Federal authorities say they may shut down cloud-storage services without having to assist innocent customers in retrieving data lost in the process.
The government is making that argument in the case of Megaupload, the file-sharing service that was shuttered in January following federal criminal copyright-infringement indictments targeting its operators.
The Obama administration is telling an Ohio man seeking the return of his company's high school sports footage that he should instead be suing Megaupload -- even though the government seized Megaupload's assets in January.
The filing (.pdf) comes as cloud-based storage services are becoming more and more popular -- despite there being little clarity about what's legal and what's not -- and who's to blame if copyright infringement happens on a service. Even Apple announced enhancements Monday to its iCloud storage service.
Assisting former Megaupload customer Kyle Goodwin "would create a new and practically unlimited cause of action on behalf of any third party who can claim that the government's execution of a search warrant adversely impacted a commercial relationship between the target of the search and the third party," the authorities wrote the judge overseeing the prosecution.
As first reported by CNET, the government noted that Megaupload had 66.6 million users and that its seizure didn't include the data O'Grady is seeking.
Though the authorities seized 25 petabytes of data, that was not all of Megaupload's data. Megaupload rented more than 1,100 servers from hosting provider Carpathia -- though the servers are of little use after the feds seized all of Megaupload's domain names. The government says it doesn't care what happens to the rest of the data, and has said Carpathia can erase it if it chooses.
"The government also does not oppose access by Kyle Goodwin to the 1,103 servers previously leased by Megaupload. But access is not the issue – if it was, Mr. Goodwin could simply hire a forensic expert to retrieve what he claims is his property and reimburse Carpathia for its associated costs," the government wrote in a brief filing Friday. "The issue is that the process of identifying, copying, and returning Mr. Goodwin's data will be inordinately expensive, and Mr. Goodwin wants the government, or Megaupload, or Carpathia, or anyone other than himself, to bear the cost."
Goodwin is the owner of a startup called OhioSportsNet, which films and streams high school sports. He stored his copyrighted footage on the file-sharing network, and he has no backups as his hard drive crashed days before the government shuttered the site on Jan. 19. He is the only Megaupload customer to come forward in court seeking return of files.
But Goodwin's lawyer, staff attorney Julie Samuels of the Electronic Frontier Foundation, says the government's methods of prosecution of online copyright infringement means there will be more Goodwins in the future.
"As more and more consumers move their data to the cloud, and as the government continues its campaign to seize whole websites without regard for third-party property residing on those sites, it's clear that we need a better solution. We hope the court will help us get there," said Samuels.
Megaupload allowed users to upload large files and share them with others, but the feds and Hollywood allege the service was used almost exclusively for sharing copyrighted material -- which Megaupload denies.
The criminal prosecution of Megaupload targets seven individuals connected to the Hong Kong-based file-sharing site, including founder Kim Dotcom. They were indicted in January on a variety of charges, including criminal copyright infringement and conspiracy to commit money laundering.
Five members of what the authorities called a 5-year-old "racketeering conspiracy," including Dotcom, have been arrested in New Zealand and are pending possible extradition to the United States.
The government said the site, which generated hundreds of millions in user fees and advertising, facilitated copyright infringement of music, television programs, electronic books, business and entertainment software, and, perhaps most damningly, movies, often before their theatrical release. The government said Megaupload's "estimated harm" to copyright holders was "well in excess of $500 million."
Carpathia said it is spending $9,000 daily to retain the Megaupload data, and is demanding that Judge Liam O'Grady relieve it of that burden. Megaupload, meanwhile, wants the government to free up some of the millions in dollars of seized Megaupload assets to be released to pay Carpathia to retain the data for its defense and possibly to return data to its customers -- a proposition which the government rejects.
