Dotcom's new site not revenge for Megaupload saga

Mega.co.nz collapses soon after launch.

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Kim Dotcom, founder of outlawed file-sharing website Megaupload, said his new "cyberlocker" was not revenge on US authorities who planned a raid on his home, closed Megaupload and charged him with online piracy for which he faces jail if found guilty.

Dotcom said his new offering, Mega.co.nz, which launched on Sunday even as he and three colleagues await extradition from New Zealand to the United States, complied with the law and warned that attempts to take it down would be futile.

"This is not some kind of finger to the US government or to Hollywood," Dotcom told Reuters at his sprawling estate in the bucolic hills of Coatesville, just outside Auckland.

"Legally, there's just nothing there that could be used to shut us down. This site is just as legitimate and has the right to exist as Dropbox, Boxnet and other competitors," he said, referring to other popular cloud storage services.

His lawyer, Ira Rothken, added that launching the site was compliant with the terms of Dotcom's bail conditions.

US prosecutors argue that Dotcom had previously promised in a written statement that he had no intention of starting a new internet business until his extradition was resolved.

Codes and keys

Dotcom said Mega was a different beast to Megaupload, as the new site enables uploaders of a file to control exactly which users can access it. Its predecessor allowed all users to search the files of other users, some of which authorities allege to have contained copyrighted content.

A sophisticated encryption system will allow mega.co.nz users to encode their files before they upload them on to the site's servers, which Dotcom said were located both in New Zealand and overseas.

Each file will then be issued a unique, sophisticated decryption key which only the file holder will control, allowing them to share the file as they choose.

As a result, the site's operators will have no access to the files. Dotcom said this would strip his company from any possible liability for knowingly enabling users to distribute copyright-infringing content.

"Even if we wanted to, we can't go into your file and snoop and see what you have in there," Dotcom said.

Dotcom said Mega would comply with orders from copyright holders to remove infringing material. This, he hoped, would afford it the "safe harbour" legal provision - minimising liability on the condition that his company acted in good faith to comply.

But some legal experts say it may be difficult to claim the protection if they do not know what users have stored.

The Motion Pictures Association of America said encrypting files alone would not protect Dotcom from liability.

"We'll reserve final judgment until we have a chance to analyse the new project," a spokesman told Reuters. "But given Kim Dotcom's history, count us as sceptical."

The German national, who also goes by Kim Schmitz, expects huge interest in its first month of operation, which would be a far cry from when Megaupload went live in 2005.

"I would be surprised if we had less than one million users," Dotcom said.

Dotcom's website launched on Sunday morning at 6.48 am. The time and date of the launch was chosen to match the day in January last year when heavily armed NZ police arrived in helicopters and cars and raided the filesharing tycoon's mansion, arresting Dotcom and Megaupload associates Finn Batato, Mathias Ortmann and Bram van der Kolk.

However, the site which is hosted in Germany appears to have been a victim of the popularity Dotcom predicted it would gain.

It fell over almost immediately after launch, with Dotcom claiming thousands of new user registrations per minute overloading the server and bandwidth utilisation reaching 10 gigabits per second in just ten minutes.

Extradition case continues

Mega's launch starts the next chapter of the Dotcom narrative, dotted with previous cyber crime-related arrests and whose twists and turns have been scrutinised by all facets of the entertainment industry, from film studios and record labels to internet service companies and teenage gamers.

The copyright infringement case, billed as the largest to date given that Megaupload in its heyday commanded around four percent of global online traffic, could set a precedent for internet liability laws and, depending on its outcome, may force entertainment companies to rethink their distribution methods.

A year on, the extradition hearing has been delayed until August 2013, complicated by illegal arrest warrants and the New Zealand government's admission that it had illegally spied on Dotcom, who has residency status in the country.

Last January, New Zealand's elite special tactics forces landed by helicopter at dawn in the grounds of Dotcom's mansion, worth roughly NZ$30 million and featuring a servants' wing, hedge maze and life-size statues of giraffes and a rhinoceros, to arrest him and his colleagues at the request of the FBI.

Police armed with semi-automatic weapons found Dotcom cowering alone in a panic room in the attic, while outside, a convoy of police cars and vans pulled up in the driveway. Around 70 officers took part in the raid.

They left with computers, files and some of Dotcom's fleet of Rolls-Royces, Mercedes and a vintage pink Cadillac tricked with personalised licence plates screaming "HACKER", "EVIL", and "MAFIA".

"Every time you hear a helicopter, you automatically think, 'Oh, another raid', so it's something that stays with you for a long time," said Dotcom, who said he and his wife still panic when they hear sudden, loud noises in the house.

Dotcom was coy about the details of the launch party as builders put the finishing touches to a festival-sized concert stage in the mansion's grounds, while two helicopters circled overhead.

But if the impromptu, Willy Wonka-styled ice cream social he threw in Auckland earlier in the week is any indication, the party could be a more wholesome affair compared with the well-documented soirees of Dotcom's past, where nightclubs, hot tubs and scantily clad women were a common fixture.

"I had to grow up, you know, I was a big baby," he said. "Big baby with too much money usually leads to baby craziness.

"I am going to be more of a person that wants to help to make things better and help internet innovation to take off without all these restrictions by governments. That is going to be my primary goal if this business is successful."

(Editing by Daniel Magnowski and Nick Macfie)