Sandra Aistars now Clinical Professor & Senior Scholar & Director of Copyright Research & Policy of CPIP
I’d like to take a moment to thank Sandra for all her hard work on behalf on indie artists, filmmakers, musicians and more. Without her unwavering guidance these past few years, there’s no doubt in my mind that our rights as creators would have been further undermined. Working in the trenches in Washington, and being the target of anti-copyright activists online, is not an easy job, but it’s one which Sandra handed with professionalism and grace. I’m excited to see what she has planned for her new venture with George Mason University of Law and wish her all the best.
Mr.Kupferschmid seems like an excellent person to succeed Sandra. His background working on copyright issues in with both tech and creative interests make him well suited to lead the Copyright Alliance and be an influential advocate for creator’s rights in coming years:
Keith brings over two decades of experience in copyright law and policy. At SIIA, he represented and advised software and content companies on intellectual property policy, legal, and enforcement matters. He also supervised the Anti-Piracy Division, including managing anti-piracy staff, investigators and outside counsel, and working with federal and state government officials on civil and criminal piracy cases. Prior to that, he was an attorney at Finnegan, Henderson, Farabow, Garrett & Dunner, as well as at the US Patent and Trademark Office (USPTO), the Copyright Office, and the US Trade Representative (USTR).
These are crucial times in the fight to protect creative rights across the spectrum and Mr. Kupferschmid promises to work on behalf of creators across the spectrum, large and small, as he tackles a number of challenging copyright issues:
I am thrilled to be the new CEO of the Copyright Alliance…. Sandra did a tremendous job building the Alliance into a respected and thoughtful organization that effectively represents the copyright interests of all types and sizes of creators and innovators. As SVP of Intellectual Property for SIIA the past 16 and a half years I worked with SIIA’s tech companies—both large and small—as well as other stakeholders in the copyright, tech, and academic communities to develop amicable solutions to complex copyright policy and enforcement issues. I hope to use my experiences in the copyright and tech arenas to further build on the strong foundation established by Sandra.
I wish him well on his new journey and am looking forward to his efforts to build more bridges with indie artists across all disciplines.
Kim Dotcom’s Court Hearing Continues
In other news, Kim Dotcom’s extradition hearing in Auckland District Court continue this week in New Zealand with Crown prosecutor, Christine Gordon who is representing the United States, wrapping up her presentation as to why New Zealand should extradite the pirate site (Megaupload) founder to the U.S. to face charges that include racketeering, copyright infringement and money laundering. Gordon focused rewards paid to top infringers:
Gordon told a judge this week that after Dotcom launched Megaupload in 2005, it grew to become so popular that each day 50 million people used the site, sucking up 4 percent of all Internet traffic.
“This was a big fraud but conducted in a fairly simple manner…
Behind the scenes, the respondents admitted their business broke the law. Sometimes they enjoyed the fact they were making their money by breaking the law,” she said. “Sometimes they worried about protection, and pondered what action they should take to, and I’m quoting here Mr. Dotcom’s words, ‘counter the justice system.” –New Zealand Herald
PayPal has finally ceased doing business with Kim Dotcom’s Mega site and he’s pouting about it. The man who has made millions be monetizing content stolen from others continues to assert that Mega is a legit cloud-based serviceand that its operations are legal. A statement posted on the site announcing that, “PayPal has ceased processing MEGA customer payments effective immediately…” also makes the claim that the cyberlocker site is being unfairly targeted:
MEGA has demonstrated that it is as compliant with its legal obligations as USA cloud storage services operated by Google, Microsoft, Apple, Dropbox, Box, Spideroak etc, but PayPal has advised that MEGA’s “unique encryption model” presents an insurmountable difficulty. The encryption models claimed by various USA and other entities apparently do not represent any problem to PayPal or the parties behind PayPal.
Nice try but even if you dress a wolf in sheep’s clothing he’s still just a wolf. It’s important to note that Mega rose from the ashes of Megaupload, the granddaddy of cyberlockers where the piracy for profit model was perfected and later copied by dozens of other online entrepreneurial thieves. After the feds shut the site down in January of 2012, Dotcom got busy working a better way to circumvent copyright law and a year later launched a more nefarious piracy for profit site named Mega. The site uses encryption technology to protect its users (and site operators) from prying eyes. Dotcom claims Mega is full of folks’ baby pictures and the like, but in reality its business model continues to provide pirates with a profitable, and protected, haven for their transactions.
