Megaupload settles copyright suit with porn studio

One of the world's largest Internet-file storage services has ended a fight instigated by Perfect 10, a litigious porn studio. But Megaupload's copyright troubles may not be over.

Megaupload lives to fight another day.

Kim Schmitz, aka Kimble, aka Kim Dotcom, aka Dr. Evil is the founder of Megaupload. Click on photo to read profile of Schmitz. 3News in New Zealand

The Internet file-storage business accused of helping millions around the world to store pirated videos, music, and software, has settled a copyright suit filed against it in January by Perfect 10, a porn studio with a long history of accusing tech companies of copyright violations .

Terms of the settlement weren't disclosed and representatives from the two companies did not respond to CNET's requests for comment. Megaupload is the parent company of multiple services, such as Megaporn, MegaVideo and MegaPix.

In e-mail exchanges this year with CNET, the company confirmed that it is operated with the support of founder Kim Schmitz, a man famous for his lavish lifestyle as well as his former brushes with the law. Schmitz is a former illegal street racer and convicted credit-card fraudster.

The only detail made public about the settlement between Megaupload and Perfect 10 involved a joint request they made to the court. In documents obtained by CNET, both companies informed U.S. District Court Judge Irma Gonzalez of the Southern District of California that as part of the settlement they wanted her to vacate a decision made in July that favored Perfect 10.

Back then, Gonzalez refused a request by Megaupload to throw out Perfect 10's claims that it was liable for direct and contributory copyright infringement. The judge found evidence that showed Perfect 10's "allegations were adequate" for the case to move forward.

"Megaupload serves as more than a passive conduit and more than a mere 'file storage' company," Gonzalez wrote in her July 26 decision. "It has created distinct Web sites presumably in an effort to streamline users access to different types of media. It encourages and in some cases pays its users to upload vast amounts of popular media through its rewards programs."

Nonetheless, after hearing that the parties had reached a settlement, Gonzalez on October 18 agreed to the parties' request.

Since the settlement came after this unfavorable decision to Megaupload, it would suggest that the file-storage company might have paid to get out of the case. Not so fast. Megaupload's lawyers had sitting in their pocket a string of recent court victories on this issue.

The gist of those decisions is that service providers that qualify for the Digital Millennium Copyright Act's safe harbor provisions don't have to hunt down and remove pirated materials from their sites.

This may not be the end of Megaupload's copyright troubles, though. Megaupload was on a list of companies recently handed to the U.S. Trade Representative by the Recording Industry Association of America. The companies on the list are accused of profiting from piracy.

 

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