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Summary:

Flamboyant entrepreneur Kim Dotcom is marketing his new file-sharing locker as “the privacy company.” Is he for real or are the privacy claims just a cynical cover-up for a new piracy business?

Pirate, piracy, hacking
photo: Kletr

Kim Dotcom, the flamboyant file-sharing champion who was arrested a year ago on copyright charges, is back with a new service called Mega that offers an easy way to store content in the cloud. Hailing itself as “the privacy company”, the new site provides users with encryption tools that make it hard for governments — or Mega itself — to detect just what type of information a person is storing.

Some media outlets are celebrating Mega as a phoenix-from-the-ashes story and a triumph for technology and privacy. The content industry, however, points to the track record of Kim Dotcom to warn that his new “privacy company” is just another ruse for people who want to share content without paying for it.

Here’s a look at what the service is all about — and the legal case for and against what Mega is doing.

Mega: A super secure locker for your files (or Hollywood movies)

Mega is a successor to Kim Dotcom’s earlier venture, Megaupload, which millions of people used to upload and store their files before the site was taken down last year in a controversial raid backed by the US government.

The difference this time around is encryption. Every file that a Mega users uploads and places in the online locker is encrypted so that third parties, including Mega itself, are unable to tell if that video you are storingshutterstock_72911554 is your niece’s birthday or Zero Dark Thirty. Sites like Ars Technica and Torrent Freak provide a good overview of the cryptography involved but the gist of it is that Mega uses a combination of passwords and browser-based encryption to keep your files private.

While Mega is nominally a way to store your files, it can also serve as an easy way to distribute them too. A Mega user, for instance, can share a file’s URL along with the password or else simply create a URL with the password embedded within it.

An advocate or an opportunist?

In an age where governments and tech companies vacuum up vast amounts of personal data, there is an appeal to the sort of encryption that Mega offers. The company, aware of this desire for anonymity, is using its encryption as a marketing tool. On its website, the company invokes a privacy section from the Universal Declaration of Human Rights and promises to give users control over who sees their files.

While this all sounds grand in theory, it’s not clear how effective it will be in practice. As Torrent Freak notes, the privacy scheme is far from exhaustive and lets Mega keep “quite detailed records of its users, including IP addresses”.

Meanwhile, a closer look at Mega’s privacy policy also reveals several references to advertising. These include Mega’s right to collect information about your visits to the site so as to serve you ads; it also mentions Mega’s intention to sell information about its users’ (albeit anonymous) activities to advertisers.

These less-than-perfect terms suggest that Mega’s prime interest is profit not privacy. Just as ad sales and premium memberships from Megaupload allowed Kim Dotcom to blow a bundle on models and yachts, it appears “the privacy company” is likewise designed more as a money machine than a moral cause.

See no evilMega’s See No Evil Strategy

The new Mega site is barely a day old but the content industry is already menacing it. The Motion Picture Association of America, for instance, said it is reserving judgment but cited Kim Dotcom’s history of “pushing stolen, illegitimate content into the marketplace” to say it is skeptical. Meanwhile, TorrentFreak reports that a group representing the adult entertainment industry plans to lobby Visa and others to cut off anyone that provides payments services on behalf of Mega.

These reactions are hardly surprising and, given the content industry’s history of legal overreach, one has to take their claims with a grain of salt. But given that the new Mega service is likely to be a bonanza for pirated content, it’s worth asking if the company’s strategy to avoid legal liability will hold up.

This time around, Kim Dotcom and his merry Mega men want to ward off copyright claims by pointing to the site’s encryption features to say they have no idea whether users are sharing copyrighted files or not. The site also boasts strong language that piracy is “strictly prohibited”.

Unfortunately for Mega, the site’s copyright strategy also sounds a lot like “willful blindness” — a legal concept that means you can’t avoid liability by deliberately staying unaware of what’s going on. US courts have recently taken dim views of willful blindness in both patent and copyright cases. Mega, however, has set up shop in New Zealand and the small country has so far succumbed to Kim Dotcom’s theatrics, which means the company is likely to remain open for business for the foreseeable future.

