Marianna Papadakis Reporter

Marianna writes for The Australian Financial Review and Business Review Weekly from the Sydney newsroom. She has an interest in legal affairs, technology and business.

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Kim Dotcom and the ‘most legally scrutinised start-up in history’

Published 21 January 2013 13:06, Updated 28 January 2013 09:47

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Kim Dotcom and the ‘most legally scrutinised start-up in history’

An actor in police costume “arrests” Megaupload founder Kim Dotcom (left)as he launches his new file sharing site “Mega” in Auckland. Photo: Reuters

Competition in the provision of cloud-based file-sharing services will heat up with this week’s launch of Mega by New Zealand internet entrepreneur Kim Dotcom.

It comes a year after Dotcom’s Megaupload file-sharing website was shut down. An ensuing legal battle over copyright and piracy is set to begin in New Zealand courts in March.

Dotcom staunchly maintains Megaupload was a legitimate site and its closure by authorities was illegal. Mega spokesman Finn Batato says the new site, which had 500,000 registrations on its first day, provides cloud-based storage but uses open-source encryption programming that claims to give users added security over their content, which they may upload, store and share.

“It’s not a replacement. There is no need for downloading extra applications or software,” Batato says.

When a user uploads a file it is encrypted “on the fly” in a web browser, Batato explains, which differentiates Mega from competitors such as Dropbox, Google Drive and Microsoft SkyDrive.

A partner at New Zealand legal firm Lowndes Jordan, internet lawyer Rick Shera, advised Mega on its set-up.

Shera says it is the most legally scrutinised start-up in history. The site is governed by New Zealand law but the company did not dismiss concerns over copyright and privacy in the US, he says. Mega users will need to provide a higher level of assurance that they are using the site lawfully than would otherwise be required of New Zealand users.

Shera says cases such as that involving iiNet, which was found in a landmark High Court case last year not to be liable for the copyright breaches of its users who uploaded and shared pirated movies and music using its services, made it clear where the courts would draw a line.

“Unless you [a service provider] know what is going on and condone or assist it as a platform host, you shouldn’t be liable,” Shera says. “You are common host or common carrier.”

It is the user who holds the key to encryption and the ability to share it , he adds.

– not Mega.

Mega will comply with the notice and take down regimes where appropriate evidence of an infringement of copyright or other illegality is provided, he says.

But another major difference is that unlike US sites, Mega does not provide a counter notice procedure whereby users whose encrypted material has been removed from the site cannot seek recourse for its reinstatement.

“The primary thing about the site is that it is really starting to reduce the bounds in terms of privacy, Shera says. “Using a website, there is all sorts of information being collected. This is a great boon to people using the internet.”

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