Hollywood Studios Sue Megaupload, Alleging Copyright Violations

Six major studios have joined in the suit and are asking for unspecified damages

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The six major U.S. movie studios hit Megaupload with a massive copyright violation lawsuit Monday, charging the file hosting service with encouraging and profiting from illegal copies of movies and television shows.

The suit claims that the defendants profited from illegal content that was hosted on their site because it allowed them to sell subscriptions and advertising to a broader base of consumers looking for cheaper, digital access to programming.

“As a direct result of the popularity of the infringing copyrighted content that defendants solicited and propagated, defendants’ business was extraordinarily successful and profitable,” the suit reads. “Megaupload was at one point in its history estimated to be the 13th most frequently visited website on the entire Internet.”

Also read: Kim Dotcom Lieutenants: ‘We’re Modern Pirates…We’re Pretty Evil’

The lawsuit was filed in the U.S. District Court for the Eastern District of Virginia by Twentieth Century Fox, Disney, Paramount Pictures, Universal, Columbia Pictures and Warner Bros. It names the site’s founder, Kim Dotcom, as a defendant, along with Chief Technical Officer Mathias Ortmann and programmer Bram van der Kolk.

The studios ask for unspecified damages associated with content they claim was uploaded and distributed illegally. It’s a list of films and programs that includes “Bad Teacher,” “Avatar” and “Tangled.”

In January 2012, Megaupload and its founders were targeted by the U.S. Justice Department and charged with operating a criminal enterprise that distributed pirated material. The site was taken down by the FBI that same year and millions of dollars worth of assets were seized.

Also read: Megaupload Shutdown Boosted Digital Movie Sales and Rentals, Study Finds

The legal skirmishes surrounding Megaupload have inspired a larger debate about the responsibility digital platforms and cloud services have for policing the content that is shared among their users and cracking down on piracy.

Dotcom, van der Kolk and Ortmann have denied that they encouraged users to share illegally obtained movies and shows and are currently in New Zealand fighting extradition.

Ira Rothken, Dotcom’s US lawyer, told TheWrap that Dotcom was not surprised at the suit and suggested it represented a desperation move by the studios and their main lobbying arm, the Motion Picture Association of America (MPAA).

“Megaupload believes that the suit lacks merit and we will vigorously defend against the claims,” Rothken said. “The MPAA is apparently concocting a civil claim out of desperation because it is likely that they and Department of Justice believe the pending criminal allegations lack merit, as there is no such thing as secondary criminal copyright infringement.”

He went on to say: “We believe that Megaupload’s robust DMCA safe harbor and the alleged rewards program limiting file size to 100 megabytes – a size too small for motion picture files – would render any claims for copyright infringement against the cloud storage provider to be without merit.”

Also read: Aereo CEO Slams Broadcasters for Being Wrong About Copyright Violations

The studios argue that Megaupload wasn’t just a video locker. Its business model was structured to reward users financially for uploading content that was popular and frequently downloaded. The content tended to be shows and movies that were being uploaded without the permission of major studios, the suit argues.

“Megaupload wasn’t a cloud storage service at all, it was an unlawful hub for mass distribution,” Steven Fabrizio, Senior Executive Vice President and Global General Counsel of the Motion Picture Association of America, said in a statement. “To be clear, if a user uploaded his term paper to store it, he got nothing – and, in fact, unless he was a paying subscriber, Megaupload would delete the paper if it was not downloaded frequently enough. But if that same user uploaded a stolen full-length film that was repeatedly infringed, he was paid for his efforts. That’s not a storage facility; that’s a business model designed to encourage theft – and make its owners very rich in the process.”

The studios filed the lawsuit while Dotcom and his colleagues were still awaiting extradition, but decided not to wait any longer and risk missing the statute of limitations on copyright infringement.

After being shut down, Megaupload was relaunched as Mega.

That site is not included in the studios’ suit.

Ira Teinowitz contributed to this report.