The bottom line is that Mega’s arrival puts internet users in a bind. On one hand, they can side with a company that is doing good things for privacy but that is also greedy, self-serving and manipulative. On the other, they can side with content owners who have legitimate complaints about Mega, but who have burned much of their credibility in past copyright debates.

(Image by Kletr, Thorsten Rust and suphakit73 via Shutterstock)

  1. What Mega is doing foretells the inevitable response to walled gardens and the attempt by ISPs to control data flowing over the internet. You can’t block encrypted traffic without destroying the commercial value of the internet, and if data is encrypted, then only the parties at the end will know what is being transmitted. This should have happened already, but since most of the big Internet players want to access your information, it hasn’t happened.

    There is nothing to stop copyright abusers from using Dropbox, Google Drive, Amazon, or any other cloud service provider the same way. Would the government attempt to shut any of those companies down, or throw their CEOs in prison? Not likely.

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  2. Well of course Mega’s more interested in profit than privacy. It’s a business – Kim knows what people want and he’s created a business that provides it while making him money. He’s trying to protect himself by using encryption so he can raise his hands and declare he is not legally responsible for what people upload. But he’s only in it to make money – otherwise he wouldn’t be the rich, flamboyant guy he is. Can you imagine Kim being more like Richard Stallman? No, Kim’s all about making money. And lots of it.

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  3. Succumbed to Kim’s theatrics, or respected the point that they cooperated with takedown notices, and DMCA provisions, EVEN THOUGH THEY ARE NOT A US COMPANY.
    Here in NZ our copyright and patent laws actually allow fair use, and media shifting, unlike the US. We can reverse enginer software to allow compatibility without being sued. We have no software patents. You can patent a whole invention, but you can’t patent the idea of one click ordering. The code that you wrote IS however protected by copyright.
    I still like to think we live in a free country, unlike the USA.

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  4. chromeronin, you raise a good point that American IP law is off the rails in many respects. And, unfortunately, the USA also has a habit of using trade negotiations to bully other countries into passing the same bad laws.

    But that still doesn’t mean you have to embrace Kim Dotcom as a good guy.

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    1. Karen Kazaryan Tuesday, January 22, 2013

      US Justice department made a really great job on cleaning up his image.

      The cast against Megaupload will most likely go nowhere – too many screwups and outright lies and overreach.

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  5. “Jeff John Roberts,…..snip… that still doesn’t mean you have to embrace Kim Dotcom as a good guy.”?
    What a bizarre and evil thing to say about anyone. Did he step on your cat or steal your lollypop?

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  6. Won’t you agree that the point of a business, whether it’s a cloud storage company, privacy company, bookseller or whatever, exists, first, to make money? Who cares what the motivation of the owner/ founder is? All businesses exist to make profit (so they might continue to exist) Mega provides legitimate service to those who want to use it legitimately and also to those who wish to abuse it.
    What motivated the founder is of no interest to me since as far ad I can tell he’s not pushing any agenda that is morally reprehensible or even illegal.

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  7. i already used mega to upload a video too big for skydrive (2.14gb), so in that way it’s pretty cool that i finally have a copy of that other than in a pendrive. it’s quite possible, however, that this site will be taken down eventually, so i won’t trust it ever to keep an only copy of sth. the site seems to have problems. you tell it to upload all ur files and you go to sleep, then you wake up and it only uploaded the first one. in that sense, skydrive works way better with an app that turns it into just another windows explorer folder, plus microsoft isn’t going anywhere.

    still, currently you have to make 7 hotmail accounts to get the same space provided by one mega account.

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  8. Megaupload was attacked illegally by DoJ because a bunch of HipHop musicians were making money by getting 100s or thousands of down loads and the studios weren’t getting a cut. They committed a crime in NZ by filling false documents to get warrants. The DoJ attempted to destroy evidence and has illegally seized property of uninvolved individuals and refuses—to return it. Basically this has wasted a reputed ~$11M of tax payer money in probably criminal malicious prosecution. Even if money laundering was occurring DoJ has so bungled the case that convection is unlikely. The RIAA was unhappy about the HIPHop guys making money without the studios and should have fought its own battles without involving the Tax payers.

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