Mega-misinformation: The difference between cloud computing and file sharing
Saturday 2nd February 2013
Article written by: Thomas Huthwaite
Several news reports in the past week have referred to Kim Dotcom’s new website, Mega, as a “file sharing” website, saying that Dotcom’s company has received “file sharing infringement notices” and mentioning the Mega website alongside reports on the recent decision of the Copyright Tribunal on the infringing file sharing legislation.
These reports appear to be confusing two different aspects of the copyright legislation: there are some important distinctions to be made.
File hosting vs. file sharing
In the colloquial sense, Mega is a ‘sharing’ website. However, it is not a “file sharing” website as defined by New Zealand’s infringing file sharing legislation. Under the legislation, file sharing occurs only when material is uploaded via, or downloaded from, the internet using software or a network that enables the simultaneous sharing of material between multiple users. Examples of such software include BitTorrent and uTorrent.
Mega does not appear to operate in this way. It is a file hosting service, otherwise known as a cloud service or a cyberlocker. When using a file hosting service users upload material to the website servers, and then provide links and encryption keys to other users, who can download that material from the server. Similar services include Dropbox, Google Drive and Microsoft SkyDrive. The now-extinct MegaUpload, the very reason for Dotcom’s arrest and infamy, was another example.
File hosting services do not typically provide for the simultaneous sharing (uploading and downloading) of material between multiple users, and are therefore not subject to the Infringing file sharing legislation, because of the definition of “file sharing” in the Copyright Act.
Most file hosting services are intended to be used by individuals and groups to store their personal or collaborated material. The difference with MegaUpload is that many individuals (perhaps inevitably) used the cloud storage to upload and share copyright material with other users. The acts of uploading copyright material, making it available to other members of the public, and downloading the material, are all forms of copyright infringement when such actions are not licenced by the true copyright owner.
In MegaUpload’s case, copyright owners soon made the website administrators aware of instances of copyright infringement. Dotcom and his associates claim to have adopted a takedown procedure, acting on the claims of infringement by removing the links. However, the website’s popularity, and the alleged widespread piracy taking place, inevitably got the better of it. MegaUpload was shut down on 19 January 2012.
MegaUpload vs. Mega
One year later, Kim Dotcom has replaced MegaUpload with the new service, Mega. The difference between Megaupload and Mega is that on Mega material is encrypted on the client’s side before being uploaded. The Mega administrators therefore do not know the encryption keys to uploaded files, do not know the content of the files, and are (arguably) not responsible for the contents of uploaded files.
Further, the Mega administrators have stated that certain companies (e.g. film and music studios) can apply for direct access allowing them to remove files that are discovered to contain copyright material. A condition of this access is that such companies will have to undertake not to sue Mega for the conduct of its users.
Whether this will be attractive to those studios remains to be seen.
Copyright infringement warnings
What has occurred already, however, is that Mega has received a host of copyright infringement warnings (at least 150 according to one of Dotcom’s New Zealand lawyers, Rick Shera).
These warnings are not the “three strikes” warnings that copyright owners can send in accordance with the infringing file sharing legislation (for more on that, see our most recent report). Rather, the warnings are the equivalent of cease and desist notices, putting Mega on notice of its users’ infringing conduct and requesting that copyright material be removed.
While Dotcom appears to have tried to avoid Mega being put on notice of copyright infringement, namely by encrypting all uploads, copyright owners have still apparently still found cause to issue their complaints. Whether Mega and its owners are vicariously liable for copyright infringement is at presently unclear; the same question remains to be answered in respect of MegaUpload.
However, copyright owners’ views are clear: encryption or no encryption, sharing their content without a licence is illegal.
 Copyright Act 1994, section 122A(1).
 122A(1) Interpretation for sections 122B to 122U
file sharing is where—
(a) material is uploaded via, or downloaded from, the Internet using an application or network that enables the simultaneous sharing of material between multiple users; and
(b) uploading and downloading may, but need not, occur at the same time.
 Typically, copyright infringement requires “substantial copying” of copyright material, which may include broadcasting, publishing, or making such material available to others.