound, the Stop Online Piracy Act (SOPA) died in the US Congress. The bill had been gaining support from massive internet companies like GoDaddy, effectively outing themselves as lapdogs of the pro-Hollywood lobby. Thankfully, the activism of people like late Reddit co-founder Aaron Swartz, along with service blackouts launched by Wikipedia, Reddit, and other web titans, ensured that the public’s outrage was too loud for Congress to ignore. SOPA was killed. But if it had passed, the web would currently be a much more censored space.

When Kim was taken into custody, the United States government released an indictment that painted him as a Bond villain, stacking riches from a pirate empire. According to the US government’s indictment document, $110 million passed through Megaupload’s PayPal account in the six years before its dissolution. The US claims that in 2010 alone, Kim’s company made $42,000,000 off the site.

In that same document, Kim’s lavish lifestyle is itemized in full, as the US Government listed the flashy assets it repossessed: 14 Mercedes Benzes, a Predator statue, two 108” TVs, a Rolls Royce Phantom with the license plate “GOD.” (Other cars sported plates that read “HACKER,” “STONED,” CEO,” and “MAFIA.”)

Beyond the MTV Cribs-style bounty snatched by the authorities, the indictment laid out accusations that the Megaupload staff was consciously allowing piracy to occur. For example, it claimed the tools Megaupload had in place to help copyright owners take down infringing material weren’t effective—if two people uploaded a copy of a movie, Megaupload would not duplicate the file on their server, they would create two links pointing to the same file. If the copyright owner found a link it believed to be infringing, Mega would not take the file down. They would simply remove the link. Some people saw this is an incomplete fix designed to keep copyright infringement on Megaupload alive and well.

Because of all this, when Tim and I first discussed the line of questioning we would have for Kim upon our arrival, we both agreed that underneath Kim’s flamboyance was a conscious pirate. It really did seem, based on the indictment and Kim’s over-the-top lifestyle, that he had been trying to pull one over on Hollywood for years. It didn’t help that the government had named Kim—and his associates—as part of a “Mega Conspiracy.”

Since the raid, Kim has repeatedly skirted the US government’s attempts to extradite him, thanks in part to a New Zealand court decision that declared the raid on his house illegal. He’s also had the Prime Minister of New Zealand apologize to him publicly, after Kim proved the government was illegally spying on him. Plus, Kim brazenly launched a new file-sharing resource called MEGA, which so far has not resulted in a large-scale government raid.

Because of the apparently shaky case the US has against Kim, it wasn’t completely surprising to discover—after grilling him about the accusations and evidence in the indictment—that Kim is not really the maniacal individual that he’s been painted as. This is a man who’s won the Gumball Rally twice and is one of the world’s top Call of Duty players, yet when we arrived he was so unassuming that he asked us not to film him downing a glass of milk. “They’ll all be like, ‘What, he’s drinking milk?’” he joked. “Who is he, Popeye? That’s super nerdy.”

Kim appears to have studied every nook and cranny of the allegations against him, and he often has perfectly reasonable rebuttals to many of the claims. As for the allegation that Megaupload’s copyright infringement tool—for helping movie studios and the like to pull down bootleg content—was purposely ineffective, he issued a simple defense. Imagine that two users have uploaded the same film. One is doing so to make a legal backup, the other user is doing so to illegally spread the file. Why should Megaupload take down every instance of that file, effectively punishing users that had signed onto the service for perfectly legitimate means?

Kim Dotcom in the studio. Photo by Patrick McGuire.

Tim and I were hoping Kim would take us in a helicopter with a bunch of models and champagne on ice, carpet bombing Auckland with glitter and laughing about the good times. However, most of our time was spent in a recording studio in downtown Auckland, observing Kim as he patiently crafted his upcoming German-style EDM album. Kim had flown out a team of young LA sound engineers to work on the record. They told me they had been staying in his guesthouse for weeks—and would be there for months more.

In the studio, we heard a sample of his newest track, an upbeat banger called “Live My Life.” The lyrics are what you would expect from a man whose life was torn from his hands:

"Don’t want to be criticized ‘cause my life’s unauthorized / Just wanna drive fast, leave behind the past / I create my paradise where all the nonsense is on ice / I just want to live my life (my life)"

When I asked him where the lyrics came from, he said, “That’s me! That’s how I feel. I put a lot of thought into the lyrics, and it’s the first idea I had for a song after the raid. Like, Leave me alone, what have I done to you? I’m creating these innovations that are making society better, allowing everyone to communicate better and share things, and here you are trying to destroy me.”

