Google cut off Megaupload's ad money voluntarily back in 2007

The federal government's 72-page indictment of file hosting site Megaupload is stuffed with odd bits of information. Take page 34, for instance, which features a single paragraph about Google's AdSense program. It reads:

On or about May 17, 2007, a representative from Google AdSense, an Internet advertising company, send an e-mail to [Megaupload founder Kim] DOTCOM entitled "Google AdSense Account Status.” In the e-mail, the representative stated that “[d]uring our most recent review of your site,” Google AdSense specialists found “numerous pages” with links to, among other things, “copyrighted content,” and therefore Google AdSense “will no longer be able to work with you.” The e-mail contains links to specific examples of offending content located on Megaupload.com. DOTCOM and his conspirators have continued to operate and financially profit from the Megaupload.com website after receiving this notice.

Sometime later, Megaupload launched an internal advertising agency so that it collect even higher amounts of cash from placing ads on its download pages.

But the paragraph is more interesting for what it tells us about Google. Policy wonks may remember that the company has been absolutely vilified in recent months for taking advertising money from pirates, counterfeiters, and other unsavory characters. The implication—and sometimes it's far more than an implication—is that Google opposed recent legislation like the Stop Online Piracy Act (SOPA) only because it couldn't pass up the sweet nectar of forbidden cash.

Dirty pirates

Such criticism doesn't come simply from copyright holders; it goes all the way to the top. At a remarkably one-sided anti-Google hearing on SOPA last year, the chairman of the House Judiciary Committee eviscerated Google in his opening statement, contrasting it with “responsible companies." Take it away, Lamar Smith (R-TX):

Another one of the companies represented here today has sought to obstruct the Committee’s consideration of bipartisan legislation. Perhaps this should come as no surprise given that Google just settled a federal criminal investigation into the company’s active promotion of rogue websites that pushed illegal prescription and counterfeit drugs on American consumers....

The company also disregarded requests to block advertisements from rogue pharmacies, screen such sites from searches and provide warnings about buying drugs over the Internet... Given Google’s record, their objection to authorizing a court to order a search engine to not steer consumers to foreign rogue sites is more easily understood.

Hollywood has been beating the same drum ever since. The Directors Guild of America, the Teamsters, and others authored a recent letter supporting SOPA. In it, they wrote:

We are well aware that opposition voices, funded and encouraged by a few enormous Internet companies like Google that stand to lose billions in illicit profit (as shown by Google’s willingness to pay a $500 million fine for knowingly placing ads on illegal pharmaceutical sites), if the bills are allowed to become law, have grown louder and shriller in an effort to sway public opinion and derail the political process. They have successfully diverted support from the bills by blanketing the Internet with mistruths and lies and using fear tactics and blacklists to overwhelm and intimidate those who should stand up for protecting American creativity and American workers.

Just yesterday, MPAA boss Chris Dodd talked about how "hurt" he was about SOPA criticism in an interview with the Hollywood Reporter. But it wasn't long before he was taking whacks at Google's finances.

Obviously what happened is those—particularly Google—who are opposed to the legislation, they don’t want [the law] to happen because [search related to piracy is] a major revenue raiser for them, not because of freedom of speech or breaking the Internet. They make a lot of money off that and I understand they don’t want to be hurt economically.

Google responds

Google policy counsel Katherine Oyama tried to fight back against this perception at the hearing, saying that Google spent more than $60 million in 2010 alone to police bad ads, and that the company voluntarily took action against 12,000 sites in 2010 and another 12,000 in 2011 for violating its ad policies on infringement.

The Megaupload indictment appears to show that Google proactively took measures against the site as far back as 2007—even though the account must have been generating quite a bit of money. (While most of the $175 million in alleged Megaupload revenues came from subscriptions, $25 million came from ads.)

This isn't to say that Google is some sainted company. Critics rightly point to the fact that it agreed to forfeit $500 million to the government over advertising it accepted for illicit online pharmacies. It ditched its hardcore net neutrality allies to do a deal with Verizon. And its "don't be evil" motto has been violated time and time and time again.