Until PayPal’s recent departure, officials at Mega even pointed to the relationship with the payment processor as a sign that Mega was “legit.” In response to charges in a study published last September by NetNames and the Digital Citizens Alliance, Mega CEO Graham Gaylard told TorrentFreak:
“We consider the report grossly untrue and highly defamatory of Mega…Mega has been accepted by PayPal because we were able to show that we are a legitimate cloud storage site. Mega has a productive and respected relationship with PayPal, demonstrating the validity of Mega’s business…”
For the past few years payment processors like Visa, Mastercard and PayPal have come under increasing scrutiny for their role in facilitating (and profiting from) pirate-linked transactions. Following publication of the NetNames study, Senator Patrick Leahy, Chairman of the Senate Judiciary Committee at the time, sent letters to the head of both Mastercard and Visa urging that the companies sever ties with piracy operations.
I’ve been reporting on this issue since 2010, and while some progress has been made as processors have severed ties with many of the worst offenders, much work remains. According to the study, PayPal was singled out for its business dealings with Dotcom:
PayPal was offered as payment option on only one site (Mega). This represents a major change in the cyberlocker universe compared to just three years ago. The fact that the vast majority of cyberlocker sites do not attempt to take PayPal through hidden or disguised means demonstrates that the payment method is not even considered as an option for accepting subscription payments.
Dropvideo still depends on PayPal
Apparently PayPal officials finally decided that doing business with Mega was no longer an option. Unfortunately, aside from Mega, PayPal’s involvement with pirate sites persists and extends beyond offering subscribers a way to pay for services.
PayPal remains an important cog in the the flow of money that’s central to the business model Dotcom perfected on Megaupload. It was essentially a pyramid scheme as I explained in this blog post from 2011. Basically, cyberlocker affiliates provide the fuel that drive the piracy machine. Individuals sign who up to be cyberlocker affiliates earn money for uploading (stolen) content based on the number of times a file was downloaded. They can also earn commissions for attracting other to enroll in various cyberlocker account offerings. Affiliate payments continue to be the lifeblood that sustain the cyberlocker eco-system and PayPal continues a popular means for affiliates to receive payment for their role in bringing traffic to sites. According to the NetNames report:
…PayPal is still used by some sites for affiliate or reward scheme payments. Of the thirteen sites that offered an affiliate scheme, eight (61.5 percent) offered PayPal as a way for affiliates to receive their payments (other online payment systems such as WebMoney and Payza were also used but PayPal was the most popular).
This morning I took a quick look at Dropvideo.com, a cyberlocker I’d recently sent DMCA notices to. Sure enough, they use PayPal for their affiliate payments. So while PayPal has distanced itself from Mega, the company still has a long way to go to clean up its dirty piracy profits.
The legal woes for Megaupload’s founder Kim Dotcom continue with today’s news that six movie studios including Fox, Disney, Paramount, Columbia, Universal and Warner have filed a lawsuit in federal court charging Dotcom and his site with “massive” copyright infringement. From the complaint filed in federal district court in Virginia:
1. Until January 2012, when defendants were indicted on federal charges, defendants operated the notorious website and service located at www.Megaupload.com (“Megaupload” or ”Megaupload website”) as a commercial online hub for publicly providing popular copyrighted content, including thousands of plaintiffs’ copyrighted works, over the Internet to millions of Megaupload users without authorization ox license. On a daily basis, defendants intentionally infringed plaintiffs’ copyrighted motion picture and television programs on a massive scale and for a substantial profit. Defendants carried out this intentional, large-scale theft of plaintiffs’ intellectual property primarily through the operation of the Megaupload website, as well as associated websites like the video streanning service located at www.Megavideo.com (“Megavideo”).
2. Defendants intentionally and actively encouraged theix users to upload to the Megaupload computer servers infringing copies of the most popular entertainment content, including plaintiffs’ copyrighted television shows and movies. For example, through Megaupload’s “Uploader Rewards” program, defendants openly paid Megaupload users money to upload popular unauthorized and unlicensed content, including plaintiffs’ copyrighted television shows and movies, onto Megaupload’s computer servers. Pursuant to the Uploader Rewards program, the more often an uploaded file was downloaded by other users, the more money the uploader made.
3. Once a Megaupload user uploaded a file, defendants provided that user with a “link” to the infringing content and encouraged the user to disseminate the “link” as broadly as possible on the Internet so that as many people as possible would find the link and use it to download the infringing content from Megaupload’s servers.
4. Defendants profited handsomely from this copyright infringement in at least two ways: by selling users “premium” subscriptions, which enabled rapid, unrestricted downloading; and by selling online advertising space to advertisers.
