A New Zealand court today ruled the search warrant used in the arrest of Megaupload founder Kim Dotcom on US online piracy charges was legal, dealing a blow to the internet entrepreneur's fight against extradition to the United States.
Acting on the request of US authorities, the New Zealand government successfully appealed a 2012 ruling that police used illegal warrants when they arrested the tycoon in January 2012 at his mansion near Auckland and seized laptops and hard drives.
The decision will benefit US prosecutors who allege the Megaupload website cost film studios and record companies more than US$500 million and generated more than US$175 million in criminal proceeds by enabling users to store and share copyrighted material like movies and TV shows.
If Dotcom is extradited, the ensuing copyright case could set a precedent for internet liability laws and, should he win, may force entertainment companies to rethink their online distribution methods.
Wednesday's ruling overturned an earlier High Court decision that the search warrants were vague and enabled police to seize materials which were irrelevant to the charges against Dotcom.
The appeals court ruled that the warrants were adequately worded and should not have caused misunderstanding.
"A reasonable reader in the position of the recipients of the search warrants would have understood what they related to," appeal court judges said in a statement.
"There was no disconnect between what there were reasonable grounds to believe might be at the properties and what the warrant authorised the police to take."
Lawyers for the German-born entrepreneur with New Zealand citizenship said they were reviewing the decision and had no further comment.
The decision could shake Dotcom's defence, as it enables US authorities access to all relevant seized evidence to argue for his extradition. A hearing is scheduled for July.
However, the appeals court upheld an earlier ruling that prosecutors had not been authorised to send clones of seized electronic evidence to the United States.
Dotcom maintains that Megaupload, which housed everything from family photos to Hollywood blockbusters, was merely an online warehouse and should not be held accountable if content stored on the site was obtained illegally.
The US Justice Department counters that Megaupload encouraged piracy by paying money to users who uploaded popular content and by deleting content that was not regularly downloaded.