Kim senses the target on his back, aggravated by a perceived double standard between himself and internet freedom entrepreneurs like Sean Parker, the man who helped create Napster, a service explicitly built for music piracy. After a very public legal headache starring Lars Ulrich, Sean was slapped with a $26,000,000 settlement with the major record labels, but since then he’s gone on to help make Facebook what it is today.

When we asked Kim about Napster, he pointed to the new climate of surveillance and copyright protectionism. “It’s interesting how times have changed,” he told us, “How important copyright is today. It’s almost a matter of national security when you consider the NSA and the whole apparatus spying on me—a guy who’s an alleged pirate.”

New political climate or not, Megaupload always operated in a legal grey zone. It would be hard to imagine that Kim Dotcom, a proven visionary when it comes to internet entrepreneurialism, didn’t see this shitstorm coming. Anyone who used Megaupload knows it helped create one of the broadest piracy networks ever. Minimal advertising—even for free users—mixed with incredibly fast speeds made it a tantalizingly good platform for anyone looking to spread a film or a TV show across the internet.

That’s not to say Megaupload was the only network that trafficked heavily in pirated content. “YouTube knows. Google knows. Everybody knows that piracy is occurring on the internet. You go to any ISP like Verizon or Comcast, and you ask them: ‘Honestly, how much of your traffic do you think is piracy?’ They’ll tell you to your face, ‘Up to 50%,’" Kim said. "But the safe harbor provisions in the US law protect them from being liable to these actions of users—and for good reason. They shouldn’t be made responsible for the actions of third parties.”

These safe harbor provisions were designed to protect online businesses from the actions of their users. If a user uploads a bootleg music video to YouTube and a record label objects, YouTube isn’t liable. For some reason, these provisions did not apply to Megaupload.

Kim's estate. Photo by Meighan Ellis.

In “Megaupload, the Copyright Lobby, and the Future of Digital Rights: The United States vs. You (and Kim Dotcom),” a white paper drafted by Kim’s legal team, an infamous lawsuit between Viacom and YouTube takes center stage. In this particular case, Viacom was attempting to penalize YouTube for the sheer amount of copyright infringement streaming freely through their site. The trial took place in April 2013, and the court eventually ruled in favor of YouTube, stating, “no service provider could possibly be aware of the contents of each such video.” Therefore, as Viacom could not sufficiently prove anyone was consciously ignoring copyrighted material, YouTube was protected under safe harbor provisions.

The question remains: Why doesn’t Megaupload qualify for the same type of safe harbor provisions as YouTube? “It’s a question I’ve asked myself since all of this happened,” Kim told us. “If you look at it, we’re not much different from sites like YouTube or Dropbox. YouTube probably has ten times more copyright infringement on its site than Megaupload ever had in its history. It’s interesting that they picked us, a foreign company based in Hong Kong, and me, an entrepreneur who’s German and Finnish with a flamboyant lifestyle, funny license plates, and a conviction as a hacker. They picked me to be a scapegoat for copyright.”

Despite being at odds with the US Government now, in 2010 Kim complied with an information request from the Americans that led to the shutdown of a site called Ninjavideo—a pirate streaming portal that used Megaupload and Megavideo to provide its content. Kim’s compliance resulted in the imprisonment of two Ninjavideo admins including Hana Beshara, aka Queen Phara, who spent over a year in prison, owes $200,000 in fines to the MPAA, and is currently serving two years of supervised release. This resulted in a backlash from Anonymous—the same multi-headed hacktivist group that rallied behind Kim when Megaupload was first shut down—to which Kim insisted, over Twitter, that he had “no choice” because “Megaupload had to comply with warrants.”

Hana Beshara sees Kim as a snitch, who is trying to feign ignorance to Megaupload’s power as a tool of piracy, and doesn’t respect his cooperation with the US. Hana told me: “He’s slicked up his whole image… I've been the same woman since before I was imprisoned. Ultimately that's the reason we're so different. I didn't try to front like I had no idea what was going on when the shit hit the fan… Kim had a choice. I forced a no-cooperation agreement with the government, practically guaranteeing myself more jail time, so that i would never speak against my friends or my site." In short, she doesn't see him as a true advocate of copyright reform.

While it would certainly be unpleasant if Kim and Hana ever met in real life, Kim Dotcom was acting in accordance with US law when he shared information with the government he now publicly disrespects: “What they did to us never happened before,” he told us. “The US government is eager to win this case, so they seized all of our assets so we couldn’t afford a fair defense. When we asked the US court to release some of the assets, the US government argued that I’m a fugitive who must be extradited before I gain access to funds for my legal defense—which basically means they want to dehydrate me from funding to pay for my lawyers, and if I wasn’t a successful entrepreneur, they would have probably succeeded.”

