U.S. says MegaUpload's hosting service is no innocent bystander
MegaUpload's U.S. legal team leaves courts following a hearing about preserving the company's data servers. From left to right: Jared Smith, William Burck, Derrick Shaffer and Ira Rothken. — (Credit: Greg Sandoval/CNET)
Context & Ripple Effects
The government's hearing-room posture toward MegaUpload's servers caps three weeks of escalating pressure on the company's infrastructure. On March 21, the MPAA pushed to have Megaupload's user data retained for future civil lawsuits, and a day later the site's host publicly pleaded for cash to keep those same files stored rather than delete them. The New York Times' 'When Stealing Isn't Stealing' piece on March 30 framed the legal-theory fight over whether the operation was infringement at all.
The U.S. position reported here — that the hosting service itself is no innocent bystander — matters because it widens the target from MegaUpload's operators to the companies holding its data. The story traveled widely for a single-day report, with pickups at Wired, Ars Technica, The Verge, BGR, Electronista, ITworld and others, reflecting how closely the file-sharing community and the hosting industry were tracking who ends up legally accountable for stored content.
First-order effects
- MegaUpload's host faces a squeeze from both sides: the U.S. now casts it as potentially complicit rather than a neutral landlord, even as its own March 22 plea showed preservation costs landing on the host while litigation drags on.
- MegaUpload's U.S. legal team — including Ira Rothken and William Burck — must defend the company's innocence claims against an adversary that has stopped treating the infrastructure layer as exempt.
Second-order effects
- If the government's framing holds, other large-scale storage providers will price legal-exposure risk into their terms of service and client vetting, because hosting high-volume file-sharing traffic now carries a documented path to federal prosecution.
- Rights holders gain leverage beyond takedowns: the MPAA's March push to preserve user data for civil suits shows studios treating seized servers as an asset for follow-on litigation, not just evidence.
Third-order effects
- The case points toward hosting becoming a legally accountable tier of the internet: if infrastructure providers can be charged alongside their tenants, cloud economics shift toward compliance-heavy contracts and away from indifferent bulk storage.
- How courts ultimately treat orphaned user data — millions of legitimate files frozen inside a criminal investigation — sets a template for collateral damage in future seizures, an unresolved question the hearing leaves open.
The trend: Cloud hosting is being pulled from neutral infrastructure into direct legal liability for tenant content, with the January 2012 MegaUpload seizure as the stress test that forced the industry's hand.