With the recent shutdown of Megaupload and the arrest of Kim “Dotcom” Schmitz (founder of Megaupload and formerly the number one ranked Call of Duty player) for massive amounts of alleged copyright infringement, other legal news relating to Megaupload might be overlooked. Well, have no fear, here is some information about the lawsuit filed by Megaupload weeks before its shutdown.

Megaupload.com was a web hosting/file sharing site where users could upload their files (very often copyrighted music, film, and software) and other users could download those files.

About six weeks ago, Megaupload filed suit in California Federal Court against Universal Music Group (“UMG”) claiming misrepresentation pursuant to the Digital Millenium Copyright Act (17 U.S.C. §512(f)).  Within Section 512, it is stated that a company shall not be liable for monetary damages, injunctive relief, or other equitable relief, if upon notice of claimed infringement, removes or disables access to the content in an expeditious manner (among other necessary conditions).  Megaupload is claiming that the takedown notices Youtube received had no basis since none of UMG’s copyrights were infringed.

But wait, what copyrights were allegedly infringed by Megaupload? Well, Megaupload created a music video featuring “endorsements by numerous famous artists, including but not limited to, Swizz Beatz, Kanye West, and Chris Brown,” all of whom “executed full releases of any intellectual property right to the video.” The music video even featured Printz Board and George Pajon Jnr of the Black Eyed Peas, among others. UMG demanded Youtube to remove the video because it featured an unauthorized performance of one of its artist Gin Wigmore.

In their complaint, Megaupload claimed that they did not infringe any copyright owned or administered by UMG and that UMG had “actual subjective knowledge of the contents of, the artist contributing to the [music video], that [Megaupload] was fully authorized to produce and publish and held all rights in the [music video] and that it did not infringe any of [UMG’s] copyrights on the date [UMG] sent YouTube the takedown notice…” (See link above for a copy of the complaint)

Megaupload then goes on to allege that UMG acted in bad faith when it sent the takedown notice. Under Megaupload’s theory, and assuming all their allegations to be true, UMG violated 17 U.S.C. § 512(f) by knowingly materially misrepresenting that the music video infringed UMG’s copyright and used the DMCA takedown notices to cause the removal of such content from the Internet.

What is interesting is that UMG stated that they do not need to give a take down notices to YouTube. Rather, UMG said that they have a contractual agreement with YouTube that gives UMG use of a Content Management System. Through this system, UMG is able to remove videos from the site “based on a number of contractually specified criteria.” This admission may have even exposed other flaws in the takedown procedure, as explained here.

However, possibly due to their recent troubles, Megaupload filed a notice to dismiss the claims against UMG without prejudice. This means that the lawsuit can be revived if they choose. Only time will tell if they will reinstitute their claims or not. Regardless, be on the look out for more information on UMG’s use of its Content Management System.

In the mean time, Megaupload’s attorneys will have to brush up on another area of copyright law – secondary liability.