Leaning on the defense that Megaupload should have the same defenses as Youtube is obviously problematic, as there is a significant difference in service between streaming a copyrighted video—like you can on YouTube today—and downloading a HD copy of that same video—like you could on Megaupload or any of the pirate networks that still exist. However, the need to transfer large files online is one that, clearly, millions of people want—and it’s one that could always be used for illegal purposes; just as the post office can always be used to mail heroin and anthrax.

One major difference between YouTube vs. Viacom and Megaupload vs. America is that YouTube’s case was civil, whereas Megaupload’s is criminal. Kim Dotcom and his associates have been charged with money laundering and racketeering on a massive scale. No one has ever accused YouTube of such crimes. In the Megaupload indictment, there’s almost no elaboration as to why the American government charged the company with these offenses. Last week, the US finally released their 191-page summary of evidence against Kim that includes Skype chatlogs intercepted by the US government—which seemingly show how Megaupload was incentivizing uploaders of pirated content with cash. These chatlogs also detail one particular episode where Kim got mad at one of his staff for removing Megaupload links to pirated content.

I got in touch with Kim about these new revelations, and his response was plainly defiant: “I'm not worried about the 191 pages of nothingness. All they show is that there never was a criminal conspiracy. But until we get access to our data to show the real picture, it is pointless talking about it, because all I have are words. I need to show the emails and chats that will form our rebuttal and the DOJ is refusing access. Let’s hope the NZ Supreme Court comes back with a decision to give us access to our own data.”

_Kim's souped up golf cart. _Photo by Meighan Ellis.__

No other file-sharing site in history has faced the type of grandiose shutdown that Megaupload did, but that doesn’t mean Hollywood’s warpath ended there. In August 2013, the MPAA prematurely announced it had won a case against Hotfile before the judge’s ruling had been made public. (Hotfile is a site that once offered a similar, but more crappy, service to Megaupload.)

Chris Dodd, the CEO of the MPAA, issued a statement about the MPAA’s legal victory: “This decision sends a clear signal that businesses like Hotfile that are built on a foundation of stolen works will be held accountable for the damage they do both to the hardworking people in the creative industries and to a secure, legitimate internet.”

While the MPAA certainly did win the case against Hotfile, another site that for whatever reason does not qualify for safe harbor provisions, US judge Kathleen Williams appeared to be very uncertain about whether or not Hotfile was deliberately set up to encourage piracy—even though it was clear Hotfile was making money from the users who were infringing copyrights, and was doing very little to discourage them from using their service. Hotfile has now been “permanently shut down.”

In addition to Hotfile, in late October 2013, a popular torrent site called isoHunt closed its doors after being slapped with a lawsuit. The site’s owner—a Canadian dude from British Columbia named Gary Fung—agreed to pay the MPAA $110 million as a result of their legal action. Once again, Chris Dodd poked his head into the public, saying the case was a “major step forward” for the copyright gatekeepers of the USA. In a statement on isoHunt (titled “Initiating Self Destruct”) Gary signed off with the Schwarzeneggerism: “I’ll be backkk.” A Terminator trailer was embedded at the bottom of the page.

It’s hard to imagine how an internet admin can return from a $110 million debt, but, never say never I suppose.

This is what you see on isohunt.com today. A nearly identical message has been published on Hotfile.com.

On top of all that, a “Trans-Pacific Partnership” (TPP) trade treaty is being developed between the US, Canada, Chile, Japan, New Zealand, Malaysia, and a few other countries. (Europe, as a whole, refused to participate.) The TPP has a chapter focusing specifically on intellectual property and the Washington Post described its proposed provisions as a “Hollywood wish list.”

For example, the US is asking all countries who sign the TPP to extend the copyright of authors to last for 70 years after their death. If passed, this would allow the gatekeepers of commercial content, like the MPAA, to keep rolling in cash long after the artist is dead. Furthermore, the TPP is looking to weaken the safe harbor provisions that protected YouTube from Viacom in the first place—and to make them an international norm outside of the US. This is a very clear example of copyright’s massive influence on American law, and how that influence is beginning to spread globally—to Kim Dotcom’s property and beyond.

Given that the raid on Kim’s compound was launched one day after SOPA died in Congress, Kim believes he was some kind of Plan B trophy for the Hollywood lobby after their anti-piracy legislation failed to pass as law: “Politically, the timing is very interesting. Right after the raid and the shutdown of Megaupload, Obama was touring Hollywood for the fundraising of his re-election campaign [Obama beat Romney 16:1 in Hollywood donations]. I think he would have had a really hard time raising that money after SOPA failed, so they needed something else.”

