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Label News (more headlines) 04-19-2014

Record Labels Sue Megaupload For Massive Copyright Theft

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A federal indictment is appropriate, but so is holding Megaupload and its operators accountable for the blatant harm caused to the music community, says RIAA

On behalf of the major music labels, the Recording Industry Association of America (RIAA) filed a civil lawsuit against Megaupload.com and its main operators for engaging in massive copyright infringement of sound recordings.

In its complaint, filed in the Eastern District of Virginia, RIAA stated that that Megaupload founder Kim Dotcom, Chief Technical Operator and co-founder Mathias Ortmann, majority shareholder Vestor Limited, and head programmer and Uploader Rewards program manager Bram van der Kolk all willfully engaged in, actively encouraged, and handsomely profited from massive copyright infringement of music on the Megaupload service before they were indicted by the U.S. Department of Justice (DOJ) on criminal charges.

According to the DOJ indictment, the defendants have generated more than $175 million in illicit profits from this theft while causing more than half a billion dollars in harm to copyright owners.

According to RIAA's filing:

Megaupload Limited played an active role in ensuring that it had the most popular content on its servers, that the URL links to those infringing content files were widely disseminated on the Internet, and that the links were advertised and promoted by pirate linking sites, so that the maximum number of Megaupload users would access the infringing content...It further exercised active control over the process of providing that content by regulating the volume and speed of transmissions to users who had not yet purchased "premium" subscriptions.

Megaupload made money in two ways: premium subscriptions and online advertising. Megaupload charged "premium" users subscription fees ranging from a few dollars per day up to approximately $260 for a lifetime subscription. In exchange for payment, premium users would receive faster access to infringing files, including Plaintiffs' copyrighted works, on Defendants' computer servers. Premium users of the site were able to download and upload files with few, if any, limitations…With respect to online advertising, the infringement-driven traffic on Megaupload and its associated websites increased the volume of online advertising impressions and transactions, leading to higher revenues. Online advertising on Megaupload and its associated websites, which was heavily dependent on the popularity of copyright infringing content to attract website visits, yielded more than $25 million for Defendants.

Further evidence shows that the shutdown of Megaupload in January 2012 had a profoundly positive impact on the digital music marketplace. According to an analysis by the RIAA of third party-provided data, millions of U.S. users of Megaupload.com and similar sites shifted away from those unauthorized services after Megaupload was shut down. In a comparison between Q4 2011 and Q4 2012, 50 percent of the users who had visited Megaupload (or similar sites that shut down around the same time) were no longer using any of the unauthorized music sites monitored in the study. The same dynamic occurred after the shutdown of LimeWire, which spurred the growth of legal downloads, according to various analyses.

In 2011, the Office of the U.S. Trade Representative (USTR) named Megaupload as a "notorious market" in an official government report, stating that the site allowed for "the unauthorized distribution of protected content through subscriptions and reward schemes to popular uploaders."

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