DOJ calls Megaupload's motion to dismiss 'incredible'

Megaupload cannot avoid prosecution in the U.S. simply because it had no physical presence in the country, the U.S. Department of Justice said in a colorfully worded opposition to the file-sharing site's motion to dismiss copyright infringement charges against it.

Megaupload's assertion that foreign corporations cannot be prosecuted for violations of U.S. law runs counter to more than eight decades of U.S. court rulings, the DOJ said in its response to the motion to dismiss, released Tuesday.

"This line of reasoning leads to the incredible conclusion that a foreign corporation can commit crimes in the United States and secure what amounts to complete immunity from prosecution, simply by ensuring that it has no address or principal place of business here," the DOJ's lawyers wrote.

The DOJ shut down the file sharing site on Jan. 19 after it filed criminal copyright infringement, racketeering and money laundering charges against it, sister company Vestor Limited, and founder Kim Dotcom. In May, Megaupload lawyers filed a motion to dismiss the charges against the company, arguing that the U.S. lacks jurisdiction to prosecute the Hong Kong-based company and has not served the company with the charging documents.

The DOJ, in its response to the motion to dismiss, argued that "Megaupload's business took place in, profited from, and injured copyright holders" in the U.S. for more than six years. The company had more than 500 servers located in Virginia, where the charges originated, and the company filed a civil lawsuit against a record label in California court in December 2011, the DOJ said.

"To dismiss the Superseding Indictment against Defendant Megaupload -- whose business model is not based on traditional goods and services delivered through brick-and-mortar stores but instead on online intellectual property piracy -- because the company has purposefully avoided establishing an office in the United States would be unprecedented and unjust," the DOJ's lawyers wrote. "It would also reward Defendant Megaupload, whose business was dedicated to criminal copyright violations, ... for having consistently taken steps to evade detection in the United States."

The U.S. Attorney's Office for the Eastern District of Virginia plans to serve Dotcom and other officers of the company with the summons after they are extradited to the U.S. from New Zealand and other countries, the DOJ said.

But Ira Rothken, one of Megaupload's lawyers, said the DOJ is asserting broad new jurisdiction over foreign companies with this case. U.S. courts have allowed charges against foreign individuals, "but corporations are different than individuals," Rothken said.

The question of whether U.S. courts can charge foreign corporations with crimes is an "important public policy issue dealing with national sovereignty" that the U.S. Congress should decide, Rothken said.

"Since almost every corporate entity around the world uses servers in the United States ... there would no corporate entity that would be off limits to overzealous U.S. prosectors" if the DOJ's case holds up, he said.

Prosectors should have to show that a company has a physical presence in the U.S. before charging the company in a U.S. court, he said.

Rothken also questioned the DOJ's reasons for not serving Megaupload with a summons. The DOJ has not "cited a single case in the history of jurisprudence that supports some of the exotic methods" the agency proposes for serving the company, he said.

Megaupload's lawyers will file a response to the DOJ on Wednesday, Rothken said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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