While in person, Kim diminished the “political timing” by calling it “very interesting,” he is, in fact, obsessed with the connections between Obama’s administration and Hollywood.

Chris Dodd is not only the head of the MPAA, he’s also a former senator, and has been described by Joe Biden as “one of his best friends in life.” The close relationship between the MPAA and the White House has been made very clear in the white paper released by Kim’s lawyers. Moreover, the white paper also refers to a particular Fox News appearance during which Chris Dodd threatened the future of Democrat funding from Hollywood, in response to the Obama administration’s fair statement that any anti-piracy legislation must protect both content creators, and the tech industry at large:

“Don’t make the assumption that because the quote ‘Hollywood community’ has been historically supportive of Democrats, which they have, don’t make the false assumption this year that because we did it in years past, we will do it this year.”

Megaupload could certainly have been sold as a suitable second-prize after SOPA’s failing, given its popularity at the time. Kim claims, however, that most of the site’s traffic was taken up by legitimate users—a claim that is impossible to verify without access to Megaupload’s internal database and a giant team of researchers.

There is, however, a recent study by Northeastern University I can point to that was able to examine 35% of Megaupload’s database of 250 million files, to check for overall copyright infringement. Those researchers found that over 10 million files on Megaupload were perfectly legal. Which means that the US government destroyed over 10 million personal files belonging to ordinary citizens, from all over the world, for absolutely no reason.

“We had 15,000 US soldiers—based in Iraq and Afghanistan—on Megaupload. They used Megaupload to stay in touch with their families. They would make these video messages, upload them to Megaupload, and then send the link by email to their families and loved ones, because the military net could not handle large attachments… This is just one of the wide range of perfectly legitimate uses that Megaupload had.”

It’s clear that the Hollywood lobby is a powerful one whose donations and influence speak loudly in Washington. In May 2013, US Attorney General Eric Holder denied that the Megaupload shutdown was an example of Washington being Hollywood’s bitch: “[The Megaupload case] was brought on the basis of facts, on the basis of law, and it is consistent with the enforcement priorities that this administration has had.”

Who sets those “enforcement priorities” is a whole other question—but it’s worth noting that while networks like Megaupload clearly antagonize the Hollywood lobby, they also don’t play ball with the US government on a security level. Last year, thanks to Edward Snowden, we learned that Google, YouTube’s parent company, has been accepting money from the NSA since 2011 to make their services compliant with the infamous mega-spy tool PRISM.

Could part of Google’s PRISM compliance deal include safe harbor provisions from copyright infringement charges? It’s certainly not the most far-fetched theory one could think of in light of 2013’s completely mind-blowing surveillance revelations. While Kim Dotcom waits to see if he’ll be extradited, in what is certainly a move to further strengthen his wave of public support in the face of Hollywood’s massive legal resources, Kim announced in September 2013 that he would be stepping down as the chairman of MEGA to start a political party—one that’s built upon a “digital bill of rights” he has, apparently, already penned.

Ultimately, Kim’s political ambitions are inconsequential (unless he becomes the president of the USA and the head of the MPAA simultaneously) in the face of the larger problem: Hollywood’s influence over America’s legal smackdown capabilities. With business-crushing lawsuits being launched against all sorts of file-sharing sites, and their influence being crystal clear in the proposed TPP provisions (and failed acts before it, like SOPA), copyright is ostensibly the king in these disputes. Given the popularity of Megaupload and sites like it, there’s more to all of this than a love of piracy; these sites offer a better method for transmitting information than DVDs or even iTunes ever can. Great open networks are fast, easy, free, and can easily be used for legal means; but Hollywood can’t monetize them.

Whether a site like Megaupload is used to store pirated copies of the entire Fast and the Furious series or host wedding videos is up to the users, not Kim Dotcom—and yet we are living in a world where America can prosecute innovative online businesses that are not headquartered in the United States. That’s an incredibly detrimental trend for the future of a democratic, job-creating internet. As a result, it certainly seems as if keeping Hollywood old boys in Lamborghinis is more important than allowing the internet to change the world. Essentially, innovation is being stifled through extending the power of copyright by penning new laws and treaties, while suing anyone who gets in the way. That type of litigious protectionism and brash anti-innovation makes the trial of Kim Dotcom, and others like him, a very important issue that could set some unfortunate precedents for the tech industry; because regardless of its conclusion, the final verdict in Kim Dotcom’s case will have an enormous impact on the future of a free internet.

@patrickmcguire