Will 'Morrison' Derail Fed's Criminal Case Against Megaupload?

WASHINGTON, D.C.—The attempt by Washington to hold Megaupload founder Kim Dotcom and six employees criminally liable for massive copyright infringement under U.S. law is certain to be challenged by the defendants' lawyers, who will likely argue that their clients, all of whom are foreign citizens seized on foreign soil, are not subject to United States jurisdiction. The government's attorneys will claim that they do have jurisdiction, but according to legal observers starting to take a closer look at the case, the government will first have to get past Morrison v. National Australia Bank (2010), a SCOTUS opinion that set strict limitations on when U.S. law can be extended to foreign defendants. Because the government clearly wants to make Megaupload a test case for future such takedowns and indictments, operators of file sharing sites and content producers around the globe will be watching with rapt attention.

It may actually be the case that the underlying intent behind anti-piracy bills SOPA and PROTECT IP was to fill in gaps presented by Morrison, and that their ill-fated reception has prompted the Justice Department to force an ultimate resolution on the limitations of U.S. law in copyright infringement cases of this magnitude, triggering another inevitable look at Morrison.

As Alison Frankel reported today, however, the government has its work cut out for it if it means to get past Morrison unscathed. "There's ... considerable precedent on racketeering and Morrison," she wrote. "In a pair of rulings just months after Morrison came down, the U.S. Court of Appeals for the Second Circuit concluded that the civil Racketeer Influenced and Corrupt Organizations law does not extend to overseas conduct. And in the most significant Morrison ruling in a RICO case, Washington, D.C., federal court judge Gladys Kessler found in March 2011 that the U.S. government has no racketeering case against British American Tobacco—even though she'd already entered a final judgment against BAT. (Here's a comprehensive analysis of RICO and Morrison from the Vanderbilt Journal of Transnational Law.)"

But Frankel also noted that Morrison “hasn't been as deeply tested in criminal cases as it has on the civil side," and pointed to "a 1922 Supreme Court opinion called United States v. Bowman, which holds that extraterritorial jurisdiction can be inferred from U.S. criminal laws."

Still, she concludes that even if Megaload is able to use Morrison to successfully derail the RICO and criminal copyright infringement parts of the government's case against it, there will still be felony money laundering charges to contend with, where U.S. law is much more definitive.

"The money-laundering statute specifically references United States jurisdiction over 'foreign persons,' and includes a prohibition on moving money into and out of the country illicitly," she wrote. "Obviously, Megaupload and its executives can argue that they weren't engaged in money laundering, but for Morrison purposes, the law does appear to have extraterritorial reach."

Megaupload's attorney, Robert Bennett, was forced to withdraw as lead counsel in the case because of a reported conflict of interest involving another of his law firm's clients. Another Megaupload lawyer, Ira Rothken, is well known to the adult entertainment community, having litigated for a number of adult entities over the years, including Friendfinder, VMI/Trade News, Penthouse and the Free Speech Coalition. In 2008, Rothken also represented TorrentSpy in a $110 million copyright infringment lawsuit brought against it by the Motion Picture Association of America (MPAA).