The complaint goes to describe the site’s business model–one built on piracy whereby the more content uploaded, the more traffic for the site, and the more ad and subscription revenue earned–more than 25 million according to the complaint. It also pokes holes in the claims of Dotcom, and his apologists, that the site was a legitimate enterprise that merely provided storage for its users:
Contrary to some of defendants’ public assertions, Megaupload was not designed to be a private data storage provider. Users without premium subscriptions were restricted not only in their downloading capabilities, but also in their ability to store files on the site. Any content they uploaded would be deleted if it was not also downloaded within a certain period of time —after 21 days in the case of unregistered, anonymous users and after 90 days in the case of registered users who were not premium subscribers. Only premium subscribers (estimated to be 1% of users) could use Megaupload for long-term file storage. Thus, by design, Megaupload functioned not as a private online storage locker, but rather as a hub for uploading and downloading infringing copies of popular movies and television shows, including plaintiffs’ copyrighted works.
With this latest legal salvo fired against Megaupload and its founder perhaps it’s worth taking a moment to examine why YouTube, another site dependent on user-generated content (UGC) managed to survive and thrive, despite early accusations (and a major lawsuit) that labeled it a piracy cornucopia. Why did Megaupload end up on the dust bin of history while YouTube has become a web video (and music) juggernaut?
The early growth and popularity of both sites was dependent on the public’s general disregard for copyright law. Sure, some of the traffic to YouTube was generated by cute cat videos gone viral, but much of the site’s popular content included clips and often entire copies of tv shows and movies–content uploaders certainly had no right to disseminate. Like Megaupload, YouTube hid behind the shield of “safe harbor” and monetized the content with advertising but unlike Megaupload, the site did not offer cash or other incentives to uploaders, not directly anyway.*
In 2007 Viacom filed suit against YouTube and like today’s filing against Megaupload, the charge was “massive” and “brazen” copyright infringement. After seven years of legal back and forth, the parties finally announced they had settled the case in March, one week before they were scheduled to again face off in court. The companies issued a joint statement which characterized the resolution this way: “The settlement reflects the growing collaborative dialogue between our two companies on important opportunities, and we look forward to working more closely together.”
Ultimately what separates YouTube/Google’s success versus Megaupload’s demise lies with the fact that the head honchos at Google determined that respecting copyright ultimately provided a better business model than ignoring it. On the heels of Viacom’s infringement suit, YouTube introduced its Content ID (digital fingerprinting) system in 2008 which gave rights holders a (relatively) efficient way to deal the massive copyright abuses that plagued the site. Rather than send hundreds, if not thousands of DMCA takedowns, musicians and filmmakers could claim content they own and be proactive in blocking, removing, or monetizing it. The key was that Content ID allowed the creators to determine if and how their content could be viewed on YouTube, not the other way around.
Megaupload paid lip service to honoring DMCA takedown requests, but in actuality was playing a shell game, removing infringing links but not removing the actual files. If you read the 70 page federal indictment against notorious pirate cyberlocker website Megaupload, you will find this charge on page 10, section 22:
When a file is being uploaded to Megaupload.com, the Conspiracy’s automated system calculates a unique identifier for the file (called a “MD5 hash”) that is generated using a mathematical algorithm. If, after the MD5 hash calculation, the system determines that the uploading file already exists on a server controlled by the Mega Conspiracy, Megaupload.com does not reproduce a second copy of the file on that server. Instead, the system provides a newand unique URL link to the new user that is pointed to the original file already present on the server. If there is more than one URL link to a file, then any attempt by the copyright holder to terminate access to the file using the Abuse Tool or other DMCA takedown request will fail because the additional access links will continue to be available.
During my dealings with Megaupload I’d long suspected as much. Time after time, I’d remove links using Megaupload’s content management tool only to see a duplicate file reappear (with a new link) minutes later. Of course, unlike federal authorities, I did not have access to the actual content residing on Megaupload’s servers, so I couldn’t really prove it.
In the fall of 2011 while I was researching a pirate blog that offered illegal downloads to LGBT films, I saw that the film “Kyss Mig” was being pirated. Since it’s a film distributed by the same company (Wolfe Video) that distributes our film I notified them of the infringing link. A DMCA notice was sent and, as expected, the link was disabled. However, when I went back to the website the following day I noticed that the disabled link had been replaced by a new one. That led me to again notify Wolfe and the exercise in futility was repeated. A few days later I noticed that the link was alive yet again, but the blog owner had changed things up (to protect her download) and the link now took me to an intermediate site “undeadlink.com.”
