Should cloud storage firms be sweating over Megaupload?

With Kim Dotcom, founder of the Megaupload website still languishing in custody in New Zealand after his bail hearing was postponed, the plight of the group detained over the US government indictment of the site raises uncomfortable questions for cloud storage service providers everywhere.  

Seven men have been arrested, while a further three are still being sought by authorities in connection with the site, which is alleged to have generated over $175m in a few years through copying and distributing copyrighted content without authorisation.

But as many premium paid users of the site complain bitterly that they no longer have access to data they have uploaded legitimately, visitors to the url are now presented with a siezure notice from the FBI, should businesses like Dropbox, MediaFire, YouSendIt and, not to mention Amazon, Microsoft and Google, be sweating a little bit?

The frighteners generated by the Megaupload case have already begun reverberating around the industry. Another such service,, has blocked US traffic to its site, though it remains available to users in other countries. While data storage site Filesonic has already put a stop to its file-sharing. “All sharing functionality on Filesonic is now disabled,” is told users. “Our service can only be used to upload and retrieve files that you have uploaded personally.”

So should legitimate storage companies be worried? The charges against Megaupload run to far more than content piracy, with money laundering, trafficking and blatant disregard for copyright all part of the US government’s long list.

Kim Dotcom’s lawyer argues that he is innocent, that Megaupload was a service like YouTube for people to promote their creativity, and that his firm took proactive action against persistent copyright infringers.

Under current rules, a site isn’t liable for the actions of its users. That is, provided that site takes appropriate action to remove pirated content and ban persistent offenders.

What may disturb cloud storage firms are measures proposed in the now defunct SOPA legislation. Measures that would have shifted the liability for checking the veracity of user generated content and links onto the website owner.

While the bill in its current form has been booted back to the drawing board, it will return in some form or another; the Whitehouse has indicated that it would like to see anti-piracy legislation passed this year. So while it would appear that legitimate storage and sharing services are safe for now, it’s clear that this debate still has legs, and we’re in for an interesting few months.

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26 Apr 2012, 7:15 a.m.

I could not agree more with the following:
"The bill would impose restrictions on US companies that link to or sell online ads to suspected content pirates; it would outlaw payment processing and require that these sites not be shown in search engine results. The scope of culpability could mean that website owners might find themselves facing costly legal bills because of a single link on their site. The added costs of having to police vast websites full of user generated content would, say tech companies, prove prohibitive" as posted in your article.

One of the major issues creating a delay in Software as a Service (SaaS) delivery is "Piracy". This continues to be an issue and will continue to be an issue in a more serious and sizeable manner if the risk is not mitigated.

However; we need to keep our government accountable to ensure they don't go too far; as we saw with the proposal or blocking certain users from accessing certain sites via DNS-blockage. The government should focus on providing protection against crimes as we deem them today. Software and content piracy is illegal and cost billions of dollars each year; and more importantly, crimes against children of all nations should not be allowed. For this reason, I am all for blocking certain violators’ access to such content.

We just need to ensure these laws are balanced and do not harm or become like those of countries who control their people's lives.

Thank you for posting this wonderful article!


26 Apr 2012, 7:24 a.m.

Should cloud storage providers be sweating over Megaupload?
No. They just need to have some controls for verifying the validity of the uploaded content. While this requires links for validation to other sites, it is a safe way of doing it.
Also, if an individual uploads specific content not validated by the storage provider, both the user and the provider should be liable.

I am pretty sure if I had a site promoting pirated software or content, I would be shut down immediately--especially if making $$.
However; laws that enforce these types of activities should be well thought out to ensure our freedom of speech and freedom of the press is not violated. These laws need to focus solely on the perpetrators and the enablers of such violations.

Thank you.