IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI

SC 57/2018

UNDER The Supreme Court Act 2003, the Senior Courts Act
2016, the Judicature Amendment Act 1972, the
Judicial Review Procedure Act 2016, and the
Extradition Act 1999

BETWEEN KIM DOTCOM

Appellant

AND UNITED STATES OF AMERICA

Respondent

APPELLANT’S ROADMAP AND SYNOPSIS OF SUBMISSIONS

DATED 18 JUNE 2019

SOLICITOR ACTING: COUNSEL: COUNSEL:

P C Creagh R M Mansfield S L Cogan
Anderson Creagh Lai Limited Level 28 Quay Chambers
Level 1 SAP Tower Level 7
110 Customs Street West 151 Queen Street 2 Commerce Street
PO Box 106-740 PO Box 2674 Auckland 1010
Auckland 1143 Shortland Street PO Box 106215
Tel: (09) 300 3196 Auckland 1140 Auckland 1143
Fax: (09) 3003197 Tel: (09) 304 1627 Tel: (09) 374 1666
Email: [email protected] Email: [email protected] Email:[email protected]
IN THE SUPREME COURT OF NEW ZEALAND
I TE KŌTI MANA NUI

SC 58/2018

UNDER The Supreme Court Act 2003, the Senior Courts Act
2016, the Judicature Amendment Act 1972, the Judicial
Review Procedure Act 2016, the Extradition Act 1999
and the New Zealand Bill of Rights Act 1990

BETWEEN KIM DOTCOM of Auckland, businessman

Appellant

AND THE UNITED STATES OF AMERICA

First Respondent

AND THE DISTRICT COURT AT NORTH SHORE

Second Respondent
 5

2.13 Gowers Review of Intellectual Property [KD-AUT.263], p 98:

5.79 The penalty for a copyright offence depends on whether the infringement occurred
online or not. In relation to those who commercially deal in infringing goods or those
who distribute goods other than in the course of business to an extent which
prejudicially affects the rights holder the maximum penalty is ten years imprisonment. In
contrast, those who commit online infringement by communicating the work to the public
(whether commercial or otherwise) may be sentenced to up to two years imprisonment.
Finally, the commercial showing or playing in public of a work carries a maximum of six
months imprisonment or a level five fine.

2.14 NZ saw itself as being in a different position from the UK and struck its own balance
between copyright owners, users and ISPs. WIPO permitted each county to enact their
own domestic legislation to implement the treaty in accordance with each country’s local
requirements.

2.15 The legislative history reveals how NZ was focused on immunising ISPs from liability so
that all NZ could enjoy economic access to such services. The current s 131 is part of
the careful balance of rights struck by Parliament. Parliament’s express intentions have
to be acknowledged and applied by the Courts. It is for Parliament to change the law, if
it considers it necessary to do so. A review of the Copyright Act is presently underway:
Ministry of Business Innovation and Employment Issues Paper: Review of the Copyright
Act 1994 [11/4726] / [KD-AUT.333].

Ministry of Economic Development Digital Technology and the Copyright Act: A Discussion
Paper (July 2001) [11/4316] / [KD-AUT.248]; Copyright (New Technologies and Performers’
 7

2.21 Possession requires, at a minimum, knowledge and control. The relevant control is not
whether the ISP has the right and ability to control its system but, rather, whether it has
the right and ability to control the user’s infringing activity. This is consistent with the ISP
liability provisions of the Copyright Act, which provide that an ISP is not liable for the
copyright infringing acts at the direction of its users.

2.22 A communication is not at the direction of the user (hence in the control of the ISP)
where the ISP exercises substantial control over the communication: Ventura Content,
Ltd., v Motherless, Inc., No. 13-56332 (9th Cir. 2018) [2/357] / [KD-AUT.356], at 32.
The US requirement of “the right and ability to control” the infringing activity might be
seen as comparable to what is required for an ISP to be in possession of any work. The
“right and ability to control” involves something more than the ability to remove or block
access to materials posted on a service provider’s website. A service provider must be
able to exert “substantial influence” on its users’ activities or the work. The US courts
have held that UMG did not and Fung did. Substantial influence may exist if the ISP
instructs users what to upload, seeks to curate uploaded content in any meaningful way
or rejected unwanted groups or content (other than if it was otherwise unlawful).