Essentially the site offered a convenient way to regenerate links to supposedly “dead” files on Megaupload (and apparently Fileserve). If Megaupload had actually removed the infringing file when it was originally reported, this wouldn’t have been an option. However, because Megaupload apparently did exactly what is spelled out in the indictment, it was very possible (and efficient). When I discovered what was going on last fall, and that it verified my suspicions, I decided to record the process. This video documents what I found.
It’s an ethos that has allowed online piracy for profit (under the guise of innovation) to propagate across the globe. Why invest in a product when it’s just as easy to steal (and monetize) it? Of course Dotcom and Michael Robertson (founder of MP3tunes who was found liable and hit with a 41 million dollar verdict last month in a copyright infringement suit) have both discovered there are consequences to such theft, but this should be the norm, not the exception. Dotcom’s unbridled hubris and greed got the better of him. One can only imagine what he could have achieved had he crossed over from the dark side and followed YouTube’s lead.
Moving forward, preventing such businesses from taking root in the first place should be one goal in Congressional efforts to update the Digital Millennium Copyright Act for the 21st century. For all its faults, YouTube’s Content ID system lights the way for a possible path forward in redefining “safe harbor.” If a website’s business model to is predicated on “sharing” creative work, providing content creators with technological tools to safeguard their work should be a requirement for meeting the “safe harbor” provisions of the law. Such a requirement would not “break” the internet. It actually would could go a long way in fixing what’s currently broken.
Meanwhile, while YouTube has thrived where Megaupload has failed, businesses like YouTube can and should better reward the creatorson whose work they depend. As online distribution options grow and improve, hopefully many will say goodbye to the opaque revenue “sharing” model imposed by YouTube (and others) and take their content to sites/businesses where formulas for compensation are more transparent, and more generous to those who actually create the content.
A download link to a pirated copy of our film on Megaupload.com
BTW, is there a way indie artists could jump on board the lawsuit filed by the studios? Why not make it a class action affair? There are plenty of indie musicians, filmmakers and authors around the world whose works (and livelihoods) were ripped off by Kim Dotcom’s enterprise. In their lawsuit the studios are asking for maximum statutory damages of $150,000 per infringement plus the profits the defendants generated. Just imagine how many new works might be in the offing if those thousands of creators whose works were pirated on Megaupload were awarded damages along with the studios?
Last night 60 Minutes ran a segment featuring a Bob Simon interview with the now-defunct Megaupload’s Kim Dotcom. Much has already been written, and debated, about the German pirate entrepreneur who currently resides in New Zealand as he fights extradition to the United States on charges of copyright infringement. So did we learn anything new from last night’s broadcast that billed Kim Dotcom (predictably) as “Hollywood’s Villain?”….the short answer–nope.
Per usual, explanations were limited as to how Megaupload operated (and launched a business model that many others would follow), Mr. Simon explained it this way:
Here’s how it worked. If you wanted to send a friend a file that was too large to email– a wedding video, for example– you could just upload it onto Mega Upload’s servers and your friends could click a link to download it. It was a virtual warehouse where people stored and shared digital files. By selling advertisements and premium subscriptions, Mega Upload brought in an estimated $175 million. It became one of the most frequented sites on the internet. How did it get so popular and profitable? According to federal authorities, by also allowing users to illegally share the hottest new movies, or hit songs, or TV programs, including some CBS shows.
Unfortunately Simon failed to explain probably the most important factor to Megaupload’s financial success, its affiliate program. What good is hosting tons of pirated content if no one know where to find it? If there’s a genius to Dotcom’s acumen as a black market businessman, this is it. Basically the cyberlocker (cloud-based storage) site’s business model was that of multi-level marketing style pyramid scheme. Instead of selling cosmetics or cleaning products, his company “sold” access to stolen movies, songs and e-books.
As with all pyramid-style companies, Megaupload depended on attracting armies of underlings to “sell” its offerings. It did so by offering incentives to users who signed up to become “affiliates.” Upload stolen content, spread the download links far and wide like a virus, and the more downloads you attracted, the more cash you would earn. Affiliates could also earn cash for recruiting more affiliates. This army of mini-pirates was the key to Dotcom’s success and fueled piracy’s rampant growth beyond the traditional, more cumbersome torrent sites like Pirate Bay. The internet was suddenly filled with forums where users “shared” their download links over and over and over again.
Those who clicked on a Megaupload download link would find that they could generally stream or download a favorite film, or song, with a mere click of the mouse. For those who wanted faster download speeds they could subscribe to “premium” services and by doing so dump more cash into Dotcom’s coffers.
