January 2012

Capitol Hill’s effort to crack down on Internet piracy was hanging on for dear life after Senate leaders gave the green light to abandon ship.

The signs of distress came from the top, as Senate Majority Leader Harry Reid released Democrats from casting their lot with the PROTECT IP Act during a procedural vote scheduled for Jan 24. That also led to questions on the fate of the House Stop Online Piracy Act. Reid's decision "means it's headed south fast and he is only keeping the vote scheduled to keep his word to Leahy," a senior Democratic aide told POLITICO.

Motion Picture Association of America Chairman Chris Dodd said he would welcome a summit meeting between Internet companies and content companies, perhaps convened by the White House, that could lead to a compromise on a federal law to control foreign online piracy.

Looming Jan 24 is a cloture vote scheduled in the Senate, which appears to promise the death of the legislation in its current form. “The perfect place to do it is a block away from here,” said Dodd, who pointed from his office on I Street toward 1600 Pennsylvania Avenue. But the startlingly speedy collapse of the antipiracy campaign by some of Washington’s savviest players — not just the motion picture association, but also the United States Chamber of Commerce and the Recording Industry Association of America — signaled deep changes in antipiracy lobbying in the future. By Dodd’s account, no Washington player can safely assume that a well-wired, heavily financed legislative program is safe from a sudden burst of Web-driven populism.

In an unprecedented display of Internet force, thousands of websites went dark or censored themselves Jan 18 to protest twin antipiracy measures pending in Congress. The blackout represented a culmination of months of intensifying outcry over the bills, echoed and amplified by social media, blogs and tech publications, that drew more and more popular sites into the official day of protest, including Google, Wikipedia, Craigslist, Wired, Reddit, Boing Boing, Reporters Without Borders, Pressthink, Greenpeace and McSweeney's. Their actions and the frenzy of media coverage in the buildup raised mainstream awareness of what, until recent days, had been a wonky set of proposals only lightly covered outside tech circles. Congressional phone lines were reportedly flooded Wednesday in what could begin the final unraveling of the already troubled measures.

Seven individuals and two corporations have been charged in the United States with running an international organized criminal enterprise allegedly responsible for massive worldwide online piracy of numerous types of copyrighted works, through Megaupload.com and other related sites, generating more than $175 million in criminal proceeds and causing more than half a billion dollars in harm to copyright owners, the U.S. Justice Department and FBI announced.

This action is among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime. The individuals and two corporations – Megaupload Limited and Vestor Limited – were indicted by a grand jury in the Eastern District of Virginia on Jan. 5, 2012, and charged with engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering and two substantive counts of criminal copyright infringement. The individuals each face a maximum penalty of 20 years in prison on the charge of conspiracy to commit racketeering, five years in prison on the charge of conspiracy to commit copyright infringement, 20 years in prison on the charge of conspiracy to commit money laundering and five years in prison on each of the substantive charges of criminal copyright infringement.

According to the indictment, for more than five years the conspiracy has operated websites that unlawfully reproduce and distribute infringing copies of copyrighted works, including movies – often before their theatrical release – music, television programs, electronic books, and business and entertainment software on a massive scale. The conspirators’ content hosting site, Megaupload.com, is advertised as having more than one billion visits to the site, more than 150 million registered users, 50 million daily visitors and accounting for four percent of the total traffic on the Internet. The estimated harm caused by the conspiracy’s criminal conduct to copyright holders is well in excess of $500 million. The conspirators allegedly earned more than $175 million in illegal profits through advertising revenue and selling premium memberships.

The indictment states that the conspirators conducted their illegal operation using a business model expressly designed to promote uploading of the most popular copyrighted works for many millions of users to download. The indictment alleges that the site was structured to discourage the vast majority of its users from using Megaupload for long-term or personal storage by automatically deleting content that was not regularly downloaded. The conspirators further allegedly offered a rewards program that would provide users with financial incentives to upload popular content and drive web traffic to the site, often through user-generated websites known as linking sites. The conspirators allegedly paid users whom they specifically knew uploaded infringing content and publicized their links to users throughout the world.