Copyright Act 1994 [2/0404] / [MO-AUT.002], ss 92C; Ventura Content, Ltd., v Motherless, Inc.,
No. 13-56332 (9th Cir. 2018) [2/357] / [KD-AUT.356]; UMG Recordings Inc., v. Shelter Capital
Partners LLC 718 F.3d 1006 (9th Cir. 2013) [10/3780] / [KD-AUT.296] at 49.

2.23 In UMG Recordings Inc., v. Shelter Capital Partners LLC 718 F.3d 1006 (9th Cir. 2013)
[10/3780] / [KD-AUT.296] at 49, the US Court of Appeal for the Ninth Circuit held that in
order to have the “right and ability to control,” the service provider must “exert substantial
influence on the activities of users.” “Substantial influence” was held to require high levels
of control over activities of users, as in Perfect 10 v Cybernet Ventures, Inc., or it may
include purposeful conduct, as in Grokster. Substantial influence could not be found, as
in UMG, in a case where an ISP’s interactions with and conduct toward its users did not
rise to such a level namely where “(a) the allegedly infringing material resided on the ISP’s
system; (b) the ISP had the ability to remove such material; (c) the ISP could have
implemented, and did implement, filtering systems; and (d) the ISP could have searched for
potentially infringing content.” The conduct must be something more than the ability to
remove or block access to materials posted on a service provider’s website.”

Perfect 10 v Cybernet Ventures, Inc., 213 F. Supp. 2d 1146, 1181 (C.D. Cal. 2002)
(“[C]losing the safe harbor based on the mere ability to exclude users from the system is
inconsistent with the statutory scheme.”); Viacom International Inc v Youtube Inc 676 F 3d 19,
34 (2d Cir 2012) at 38 [10/3741] / [KD-AUT.206]; Capitol Records, Inc. v. MP3tunes,
 10

[11/4361-4365] / [KD-AUT.248] at 42-43.

2.31 In 2011, Parliament confirmed that it considered it had, by the 2008 Amendment Act,
provided ““safe harbours” (exclusions from liability)” for ISPs where they are acting as a
mere conduit for copyright infringement over the ISPs’ network”: Copyright Infringing
File Sharing Amendment Bill (119-1) [12/4961] / [KD-AUT.349] at 3.

Section 92B

2.32 Section 92B provides that an ISP has not committed an infringement and has immunity
from civil and criminal infringement when providing the defined services of an ISP.
However, without more means that there is no such protection for infringement from
providing any additional service outside the definition of an ISP.

2.33 As a result of the broader definition of an ISP at the second reading of the Bill, s 92B
also applies to hosting (storage). Therefore, it applies to Megaupload. The US accepts
that Megaupload is an ISP.

Refer: [US.SC.SUB.01], at paragraphs 277-278

2.34 It is clear from the legislative history that a deliberate decision was made to extend the
application of s 92B to hosting (i.e. storage). It is irrelevant that s 92C would also apply
to storage and may have independently provided immunity if s 92B did not otherwise
apply. If Parliament had intended the s 92B immunity to be subject to s 92C, it would
have said so e.g. “subject to s 92C” or words to that effect.

Copyright (New Technologies and Performers’ Rights) Amendment Bill (102-2)

[11/4884] / [KD-AUT.213] at 6-7; WIPO Copyright Treaty, Article 8 [12/5484] /
1
[KD.AUT.230]; Copyright Act 1994 [2/0404] / [MO-AUT.002], ss 2, 40, 92B, and 92C

2.35 To the extent an ISP provides internet services, and complies with ss 122A-122U (which
do not apply to Megaupload as it is not an IPAP), it is immune from liability. If it provides
more than internet services (as defined), those additional services (if they result in
infringement) are not immune from liability. However, the ISP does not lose immunity in
respect of its remaining internet services.