By having others do their dirty work uploading stolen content, Megaupload attempted to skirt copyright law by claiming refuge under the “safe harbor” provisions of the DMCA (Digital Millennium Copyright Act). Dotcom reiterated this excuse in his interview with 60 Minutes:
Am I the one who is at fault if users upload that kind of stuff and up… re-upload it again? Do I have to go to jail for that? Because I didn’t do it. I didn’t upload these things to Mega Upload.
Dotcom also blamed his flamboyant lifestyle and his nationality as reasons for his targeting by U.S. officials not the 2 and a half billion his company was worth at its peak when he left Hong Kong for New Zealand—a valuation built by pirating the hard work of others—musicians, filmmakers, authors and more. Too bad the folks at 60 Minutes didn’t think it worth interviewing any of those (beyond Hollywood) whose livelihoods suffered thanks to Megaupload and sites like it.
At this point, whatever happens with Dotcom is pretty much irrelevant. The key truth is that with the demise of Megaupload the entire piracy for profit industry was finally put in the spotlight. Why did so many other cyberlocker sites immediately shut down after the Megaupload indictment? If Filesonic, Wupload, Fileserve and other sites’ business models were legit, why did their operators scurry like cockroaches exposed to bright lights. The answer is simple. They, like Megaupload before them, were engaged in (illegal) theft for profit.
The shuttering of Megaupload marked an important shift for the landscape of online piracy. Just as cyberlockers’ illegal business models were being called into question, legitimate online options were gaining steam. The sudden vacuum allowed legal alternatives like Netflix, Hulu and their ilk to gain traction. Consumers who’d sought out pirated content out of convenience suddenly found that using their Roku or Apple TV box was a better option than scouring the internet for torrents or Russian streaming sites.
I for one don’t care much about what the future holds for Mr. Dotcom. I’m sure he’ll figure out another way to game the system and make money at the expense of others, but in the meantime I’ll be happy that content creators were the victors this time ’round.
P.S. for more analysis on the case against Kim Dotcom and copyright law I suggest Robert Parloff’s excellent piece published in Fortune Magazine in 2012: Megaupload and the twilight of copyright
Santa doesn’t have much in his stocking this year for pirate website
Not to sound to be a grinch, but I must say it warms my heart during this holiday season to see pirate websites on the verge of closure, begging for donations. I wrote about x264.bb site losing access to PayPal and turning to Bitcoin as a source of donations. Well, apparently that isn’t going too well because, according to an email received today, the site is on the verge of closing due to lack of funds.
Due to insufficient funding from donation, we deeply regret to inform that x264-BB might not be able to survive should the donations are not coming in by the end of December 2013. We hate to see this great community die off, therefore we are seeking for everyone’s help now, kindly donate generously to help keep this website alive.
Alternatively, should there be any individual with ample monetary support who wishes to buy over x264-BB and able to support x264-BB for long term, send an email to: [email protected] with your offer price, please bear in mind that we will only sell off x264-BB as the last resort. All offers must be at logical prices and we will make the final decision for the sell-off at our sole discretion.
Now, before you get all teary-eyed over their possible demise, you should know that this site is in the business of piracy. Basically it offers its members a place to “share” download links and earn money via cyberlocker affiliate accounts. The more downloads forum users attract to their links, the more they earn. The site, which at one point boasted having 100k member, displayed advertising in the past, but now seems to depend primarily on donations for their survival. They explain their need for donations as follows:
Dear all, The Staff here at x264-BB truly value and appreciate the support that you all provide as members. With your help we have seen this community grow to where we are now fast approaching 100k members! Hard to believe for those who were here with us from the very start to partake in our humble beginning, but with your constant support we have been able to reach milestones. It would honor us if you would continue to support x264-BB through a small contribution.
This forum, and others like it, thrived during Megaupload (and other cyberlocker’s heyday). When Megaupload was taken offline by the feds, cyberlocker sites that mirrored its business model fell like dominoes as their operators chose not to suffer the same fate as Kim Dotcom. Now that the black market business model of paying affiliates to upload stolen content is fading, so too it seems is this pirate eco-system. Another factor in x264’s difficulties is due to the cornucopia of legit streaming sites now available. Just goes to show you that with a little nudge from law enforcement, legit sites can compete and win back the market.
Hopefully all the folks at x264 will get in their Xmas stocking is a lump of coal.
As an indie film and broadcast journalism veteran, I'll share my perspectives on issues of interest to the creative community and beyond--Ellen Seidler