But some of the criticism has turned into Google Derangement Syndrome; as the government's own indictment shows, Google has for years made (yes, sometimes inconsistent) efforts to address infringement and counterfeiting using its ad programs. Trying to pretend that this debate is solely about Google's piratical cash hoard, or that Google is the only entity that opposed SOPA, is exactly the kind of hyperbole that SOPA backers now say they want SOPA opponents to abandon.

The SOPA and PIPA War: An Analysis

File-sharing site Megaupload.com's recent shutdown merely underscores the escalating firestorm over international copyright laws, one revitalized by the House of Representatives' controversial Stop Online Piracy Act (SOPA) and Senate's Protect Intellectual Property Act (PIPA). Despite SOPA's recent shelving and Senate Majority Leader Harry Reid's decision to temporarily delay the PIPA vote, the offensive makes it clear that the war for technology users' hearts and minds still rages on. For both opponents of online piracy and advocates of information sharing, it's obvious that a long, painful and drawn-out conflict lies ahead as lawmakers and leading corporations battle for control of the Internet.

Though temporary derailed, SOPA and PIPA – contentious bills aimed at curbing illegal music, movie and software sharing (including offenses by overseas websites) – continue to be blasted by critics despite support from the film and record industries. Claiming that the bills violate free speech laws and place undue burden on innocently linking websites, experts are fretting over the impracticality of enforcement and precedents it may set for widespread government censorship. While detractors applaud their ultimate goal, prevailing consensus seems that the execution is deeply flawed, including provisions that would give the Justice Department wherewithal to demand that search engines remove links to allegedly offending websites. Further issues raising red flags extend to overly-broad definitions of "foreign" vs. "domestic" sites, plus provisos barring payment processors such as Visa or PayPal from doing business with alleged offenders or forcing Internet providers to block users' access to identified targets.

These clauses would potentially give the U.S. Attorney General unprecedented powers of censorship and, by proxy, unwarranted leverage over innocent, privately operated companies. Targets of anti-piracy efforts may also be subject to the blacklisting of entire domains – not just individual website pages. Alone, the burden of policing and scrubbing a single site of offenses, e.g. popular online exchanges such as eBay or Craigslist, could potentially hobble entire services and huge tracts of online real estate. Disturbed by the issues these pieces of legislation raise, Internet leaders such as Yahoo, Twitter, America Online and Zynga have quickly banded together in vocal opposition.

The growing backlash has culminated in widespread protests by top tech firms, including this week's voluntary shutdown of popular online services, including WordPress and Wikipedia. Even celebrities such as The Daily Show's John Stewart have felt compelled to weigh in, stating that SOPA will "break the Internet," while Facebook founder Mark Zuckerberg took aim at the act in a rare tweet. "Tell your congressmen you want them to be pro-Internet," he posted, accompanying the sentiment with a larger Facebook post. As these outbursts illustrate, despite the bills' stated intention to make it harder for sites located outside the U.S. to steal digital media or sell counterfeit goods, mainstream support appears to be rapidly deteriorating.

Good intentions aside, political support for both measures has dwindled in recent weeks, culminating in indefinite delays for both bills. Onetime advocates on Capitol Hill have increasingly pulled prior endorsements, too, citing concerns with both pieces of legislations' current form and potential infringements on personal rights and due process. But even in the face of apparent victory, fears continue to mount among the general public regarding provisions that would give lawmakers freewheeling powers to pursue and punish copyright infringers. Major Internet firms have remained ardent in their opposition, including Google, which two days ago placed a black bar over its logo in protest and has collected over 7 million signatures for a petition calling for Congress to halt web censorship. Claiming that the bills limit creativity, innovation and expression, these ongoing debates prompted over 2.4 million heated tweets on Wednesday alone, buoyed by mounting public outcry against ratification.

As Hollywood studios and record industry titans grapple with top technology startups, both sides agree that more must be done to prohibit the flow of online piracy and counterfeit wares. But whereas entertainment giants favor tighter restrictions and more draconian enforcement measures, Silicon Valley startups favor a more laissez-faire approach. In the latter case, unrest has materialized around concerns that if left unchecked, the bills could lead to site blacklisting, organized control of information and unwarranted site shutdowns.

