FBI makes arrest in 'Wolverine' uploading case

Update 7:50 a.m. PST: To include new information from FBI that suspect may not be source of the leak.

The FBI has accused a man of copyright infringement for allegedly uploading to the Web the feature film "X-Men Origins: Wolverine" last spring.

Gilberto Sanchez, 47, was arrested in the Bronx, N.Y., early Wednesday morning by FBI agents without incident, law enforcement sources told CNET. A spokeswoman from the FBI's Los Angeles field office, which led the investigation, confirmed the arrest.

If convicted, Sanchez faces up to three years in prison and a $250,000 fine, or twice the gross gain or gross loss attributable to the offense, whichever is greater.

When the feature film from 20th Century Fox was leaked to the Internet in April, it caused panic in Hollywood because the movie, which reportedly cost $100 million to make, was not scheduled for theatrical release until May. The fear was that Internet distribution of an unauthorized copy would hurt ticket sales.

By the time the movie screened in theaters, the unauthorized copy had been watched 4.1 million times, according to market researcher BigChampagne.

"We're supportive of the FBI's actions," said a Fox spokeswoman. "We will continue to cooperate with law enforcement officials to identify and prosecute those who illegally steal our creative content."

According to a copy of a grand jury indictment that was unsealed last week in U.S. District Court for the Central District of California, Sanchez is accused of uploading the film to file-sharing network Megaupload.com under one of his online aliases, which include "theSkilled1" and "SkillyGilly."

The indictment does not say, however, how Sanchez allegedly obtained a working copy of the film and FBI spokeswoman Laura Eimiller declined to provide those details. She did say that the agency has not ruled out more arrests. What this means is that Sanchez may not have been the source of the leak.

The copy that made the rounds online was rough. Many of the computer-generated graphics had not been inserted yet and the cables holding actors to simulate flying were visible.

The major studios say that films being leaked to the Web is a huge problem, and they have gone to great lengths to increase security. In this case, when the film first leaked, executives at Fox said they were confident that the person who leaked the movie would be caught because of forensic marks on the film copy.

Watermarks are inserted into varying film copies so that they can be identified and any leaks can be traced.

However, some proponents of content sharing claim that such leaks and the publicity they stir actually help ticket sales by building interest in a movie prior to its release--provided that the film is any good.

"Wolverine" ended up making at least some money. It cost about $100 million to make, and worldwide grossed almost $375 million in ticket sales, according to to Numbers.com, which tracks box office sales.

In 2003, a New Jersey man pleaded guilty to copyright infringement charges after uploading the superhero film "Hulk" to the Web weeks before its theatrical release. In that case, the man was sentenced to six months house arrest and ordered to pay a $7,000 fine.

Below is the meat of the indictment

The grand jury charges:
[17 U.S.C. § 506(a)(1)(C) and 18 U.S.C. § 2319(a), (d)(1)]

On or about March 31, 2009, in Los Angeles County, within the Central District of California, and elsewhere, defendant GILBERTO SANCHEZ, also known as ("aka") "theSkilled1," aka "SkillfulGil," aka "Skillz101," and aka "SkillyGilly," did willfully infringe the copyright of a copyrighted work by the distribution of a work being prepared for commercial distribution, by making the motion picture "X-Men Origins:Wolverine" available on www.Megaupload.com, a computer network accessible to members of the public, when he knew and should have known that the work was intended for commercial distribution.