Earlier this year, adult media company Perfect 10 filed a lawsuit accusing MegaUpload of disregarding its intellectual property rights. Perfect 10 claimed that the file-hosting giant infringed its copyrights and trademarks, and engaged in unfair competition. In addition, Perfect 10 claimed MegaUpload did not remove footage from their websites upon complaints of copyright owners. 

Now we know the trail’s outcome: the online file storage service MegaUpload could be found guilty of direct infringement according to the United States District Court of California.

This is a remarkable ruling, due to several reasons:

First of all, Perfect 10 almost always loses its cases. In 2009, Perfect 10 lost the similar lawsuit against the file-hosting service Rapid Share. Among other claims, Perfect 10’s complaint stated that RapidShare was guilty of infringing the copyrights of many of its images. In May 2010, the District Court of California ruled that RapidShare was not liable for copyright infringements, partly because they closely followed up on notifications by copyright owners. 

Second of all, hosting providers usually only play a passive role and are only held liable for indirect copyright infringement. Direct infringement claims are used against the actual party doing the infringing. Here, however, the judge says that MegaUpload is involved enough that it could be found guilty of direct infringement:

“Drawing all reasonable inferences in Perfect 10's favor, MegaUpload serves as more than a passive conduit, and more than a mere "file storage" company: it has created distinct websites, presumably in an effort to streamline users' access to different types of media (e.g., megaporn.com, megavideo.com) it encourages and, in some cases pays, its users to upload vast amounts of popular media through its Rewards Programs; it disseminates URLs for various files throughout the internet; it provides payouts to affiliate websites who maintain a catalogue of all available files; and last, at a minimum, it is plausibly aware of the ongoing rampant infringement taking place on its websites. Taken together, Perfect 10 has adequately alleged MegaUpload has engaged in volitional conduct sufficient to hold it liable for direct infringement.”

We shall have to wait and see whether this court ruling will create a precedent in other American law suits against hosting providers, and whether or not they will be play a bigger role than the passive role with respect to copyright infringement.

Reference: Techdirt.com