Potentially giving the government or content creators undue leverage to influence the Web's leading lights, protestors like Wikipedia and Reddit have fired back, causing temporary site blackouts that have inconvenienced millions. A taste of what may come if these or similar bills were ever to pass, besides continuing to plague users of popular online services, the currently raging debate promises to leave behind at least one lasting impact. Pointing towards the growingly contentious future of the Internet, as envisioned by multimedia makers vs. information distributors, both SOPA and PIPA herald an online era destined to be defined by well-publicized site takedowns and high-profile legal battles. Already, fallout has extended to the music industry, as the controversy surrounding Megaupload.com has captured hip-hop producer Swizz Beatz in its web.

Backroom arm-twisting and fear-mongering headlines aside, an increasingly frustrated public, annoyed by consistently flawed attempts to stem the rising tide of Internet theft, may nonetheless be able to find some consolation in the mounting conflict. For the foreseeable future, any actions aimed at restricting online sharing – SOPA, PIPA or otherwise – will likely emerge so mangled from impending clashes that they'll have scant impact on one's ability, legal or otherwise, to download favorite songs and albums.

Twitter Reacts to SOPA’s Burial

The Internet rejoiced Friday after Rep. Lamar Smith (R.-Texas) said that he would indefinitely pull the Stop Online Piracy Act (SOPA) from consideration “until there is wider agreement on a solution.”

Smith’s announcement came two days after a web-wide blackout protest in which some of the Internet’s most popular and prominent websites censored content, calling attention to SOPA’s potentially devastating effect on Internet freedom and creativity.

Twitter users declared victory after Smith’s retreat on Friday, crediting the mass action by activists and ordinary web users alike for the change in course. While similar legislation will undoubtedly set off future rounds of contentious debate in Congress and among the public, Friday was nonetheless a moment of optimism for SOPA’s opponents on Twitter.

“SOPA Is Dead” trended nationally on the network. Politicians, digital advocates, artists, celebrities and popular parody accounts joined the celebration. Many simply expressed joy, but others emphasized the need for sustained vigilance and continued pressure on elected officials.

It was the culmination of an extended public battle over SOPA since the bill was introduced in October. GoDaddy felt the wrath of Internet users in December when it was included on a Congressional list of official SOPA supporters; the company soon reversed its position after vociferous backlash.

Support for the bill quickly eroded over the past week, and the growing momentum was regarded as a powerful example of the web’s populist reach. Then Smith’s significant backtrack on Friday signaled SOPA’s ultimate demise — at least for the foreseeable future.

What do you think about the death of SOPA as we knew it? What were your favorite tweets from Friday? Let us know in the comments.

Facebook ‘Relieved’ That SOPA Is Dead

Facebook has responded to the death of SOPA, expressing its relief that the bill has been pulled and thanking its users for their feedback.

Although Facebook didn’t go dark for SOPA, the company has expressed its opposition to the bill. On Wednesday, Facebook founder and CEO Mark Zuckerberg expanded on his thoughts, calling the legislation “poorly thought out.”

On the Facebook Washington DC Page, the company posted the following message:

“We are relieved that Congress has recognized the serious damage the PROTECT IP Act (PIPA) and the Stop Online Piracy Act (SOPA) could cause to the Internet and are pleased that congressional leaders have decided not to move forward on these bills. We want to thank the millions of Facebook users who shared their views with us, with members of Congress, and with their friends and families on this important issue, and who changed the direction of this harmful legislation. We appreciate that lawmakers have listened to our community’s concerns, and we stand ready to work with them on solutions to piracy and copyright infringement that will not chill free expression or threaten the economic growth and innovation the Internet provides.

You can read more about Facebook’s view on this legislation by clicking the “Anti-Piracy Bills” tab on the left side of the Facebook Washington DC page.

RIP SOPA: The Internet Kills Its Attackers

Be honest: When this week began, how much did you really know about SOPA?

