Kim Dotcom became the Internet's most widely known fugitive in 2012 when his New Zealand home was raided and he was hit with criminal copyright charges for running the popular website Megaupload.

The charges brought by US authorities led to Dotcom and his colleagues being arrested and his assets frozen, including bank accounts holding more than $175 million. However, Dotcom was quickly released and is fighting extradition efforts in New Zealand courts. A trial over his extradition could be held as early as July.

But a new lawsuit filed today will add to Dotcom's headaches. Already facing criminal charges, Megaupload—along with Dotcom and two other former Megaupload executives—was sued today by the Motion Picture Association of America (MPAA).

"Megaupload wasn't a cloud storage service at all; it was an unlawful hub for mass distribution," said MPAA general counsel Steven Fabrizio in a statement accompanying the lawsuit. Fabrizio focused on the "incentive system" that Megaupload employed to encourage the sharing of content. He stated:

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. There’s nothing new or innovative about that. That’s just a profiteer using existing technology to try to get rich off of someone else’s hard work.
The lawsuit notes that just one percent of Megaupload users were "premium" subscribers, meaning that they could use the service for long-term storage. "Any content [users] uploaded would be deleted if it was not also downloaded within a certain period of time—after 21 days in the case of unregistered, anonymous users and after 90 days in the case of registered users who were not premium subscribers," states the suit.

The lawsuit also notes that at the point at which Megaupload was shut down, in January of 2012, it was absolutely huge. "The site claims to have had more than one billion visitors, more than 180,000,000 registered users, an average of 50 million daily visits, and at one point to have accounted for approximately four percent of the total traffic on the Internet," write MPAA lawyers.

“A desperate move”

Megaupload lawyer Ira Rothken said that he'll defend the MPAA case against Megaupload vigorously "at the appropriate time."

"It's likely that the MPAA and DOJ have a healthy understanding that the pending criminal case lacks merit," Rothken said. "There is no such thing as criminal law related to secondary copyright infringement. They're now filing a civil action in a desperate move."

A civil suit is "a more appropriate forum for this type of dispute," said Rothken, who has said that there's no room under US law for a criminal case to be brought over Dotcom's alleged conduct. Still, if a civil trial ultimately proceeded, Megaupload would prevail, Rothken said. "There are DMCA safe harbors," he said. "Megaupload had no search engine. It was a much more conservative site than YouTube," which recently settled a long-running civil lawsuit brought by Viacom.

Neither Dotcom nor Megaupload have any assets they can access outside the living expenses he is allowed to withdraw under an order from a New Zealand court. Rothken himself has not been paid for his work on criminal or civil cases, although that may soon change, he said.

As for the MPAA's focus on the Megaupload incentives system, Rothken said it's a red herring. For starters, the rewards system was limited to file sizes of 100MB or smaller. Suggesting the system was used to promote widespread pirating of movies, which have much larger file sizes, "doesn't pass the giggle test," said Rothken.

"Megaupload had a rewards program that was copyright-neutral," he said. "It paid out a very, very tiny amount of money over a multi-year period. It was a rounding error on total revenue. It had little to do with the growth of Megaupload as a cloud storage company. This is a misleading attempt to try to take a legitimate cloud storage site and brand it as something negative, just for the MPAA to concoct a lawsuit."

An earlier civil case was stayed after Rothken pointed out that Megaupload has no assets it can access. Megaupload can't even access its own servers, which were seized by the US government (along with cars, televisions, and a "Predator statue.") Megaupload isn't being allowed to access that evidence, even to prepare for Dotcom's upcoming extradition trial.

Dotcom responded to the lawsuit on Twitter, writing that "DOJ probably demanded that @MPAA sues #Megaupload because they initiated this shitty Hollywood science fiction script of a case... Now it's David vs. Goliath & Godzilla."