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Courthouse News Service Courthouse News Service

Service of Process Could Doom MegaUpload Case

(CN) - A federal judge refused to dismiss the government's copyright case against Megaupload, but said the case would fare better with U.S. extradition of company officers.

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Federal prosecutors indicted the Hong Kong-based Megaupload, its founder Kim Dotcom and six other individuals in one of the "largest criminal copyright cases ever brought by the United States," according to the January 2012 filing.

The defendants face charges of engaging in an international "Mega Conspiracy" to defraud copyright holders of more than $500 million.

Megaupload has claimed, however, that the government did not issue it a summons in accordance with Rule 4 of the Federal Rules of Civil Procedure.

In a motion to dismiss, Megaupload argued that it was "impossible" for the government to serve the corporation by mail because Megaupload has no office or officers in the United States.

"Service of a criminal summons on Megaupload is therefore impossible, which forecloses the government from prosecuting Megaupload," the company argued.

U.S. District Judge Liam O'Grady denied the motion, but without prejudice, finding dismissal premature.

"Rule 4 does not require a result so extreme as dismissal, and to this Court's knowledge, no court has ever dismissed an indictment for failure to meet Rule 4's secondary mailing requirement," O'Grady wrote.

"It is doubtful that Congress would stamp with approval a procedural rule permitting a foreign corporate defendant to intentionally violate the laws of this country, yet evade the jurisdiction of United State's courts by purposefully failing to establish an address here," he added.

O'Grady noted that Rule 4's mailing requirement is indeed mandatory, but it still may be possible for the government to meet this requirement by mailing a copy of the summons to an alter ego, if it can extradite a Megaupload officer to the United States.

"In this case, the government may be able to prove that at least one of the individually named defendants is an alter ego of the corporate parent," O'Grady wrote. "If so, the corporation's last known address within this district will be the address of the individual defendant, once extradited. In other words, so long as the government could prove that an individual defendant is an alter ego of the corporate defendant, the government could satisfy Rule 4's mailing requirement by mailing a copy of the summons to one of the individual defendants once that defendant is extradited to this district. It is this contingency which causes the Court to deny defendant's motion."

In a footnote, the judge acknowledged that the individual defendants may never be extradited from New Zealand to the United States.

"Be that as it may, the present motion is based on the argument that the government could never serve Megaupload," the decision states (emphasis in original). "Because the alter ego analysis provides a means by which it may be possible to serve the corporate defendant, it is appropriate to deny defendant's motion without prejudice."

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