2.36 Otherwise the s 92B safe harbour is illusory. Knowledge is an element of civil liability
under ss 36 and 131. The effect of the safe harbour would be that an ISP is only
immune if it does not infringe and the safe harbour does not apply if it does. Why would
a safe harbour then be required? Section 92B is the comprehensive immunity

1
“The mere provision of physical facilities for enabling or making a communication does not
in itself amount to communication within the meaning of this Treaty or the Berne
Convention”.
 11

Parliament intended for ISPs.

Section 92C

2.37 If it is necessary for Megaupload to bring itself within s 92C, it meets the requirements.

2.38 There can be no suggestion based on the ROC that any user who uploaded the material
is acting on behalf of, or at the direction of, Megaupload. Rather, it is alleged that
Megaupload:

(a) knew or had reason to believe that the material infringes copyright in the work; and

(b) did not, as soon as possible after becoming aware of the infringing material, delete
the material or prevent access to it.

2.39 The US now appears to concede that Megaupload complied with takedown notices
because it deleted links to the material specified in any notice, even though no notices
were filed or summarised in the ROC. Certainly, there is nothing in the ROC to
establish that it did not. However, the US say that having done so, it should have
investigated further and deleted the underlying file.

2.40 The US say that if any URL was infringing then the underlying file should have been
deleted, even though it may be linked to by many other users.

2.41 An ISP is not required to disable all links to a given file, or delete the underlying file
itself, in response to a takedown notice. There is no such requirement, either under s
512(c) of the DMCA or s 92C. Under both, the ISP is only required to delete or remove
access to the infringing material specified in the relevant notice. The notice is given by
reference to the infringing URL. This requirement recognises that the same file may
have infringing and non-infringing links to it due to the industry practice of de-
duplication. Simply because one link may infringe, that is no indication as to whether
others may infringe. Remaining links may be licensed or subject to fair use or other
permitted acts including another’s quite lawful backup copy. Further, in each variation
there will be a variation as to the available permitted acts and their scope.

DMCA, s 512(c) [10/3704-3705] / [KD-AUT.314]; Copyright Act 1994, s 92C [2/0499-0500] / [MO-AUT.002]

2.42 The ROC discloses, where there is any reference to a takedown notice, that the
copyright owner (or its representative) only ever sought that the URL be disabled. The
copyright owner could not have expected anything else, nor could they have been
misled. They knew of the “whack a mole” response. US copyright owners have
complained about this reality in the industry as a whole and sought law reform to
address it.
 15

(i) Who the user is;

(ii) In which jurisdiction they are located (e.g. because different jurisdictions have
different rules about making back-up copies for personal use);

(iii) How they acquired the file;

(iv) The existence of any licence and its terms;

(v) To whom (if anyone) they provided access;

(vi) For what purpose;

(vii) Whether that person was permitted to use the material for that purpose e.g. a
back-up copy; a published supplying a manuscript for review; a teacher
supplying material to students; and

(viii) which (if any) right of the owner has been infringed.

(e) Whether a valid takedown notice was served in respect of any allegedly infringing
work, either by attaching the relevant notice or setting out (again on a work by work
basis) that a notice was served that:

(i) Was signed by a person authorized to act on behalf of the owner of the
exclusive right allegedly infringed;

(ii) Identified the copyrighted work(s) claimed to have been infringed;

(iii) Identified the material that is claimed to be infringing or to be the subject of

infringing activity and that is to be removed, or access to which is to be
disabled;

(iv) Provided information reasonably sufficient to permit the service provider to

locate the material; and

(v) Provided contact details.

(f) Whether the copyright owner considered fair use in accordance with Lenz.

