Federal prosecutors survived another legal hurdle in their efforts to keep file-sharing service Megaupload Ltd. out of business. A Virginia federal judge recently denied the company’s bid to dismiss the criminal copyright infringement charges.
As we previously discussed on this IP law blog, Megaupload founder Kim Dotcom was arrested in Australia at the request of the U.S. government. The FBI and Department of Justice allege Dotcom was the mastermind behind one of the largest cases of copyright infringement on record. Prosecutors contend that Megaupload.com, a popular file locker service that allowed users to upload files and share them with other users, was used to facilitate millions of illegal downloads of films, music, and other copyrighted content.
In addition to several other legal challenges, Megaupload has contested whether the United States had the authority to bring the case given that the company has no offices in the U.S. The argument hinges on Rule 4 of the Federal Rule of Criminal Procedure. It requires that "a summons [be] served on an organization by delivering a copy to an officer, to a managing or general agent, or to another agent appointed or legally authorized to receive service of process." The rule also requires that the summons "must also be mailed to the organization's last known address within the district or to its principal place of business elsewhere in the United States."
The problem for prosecutors is that although Megaupload leases 500 servers in the state of Virginia, it does not maintain an office in this country and has not designated any officers or authorized agents for service of process in the U.S. Therefore, it has been impossible for prosecutors to serve the company until extradition from Australia is completed.
Nonetheless, U.S. District Judge Liam O’Grady refused to dismiss the case on a technicality, at least at this point. “It is doubtful that Congress would stamp with approval a procedural rule permitting a foreign corporate defendant to intentionally violate the laws of this country, yet evade the jurisdiction of the United States’ courts by purposefully failing to establish an address here,” O’Grady ruled.
“In this case, the government may be able to prove that at least one of the individually named defendants is an alter ego of the corporate parent,” O’Grady added. “If so, the corporation’s last known address within this district will be the address of the individual defendant, once extradited.”
This case is one of the largest criminal copyright cases filed to date and raises several novel questions of law. As a result, we will continue to monitor it and provide updates as they become available.
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