New Zealand High Court Declares Kim Dotcom Raid 'Illegal'
New Zealand High Court Declares Kim Dotcom Raid 'Illegal'

The Megaupload homepage as it currently reads following the FBI and the U.S. Justice Department's decision to shutter the site and arrest its founder and key executives on copyright violation charges. The action has reverberated across the Atlantic and beyond.

Forget the debt crisis or the Iranian oil embargo. The FBI's spectacular raid of Megaupload in New Zealand last week has reenergized the online piracy debate in Europe, from government and media all the way down to online forums and blogs, radicalizing positions but also spurring calls for negotiations to find some kind of middle ground.

As soon as Megaupload went silent, dozens of copycat pages propped up worldwide (see here, here, or here), demonstrating the challenges in fighting illegal downloading solely with laws. At the same time though, the raid was a stern warning for any company and person facilitating piracy on a global scale.

Megaupload Shut Down by U.S. Prosecutors; Kim Dotcom, Three Others Arrested

In Spain for example, the most popular illegal download site was included in the indictment against Megaupload. It's also is among a most-wanted list of pages that will likely face closure when the Spanish government implements its new antipiracy legislation starting in March.

Spain's most popular illegal download site was included in the indictment against Megaupload as a site that linked to Megaupload.

While denying any relation in a press release, the company that owns SeriesYonkis, as well as several other webpages offering links to protected content, have limited access to online streaming -as much as 50 percent according to media reports --because it was using one of the shutdown Megaupload platforms.

New Spanish Gov't Enacts Sinde Anti-Piracy Laws, Opponents Promise A Fight

But at the same time, the use of harder-to-trace peer to peer downloads have soared, according to Ipoque, a firm that analyzes Internet traffic in Europe. Spanish legislators also asked the government to demand the FBI to return all content seized from Spaniard clients of Megaupload. And throughout Europe, calls for calm and negotiations are increasing.

To be sure, the Megaupload raid is effectively catalyzing alternatives in the EU to simultaneously fight online piracy, without punishing downloaders. And the winners, Enrique Dans, professor of Information Technology in Madrid's IE Business School says, will be those who build business models that eliminate the middlemen and connect consumers to artists directly, reducing costs for the first and increasing revenue for the latter.

"I've said that we have to safeguard the benefits of an open Internet and that [the U.S. Stop Online Piracy Act] is not the model for Europe. wrote Neelie Kroes, Vice President of the European Commission, the executive arm of the EU, who is also responsible for antipiracy issues, last week in the BBC. "What we need instead is laws that are effective, proportionate and preserve the open Internet we cherish.

"I agree we should fight against piracy," Kroes continued, "But it's becoming increasingly hard to legally enforce copyright, and enforcement is only one side of the coin. Overall, I have been clear that we need to go back to basics and put artists back at the centre of copyright law."

Enrique Dans says the Megaupload case has opened a window for new business models directed at the vast majority of downloaders, who don't profit from online piracy. In effect it has undermined the radical expressions of both sides of the debate, the US entertainment industry and global online activists who reject any legal encroachment on the web.

The raid in fact will strengthen the online downloading movement, although not necessarily piracy. "It's a show of force, but it's part of the negotiation. It shuffled the playing field and the end result is that we are talking about this issue," Dans said. "Politicians realize that the opposition is too strong and that their support for anti-piracy legislation implies losing support. It also shows more and more people realize that another solution is necessary."

In Spain, authorities can't prosecute illegal downloading of copyrighted material, unless a profit is being made. As a result, the number of illegal downloads is bigger and the U.S. music and film industries as well as U.S. Government have singled out the country as one of the main battlegrounds.

The new law would allow a government-named commission to determine if a webpage is used for illegal downloads. After a warning, webpages would face being shut down without court supervision on piracy matters.

More than 40% of Internet users download copyrighted material, according to market-research firm Nielsen, compared to 23% average in the top five EU markets.

Dans though says these numbers are skewed because they don't address the fact that most downloading here can't be prosecuted and that there are few legal alternatives like Netflix to offer consumers something other than downloads. Legal music streaming, which soared in Spain more than 1,700% since 2010, according to the latest IFPI report, still only accounts for a small share of music sales.

Citing Spain as an example, Dans said the online piracy debate has been radicalized and average users have been criminalized. "This has become an ideological issue. The entertainment industry used to send inspectors to weddings or barbershops. As a result, a huge part of society rejects being labeled as criminals and thus refuse to pay for content, even if they support copyrights."

Megaupload was popular in Europe. Most of hits to the page since January 2009 came from Brazil, followed closely by France, then Spain, the US and Mexico, according to Google Trends. And while it's impossible to say how much of its popularity was based on illegal downloaded of protected content, the indictment and experts concur that websites offering links to online streaming and P2P are knowingly using hosts such as Megaupload to hide protected content, thus colluding in piracy.

"It's pages like that are hosting Megaupload and it's possible that they were sharing the profit," Dans said. But the political and legal difficulties in fighting online piracy also suggest law enforcement alone will not solve the problem. "There is so much you can do, and ultimately users well return to P2P, so far the only full-proof system because it completely avoids the middleman," Dans said.

William Dutton, professor of internet studies at the Oxford Internet Institute, writing on the BBC site, argued that indeed copyright and freedom of expression are not mutually exclusive. "In the short run, it is time to talk and to stop these flame wars," he wrote. "Each side has failed to be open to discussion, but that is exactly what is needed. In the long term, the creative industries must focus on new business models that are sustainable in the digital era. More generally, all stakeholders need to understand that freedom of expression and copyright cannot be pursued as single issues. Both are part of a larger ecology of policies that have major interactions."