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Wanted internet tycoon launches new venture

Megaupload founder Kim Dotcom back with legal cyberlocker website

Megaupload founder Kim Dotcom launching his new file-sharing site Mega, surrounded by dancers, in Auckland, on Sunday. Photo: Reuters

Megaupload founder Kim Dotcom launching his new file-sharing site Mega, surrounded by dancers, in Auckland, on Sunday. Photo: Reuters

Wanted Megaupload founder Kim Dotcom has launched a new file-sharing website, promising users of beefed-up privacy levels in a defiant move against US prosecutors who accuse him of facilitating massive online piracy.

In the Dark Ages... the enemies of progress burned books... And now today they are burning websites

The colourful entrepreneur unveiled the Mega site ahead of a lavish gala and press conference planned at his New Zealand mansion on Sunday, the anniversary of his arrest on racketeering charges related to his now-shut Megaupload file-sharing site.

Megaupload, which Dotcom started in 2005, was one of the most popular sites on the web until US prosecutors shut it down, accusing Dotcom and several company officials of facilitating millions of illegal downloads.

“As of this minute one year ago (hash)Megaupload was destroyed by the US Government. Welcome to http://Mega.co.nz ,” Dotcom posted on his Twitter account as the new site went live. Within hours, Dotcom wrote, Mega had received 250,000 user registrations.

US authorities are trying to extradite the German-born internet tycoon from New Zealand, where he is free on bail. Prosecutors say Dotcom made tens of millions of dollars while film-makers and songwriters lost around $500 million (€375 million) in copyright revenue.

Dotcom argues that he cannot be held responsible for copyright infringement committed by others and insists Megaupload complied with copyrights by removing links to pirated material when asked.

“In the Dark Ages... the enemies of progress burned books,” Dotcom said last week at an Auckland ice cream shop, where he handed out ice cream cups, some bearing Willy Wonka-style golden tickets to his launch party. “And now today they are burning websites. And Mega is going to be the website that is going to end all of that.”

Mega, like Megaupload, allows users to store and share large files. The cyberlocker offers 50 gigabytes of free storage, much more than similar sites such as Dropbox and Google Drive, and features a drag-and-drop upload tool.

The key difference is an encryption and decryption feature for data transfers that Dotcom says will protect him from the legal drama that has entangled Megaupload and threatened to put him behind bars.

The decryption keys for uploaded files are held by the users, not Mega, which means the company cannot see what is in the files being shared. Dotcom could then argue that Mega – which bills itself as “the privacy company” – cannot be held liable for content it cannot see.

“What he’s trying to do is give himself a second-string argument: ‘Even if I was wrong before, this one’s all right because how can I control something if I don’t know that it’s there?’,” said Sydney lawyer Charles Alexander, who specialises in intellectual property law.

“I can understand the argument; whether it would be successful or not is another matter.”

US prosecutors declined to comment on the new site, referring only to a court document that cites several promises Dotcom made while seeking bail that he would not – and could not – start a Megaupload-style business until the criminal case was resolved.

“I can assure the court that I have no intention and there is no risk of my reactivating the Megaupload.com website or establishing a similar internet-based business during the period until the resolution of the extradition proceedings,” Dotcom said in a February 15, 2012, affidavit.

The Motion Picture Association of America, which filed complaints about alleged copyright infringement by Megaupload, was not impressed.

“We are still reviewing how this new project will operate, but we do know that Kim Dotcom has built his career and his fortune on stealing creative works,” the MPAA said in a statement.

“We’ll reserve final judgment until we have a chance to take a closer look, but given Kim Dotcom’s history of damaging the consumer experience by pushing stolen, illegitimate content into the marketplace, count us as sceptical.”

Still, as much as Dotcom’s new venture might enrage prosecutors and entertainment executives, it should not have any impact on the Megaupload case.

“All it might do is annoy them enough to say: ‘We’re going to redouble our efforts in prosecuting them’,” said Mr Alexander. “But I don’t think it makes any practical difference to the outcome.”

What you need to know on cyberlockers

What are cyberlockers?

• Cyberlockers, also known as cloud storage or file storage services, enable users to keep files, or back them up, on the internet.

Users can access files from these virtual storage lockers, which operate on remote servers, from any computer with an internet connection, often more quickly than on personal computers.

Many of these sites offer limited free storage, and users can pay for more capacity through subscriptions.

What are they used for?

• Like cloud storage services, users can use cyberlockers to store photos, documents, music and video files, which are often too large to save on personal computers.

Users can grant access to these files at their discretion, while many sites enable users to search for content.

Many cloud storage services are promoted as a business tool to enable several people to access shared files, while cyberlockers often refer to services for individual use. Both are interchangeable in their uses.

Why are they controversial?

• The entertainment industry has been a vocal opponent of cyberlockers containing copyrighted films and music, arguing that it is illegal to distribute such material without their consent. Site operators say they cannot be held responsible for any illegally obtained content as it is impossible for them to monitor the massive number of files stored on their servers. They say they do not knowingly enable users to store and share illegal material.

Sites offer a ‘take-down’ feature which enables copyright holders to order cyberlocker users or the locker operator to remove unpermissioned content. The understanding is that any delay or refusal to act may make the cyberlocker liable for such content.

What role does encryption play in cyberlockers?

• Encrypted files feature a code designed to stop the file being hacked. Some cyberlockers offer this feature to guarantee users privacy of their files.

Many in the technology and security industries see considerable merits to file encryption, as it would secure large files, including government documents, stored on offshore servers.

While protecting the privacy of files, encryption also enables users to conceal them.

Mega, Kim Dotcom’s cyberlocker launched on Sunday, features a file encryption system which will enable users to encode their files before storing them on the Mega servers.

Once the file is encrypted and stored, they are accessible only using a decryption key which the file holder alone will control.

As a result, Dotcom claims that the file holder will be solely responsible for the content stored on Mega, and that the site operator cannot be held liable for content as it will not have access to any of the files stored in the cyberlocker.

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