Five days ago, the Stop Online Piracy Act was still a relatively obscure House bill. Sure, your average geek knew what was contained within; Mashable, in common with other tech news sites, had been covering it from all angles for weeks. Go Daddy had seen the wrath of the online community firsthand when it tried to support the bill. But the silence from primetime network news, where most Americans still get their information, was deafening.

Even if you knew the difference between SOPA and a bar of soap, it was just too easy to gloss over the news. Too easy to think, “OK, it’s got something to do with piracy; it’s probably a bit too tough, but what can be done? Hollywood has too many powerful lobbyists. Congress is too beholden to them. It’ll just be one more bad copyright law on the books. Maybe there’ll be loopholes. They probably won’t send anyone to jail who doesn’t deserve it. I wonder what’s in the sports section?”

Then Wednesday happened, and suddenly everyone seemed to understand how serious this was. Wikipedia went dark, and the country wailed; we realized how much we have come to depend on the crowdsourced encyclopedia. Google hung a black sash on its logo. Crowds marched in protest. Facebook issued an uncharacteristically political statement (although we urged it to go further). Network news could not fail to take note.

In short: the Internet got its act together, and the world shook.

SOPA’s co-sponsors began to withdraw that day. By Thursday night, the GOP candidates for president were trying to outdo each other in anti-SOPA statements. Senate Republicans, also sensing a political opportunity, tried to hang the PIPA bill (SOPA’s sister in the Senate) around the Democrats’ necks. Finally, on Friday, SOPA and PIPA were withdrawn. Given a tight congressional timetable, and the toxic nature of these bills, it’s unlikely we’ll see them again.

True, we’re not out of the woods yet. There are few lobbyist organizations as deep-pocketed as the MPAA and the RIAA, and they have a long history of choosing to fight new technology with legislation (even if that technology actually benefits the entertainment industry in the long run). This battle may well have to be fought all over again — hopefully over a less draconian bill.

But there is a sense in which these mega-lobbyists are running scared. They woke a sleeping giant, and they don’t like the results. Witness the strange response from Chris Dodd, former senator and new head of the MPAA, who called the actions by Wikipedia, Google et al “stunts that punish their users or turn them into corporate pawns.” Given how many pawns the MPAA effectively owns in Congress, it was hard to suppress a grin at that.

So, well done, Internet. You did it. You took a relatively obscure bill and you made the world care. One concerted day of action by you shook Washington to its core. Lobbyists like Dodd who have had too much unquestioned control for too long got served notice. There’s a new power player in town; not one man in a suit, but millions of faces with electronic megaphones. And this power player doesn’t take kindly to bills that threaten its behavior.

Take heed, legislators. Want to stamp out online piracy, or regulate any other corner of the new digital landscape? In the future, you’d better come talk to the millions with megaphones first.

SOPA Is Dead: Smith Pulls Bill

Lamar Smith, the chief sponsor of SOPA, said on Friday that he is pulling the bill “until there is wider agreement on a solution.”

“I have heard from the critics and I take seriously their concerns regarding proposed legislation to address the problem of online piracy,” Smith (R-Texas) said. “It is clear that we need to revisit the approach on how best to address the problem of foreign thieves that steal and sell American inventions and products.”

Smith also released the following statement on Friday:

“We need to revisit the approach on how best to address the problem of foreign thieves that steal and sell American inventions and products. The problem of online piracy is too big to ignore. American intellectual property industries provide 19 million high-paying jobs and account for more than 60% of U.S. exports. The theft of America’s intellectual property costs the U.S. economy more than $100 billion annually and results in the loss of thousands of American jobs. Congress cannot stand by and do nothing while American innovators and job creators are under attack.

“The online theft of American intellectual property is no different than the theft of products from a store. It is illegal and the law should be enforced both in the store and online.

“The Committee will continue work with copyright owners, Internet companies, financial institutions to develop proposals that combat online piracy and protect America’s intellectual property. We welcome input from all organizations and individuals who have an honest difference of opinion about how best to address this widespread problem. The Committee remains committed to finding a solution to the problem of online piracy that protects American intellectual property and innovation.”