(g) Whether Megaupload complied with the notice on its terms.

(h) To the extent it is alleged that the notice provided Megaupload with knowledge of
other alleged infringements, the particulars of such infringements and whether the
copyright owner had considered fair use in accordance with Lenz.

2.56 In respect of Count 2, there are no particulars of any agreement with users to upload
infringing material, nor of Megaupload’s or users’ knowledge that uploaded material was
infringing, nor that users carried out such infringement in the course of a business.
 20

APPENDIX - INADEQUACIES IN ROC [8/3896] / [B-1066]

General

1. The US asserts that a conspiracy to infringe copyright in a general sense can be

established from the summary of Appellants asserted admissions as included in the
ROC. The US submitted that the Megaupload site was designed to infringe and made
that clear to the world. At times, it fell back to, Megaupload allowing, and at times it
asserted “encouraged”, its site to be used to infringe copyright. However, the ROC
contains no such “admissions”. The ROC simply discloses generalised knowledge of
infringement by users, that the traffic it generated was welcomed, and that the
company financial position benefited from it. The Appellants were no different to any
other officer of any other ISP. The US courts in YouTube makes it clear that this is
not sufficient: Viacom International Inc v Youtube Inc 676 F 3d 19, 34 (2d Cir 2012)
[10/3741] / [KD-AUT.206]: Viacom International Inc v Youtube Inc 07 Civ. 2102 (LLS)
(18 April 2013) [10/3756] / [KD-AUT.330]. Something more is required as in Grokster
or Fung, where the ISP expressly incites or induces infringement in its interactions
with users or the world at large. Megaupload did not do so and there is no such
evidence in the ROC.

2. Further, the way that Megaupload presented itself shows that it did not. Refer:
Megaupload Screenshots (hardcopy provided at the appeal hearing); Affidavit of
Chris Gibson dated [C-0173] at [C-0175] Exhibits “CG-6”-“CG-8” [D-1880], [D-1085]
and [D-0821] [“Megaupload Screenshots” in hard copy].

3. Megaupload was a dual use service and its business incentives were equally dual
use. None specifically focused on infringement or rewarded it.

YouTube copying [8/3913] / [B-0183]

4. These allegations are set out in the ROC at para 26-29 (inclusive): [8/3913]-[8/3915]
/ [B-0183]-[B-0185]. It does not allege that the YouTube videos were added to the
top 100 as was asserted by counsel for the US in oral submissions during the appeal
hearing. Further, while the YouTube files were copied to selected dummy accounts
for Megavideo for that purpose (called fake accounts) in 2006, there is no evidence
connecting that act with subsequent complaints in 2007 by some individual users that
their Youtube works could be located on Megavideo related to this act, rather than the
actions of other users submitting the videos independently. Further, a user blocked in
2007 may be unblocked before 2012. There is also no evidence that the YouTube
files were themselves subject to copyright, that such copyright was infringed by
whoever posted them, or that any take down notice was served but not complied with.
 21

Top 100 [8/3915] / [B-0185]

5. These allegations are set out in the ROC in the ROC at para 30: [8/3915] / [B-0185].
It is clear that there is no assertion that this contains either other users’ material (from
their electronic lockers on Megaupload) or from YouTube. This, as the ROC makes
clear was a curated list of non-infringing works sourced from the internet. The works
were downloaded to dummy accounts, which the US calls “fake” accounts, to
facilitate this quite lawful activity. The Top 100 has never been presented as the top
100 files stored by users. The existence of the Top 100, purely a marketing list to
encourage users to try using the site, does not incite or encourage infringement.

Infringement of the Copyrighted Motion Picture “Taken” [8/3926] / [B-0196]

6. There is no evidence that the file “Taken 2008 DVDRip Repack…” is in fact the film
by that name. The file itself was not secured or examined to allow that to be said. All
that is included is a reference to the file name in the correspondence. Further, there is
no evidence linking that file and the version of the movie downloaded from the server
on 27 November 2011. This evidence is insufficient.

