Why New Zealand Business Needs to Fear the Dotcom Raid

Why New Zealand Business Needs to Fear the Dotcom Raid

LawFuel.co.nz - Law News NZ - Some New Zealand businesses may shudder with apprehension at what has happened to Kim Dotcom and the destruction of the MegaUpload business.

And their business need have nothing necessarily to do with movie or music downloads.The Dotcom saga, with its helicoptered, TV drama raid on the MegaUpload chief's Coatsville mansion is part of a developing trend by US authorities to close down websites they believe jeopardises US commercial interests.

While most of those interests are IP-based, largely stemming from the influence of Hollywood and the entertainment business, which has legitimate interests in stopping online piracy, they also extend well beyond purely intellectual property-based enterprises.

The extent to which American authorities like the FBI, the Department of Homeland Security and others can exert extra-territorial influence over commercial operations beyond their own borders has never been so high as it is at present.The action taken by American authorities against Kim Dotcom's operation occurred only a few hours after the mass protest against the Stop Online Piracy Act (SOPA), which also resulted in the take-down of the US Department of Justice website and the brief disruption to the FBI website by the Anonymous hacking group.The power of the federal government to destroy businesses beyond their own borders but with any links to US soil is extraordinary, prompting top Auckland IP lawyer Rick Shera to tell LawFuel that while it may seem "laughable" to suggest that the FBI close down a business like the BNZ for some alleged money laundering or other transgression, it was the sort enforcement action "de jour' taken by the US authorities.

Last month, Canadian-based gaming company bodog was closed, only because it's host company was US-based.Megaupload, which is not US based, has been effectively destroyed and yet, as Rick Shera points out, all the talk of money laundering, wire fraud and racketeering depends entirely upon whether Megaupload breached copyright law, and that is a question that is likely to go all the way to the Supreme Court.

New Zealand copyright law is different from the US, with 'safe harbour' provisions that provide considerable protection to those entities that may harbour copyright-infringing material."It appears they (US authorities) could simply lock someone out of their business," Mr Shera said.

The offences would amount to extradictable offences if proven, but the Crown may have a struggle on its hands doing so according to other commentators, with one senior commercial barrister saying the whole episode has been an example of New Zealand "toadying up" to the Americans.

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