The move comes after widespread protest on the Internet on Wednesday by Wikipedia, Reddit and others. The sites signaled their displeasure with the bill by going dark. That day, several Congressmen dropped their support for SOPA and its Senate counterpart, PIPA. The latter bill has also been taken off the table for now.

“In light of recent events, I have decided to postpone Tuesday’s vote on the PROTECT IP Act,” said Senate Majority Leader Harry Reid (D-Nev.) in a statement Friday morning.

Smith’s stance comes just two days after he told The Wall Street Journal that he didn’t plan to back down on SOPA, telling the newspaper he expected to “move forward” with the bill in February.

What Megaupload Teaches Us About the Cloud, SOPA and Backups

The raid and subsequent shutdown of file-sharing service Megaupload not only hacked off members of Anonymous, it also underscores one of the inherent vulnerabilities in storing data in the cloud.

Beyond just providing easy TV access to college students without cable, Megaupload and the other sites in its network helped encompass the largest digital locker service in the world. While we suspect that the majority of Megaupload users were not storing family photos and personal documents, the site was exceedingly popular with users.

Ars Technica reports that Megaupload consumed more bandwidth in corporate workplaces than cloud-storage and collaboration services like Dropbox and Box.net.

Since the Megaupload shutdown, users with non-infringing content served on Megaupload’s servers have expressed outrage at no longer having access to their content.

According to the federal indictment, the data center that housed Megaupload’s servers had more than 1,000 different computers and contained more than 25 petabytes (25 million gigabytes) of data storage. That’s a lot of data.

The fact that Megaupload stored so much information — and for so many potential users — got us thinking about the bigger implications of the cloud, online storage and the rights of law enforcement.

Could a Service Like Dropbox Get TKO’ed Megaupload Style?

Although cloud storage and backup services have existed in various forms for well over a decade, few companies have managed to make the concept easy to understand and use. Dropbox is one of the few companies that has managed to present a concept — and a service — that is easy to understand and invaluable to use.

I’m a Dropbox Pro user myself and I gladly pay $99 a year for 50 GB of storage. I use Dropbox with Mashable colleagues, friends and family members. I also use Dropbox as a way to back up my music and video libraries. In most cases, these are files that I have digitally purchased or ripped from a CD. Still, the nature of Dropbox and its ability to easily share files with others means that hypothetically, I could share my Amazon MP3 library with someone else.

That opens up the question: If the district court could shutdown charge Megaupload and its employees with “conspiracy to commit copyright infringement” (amongst other crimes) and shut down the service (including access to non-infringing files), could a much more legitimate service like Dropbox be next?

Right now, the answer is “no.” Megaupload’s problems go far beyond the content its users uploaded to the service. The government case against the company and its employees alleges money laundering, trafficking and a blatant disregard for copyright, even in the face of takedown notices. A court will make the final determination as to the validity of these charges, but suffice to say this isn’t just about copyright infringement.

Moreover, current safe harbor rules don’t hold Internet services accountable for the the actions of their customers. In other words, if I commit copyright infringement by using Dropbox to share music and movies with my friends, Dropbox as a service isn’t liable for my actions (provided it kicks me off when presented with my misdeeds).

One of the major problems with the SOPA and PIPA legislation was the restriction of these safe harbor legislations. Web services — and even websites including Mashable — could be held responsible for the actions of users, even if the services themselves were unaware of those actions.

While SOPA in its current form is dead — or at is on hiatus — it’s important to remember that if it or similar measures pass, what has happened to the (few) legitimate users of Megaupload could happen to other services as well.

The Cloud Isn’t Always Forever

As I’ve read accounts of users who actually used Megaupload for work or personal file storage, I’ve been struck by two things.

Why would you choose Megaupload over Skydrive, Dropbox or YouSendIt? I mean, really.
The cloud isn’t a panacea or a total replacement for off-site backups.