Alleged Wilful Refusal to Remove Copyright-Infringing Files and Misrepresentations

to Copyright Owners [8/3915] and [8/3922] / [B-0185] and [B-0192]

7. This part of the ROC – and elsewhere – proceeds on the legally incorrect view that an
ISP is required to delete the underlying file. This is contrary to the US and NZ
provisions not requiring this and Copyright owners being aware of the deduplication
process used by ISP to increase speed to users and to reduce storage costs. In all
examples in the ROC, the references are to the provision of the URL to identify the
allegedly infringing work. Copyright owners could not and were not mislead by any
response that related to the deletion of a file or a URL. As can be seen, the copyright
owners and the US know that no more is required than to disable the link and could
not therefore have been misled. Copyright owners have been actively seeking to
have the law in this area reformed. Indeed, counsel for the US quoted from a
submission by the music industry in oral submissions that makes it clear that
copyright owners know that disabling the specified link is all that is required as they
are dissatisfied with it and seeking to change it.
 22

Dotcom Knowledge of Copyright Infringement [8/3927] / [B-0197]

8. The ROC first addresses this heading. However, later additional ROCs also do so in
a more limited manner. At para 38 several cited examples are relied on [8/3927] / [B-
0197]. However, if (for the sake of argument) that relevant correspondence conveys
what it is summarised to have said, there is no evidence disclosed that after being
informed of concerns or complaints regarding their use (even if accepted that the
example complains of infringement), that the links to the works were not removed or
disabled. That is putting to one side the fact that such communications do not amount
to a valid takedown notice, no takedown notice is disclosed and/or summarised so as
to require action, or from which a non-compliance might result in the loss of a safe
harbour for that work or any knowledge of infringement can be imputed. Unless the
notice was valid or the link to the work was not removed, the safe harbour applies in
NZ and there would be no infringement. Further, there would be no basis to infer
actual knowledge. Accordingly, the ROC fails to establish an infringement by
Megaupload in relation to any specific work or any knowledge of it. Also, the
Appellants cannot be said to have actual knowledge of infringement in particular
works. Finally, none of the examples relate to any particular count or any work
alleged within a particular count.

Uploader Rewards Programme [8/3910] / [B-0180]

9. The relevant allegations are set out in the ROC in the ROC at para 25 [8/3910] / [B-
0180]. The First Supplemental ROC also summarises further allegations in respect of
the rewards program.

10. While it is variously asserted that Megaupload paid rewards to relate infringers, there
is no evidence that they paid rewards for works that were identified an infringing.
Unless this is established, which it is not, then this is irrelevant. NZ does not require
an ISP to have a repeat infringer policy or that they be removed. In fact, the ROC
discloses examples where infringement is identified and this is a basis upon which
rewards were not paid. While the US claim this was to reduce the expenditure on
rewards, this does not matter.

11. Given that Megaupload is alleged to have accounted for 4% of Internet traffic, the
sums paid by way of rewards are minimal.
 23

Megaupload Terms of Use and Rewards Program Terms of Use [D-1880], [D-1085] and
[D-0821] [“Megaupload Screenshots” in hard copy].

12. Both terms required a user to agree not to upload infringing content. Further, that the
works would remain the property of the users. Finally, for the Rewards Program, that
the size of files were limited to 100 MB. This ruled out otherwise infringing movies,
series or music. There is nothing within the terms of use that incentivise infringement.

Industry Practice

13. The ROC contains no summary of industry practice or seeks to compare and contrast
Megaupload’s practice to that foundation. As a result, it is not appropriate for the
Court to infer that the manner the Megaupload site was designed to incentivise or
further infringement. In fact, US authorities reveal, as do the US Copyright Office
DMCA review documents and industry submissions, that Megaupload set up a
service that was comparable to many ISPs such that it could not be said to induce or
encourage infringement by its users, despite any generalised knowledge of
infringement.