This isn’t the first time that a cloud service has gone offline and taken user files with them, and it won’t be the last. In the mid-2000s, a rush of online storage services raced on the scene, only to go belly-up a few years later.

Cloud storage and online backup is a wonderful thing, but it cannot — and should not — be the sole backup solution for a person’s most important files and documents.

Instead, I advocate a combination of backup policies that combines local backup (preferably on a RAID setup) and cloud backups. For truly important files, an offsite local backup (in a firesafe box or safe deposit box) is also a great idea.

Even if you pay a service money for backup and storage space, disasters do happen. Proper backups at multiple locations is the best way to protect yourself from the pain of losing important files.

Also — if you’re using a service that is best known as a pirates paradise to store and transfer work or personal files — it might be time to switch to a provider with a bit less heat.

Police complete Dotcom search

Police and FBI agents have finished searching the home of a multi-millionaire New Zealand resident at the centre of an alleged global piracy and money laundering conspiracy, after seizing millions of dollars worth of luxury items.

Kim Dotcom, also known as Kim Schmitz, was arrested yesterday by police in the FBI-led raid on the $30 million mansion he lives in with his family in Coatesville, north of Auckland.

Police spent most of the day at the property, seizing assets such as luxury cars and artwork, as well as computers and documents as evidence.

The assets have been passed to the control of the Official Assignee, although police said some of the larger items remained at the property and would be removed in the coming days.

Police have also confirmed that they found two firearms at the property yesterday and a 55-year-old New Zealand man was charged with unlawful possession of a pistol, before being released on police bail.

The US led investigation into criminal copyright infringement, which also involved local police and Organised & Financial Crime Agency New Zealand (OFCANZ), finished its search at the Coatesville property shortly before midnight last night.

Detective Inspector Grant Wormald of OFCANZ said the team will continue working at the North Shore Policing Centre through the weekend.

"Our focus now is on completing all the documentation required by Crown Law ahead of the next court appearance on Monday.

He confirmed that the team of four FBI staff working on the searches would also continue to do so "for the next few days".

Nothing to hide

Yesterday, Dotcom - the founder of Megaupload, one of the largest file sharing sites on the internet - said he had "nothing to hide".

The American agents had been working with New Zealand police on the case since August last year. It is alleged that Dotcom and six others are part of a group called the "Mega Conspiracy", accused of reproducing and distributing infringing copies of copyrighted works - including movies, television programmes, music, software and books.

More than $100 million in assets has been seized worldwide.

In New Zealand, $6 million-worth of luxury cars - including 15 Mercedes Benz, a 1959 pink Cadillac and a Rolls-Royce Phantom - and $10 million held in several financial institutions have been seized.

The move against Megaupload sparked an immediate and furious reaction from hackers who shut down websites around the world, among them the US Department of Justice site.

Also arrested were Bram van der Kolk, 29, who is from the Netherlands but is a New Zealand resident, and Finn Batato, 38, and Mathias Ortmann, 40, both from Germany.

The FBI will now seek to extradite the men back to the United States to face charges of conspiring to commit racketeering, conspiring to commit money laundering, copyright infringement and aiding and abetting copyright infringement.

In the North Shore District Court, Judge David McNaughton remanded the men in custody until Monday morning for a bail hearing.

Lawyers acting for the US Government are opposing bail.

Lawyers for the accused men tried to stop news media taking photographs of their clients in court.

But as Judge McNaughton was addressing the matter, Dotcom - who had been smiling and winking at a woman in the public gallery - interrupted him.

"We don't mind ... if people want to take photographs of us or cover this event because we've got nothing to hide."

Dotcom, a dual citizen of Finland and Germany, made $42 million in 2010 from the Megaupload site, according to the indictment laid by American authorities.

Last year, the Government blocked him from buying the sprawling Coatesville mansion because he did not meet the "good character" requirement applied to foreigners who want to buy New Zealand land.

The MegaUpload site was shut yesterday but previously contained endorsements from celebrities such as Kim Kardashian, Alicia Keys, Kanye West among others.

Nearly 80 police, including officers from the the Organised and Financial Crime Agency, raided 10 properties yesterday to make the arrests after a request from the FBI.

Yesterday, the Weekend Herald saw luxury cars with the licence plates KIMCOM, HACKER, STONED, GUILTY, MAFIA, GOD and POLICE loaded on to transporters.

According to the indictment on the US Justice Department website, the harm to copyright holders is put at more than US$500 million ($623.2).

It is alleged Megaupload generated more than US$175 million in criminal proceeds.

The indictment contains emails allegedly sent between the arrested men in which they respond to complaints from users.

An email purportedly sent by Dotcom in July 2010, claims he was worried by a crackdown on sites thought to contain pirated content.

He wrote: "This is a serious threat to our business. Please look into this and see how we can protect ourselfs [sic]. Should we move our domain to another country (Canada or even Hong Kong)."

The indictment claims the accused men knew the site contains unauthorised content.

In a February 2011 email, Ortmann sent Dotcom and Van der Kolk an article headed "how to stop domain names being seized by the US government."

Another email allegedly sent by , Ortmann said: "We're not pirates, we're just providing shipping services to pirates."

Detective Inspector Grant Wormald said Dotcom had put money into Government bonds, and expensive artworks had been found at the Coatesville mansion.

Mr Wormald said the raid of Dotcom's house went smoothly - despite problematic obstacles at the property including tight security, gating and a bodyguard.

A team of 76 police staff including armed offenders squad members went to the sprawling property at about 6.45am.

FBI officers, who have been in New Zealand for about five days, did not participate.

They were expected to stay here for another week or so.

"It's a huge property and we were aware that there were a number of people there," Mr Wormald said.

"Police arrived in two marked helicopters. Despite our staff clearly identifying themselves Mr Dotcom retreated into the house and activated a number of electronic locking mechanisms.

"While police neutralised these locks he then further barricaded himself into a safe room within the house which officers had to cut their way into.

"Once they gained entry into this room they found Mr Dotcom near a firearm which had the appearance of a shortened shotgun.

"It was definitely not as simple as knocking at the front door."

Hot properties

Among the movies allegedly made available on publicly accessibly websites, therefore infringing copyright, were:

1. Bad Teacher
2. Harry Potter and the Deathly Hallows Part 1
3. Lord of the Rings: Fellowship of the Ring
4. The Twilight saga: Breaking Dawn
5. The Green Hornet

Some of the movies were made accessible days after their release or before they were commercially released.

New Zealand police cut way into mansion in Internet fraud case

New Zealand police broke through electronic locks and cut their way into a mansion safe room to arrest the alleged kingpin of an international Internet copyright theft case and seize millions of dollars worth of cars, artwork and other goods.

German national Kim Dotcom, also known as Kim Schmitz, was one of four men arrested on Friday in an investigation of the Megaupload.com website led by the U.S. Federal Bureau of Investigation.

The group was accused of engaging in a scheme that took more than $500 million away from copyright holders and generated over $175 million in proceeds from subscriptions and advertising.

A police official said on Saturday that dozens of officers, backed by helicopters, forced their way into the mansion, nestled in lush farmland, after Dotcom refused them entry.

"Despite our staff clearly identifying themselves, Mr Dotcom retreated into the house and activated a number of electronic-locking mechanisms," said Detective Inspector Grant Wormald from the Organised & Financial Crime Agency New Zealand.

Officers broke the locks and Dotcom barricaded himself into a safe room which officers had to cut their way into, he said.

"Once they gained entry into this room, they found Mr Dotcom near a firearm which had the appearance of a shortened shotgun," he said. "It was definitely not as simple as knocking at the front door."

PINK CADILLAC

Two firearms were seized and a 55-year-old New Zealand man had been charged with illegal possession of a pistol. Computers and documents were also retrieved and more than NZ$10 million ($8 million) was seized from financial institutions.

Television footage showed vehicles, including a pink Cadillac and a Rolls-Royce Phantom Drophead Coupe, being removed from the property north of Auckland, New Zealand's largest city.

The arrests were made as the debate over online piracy reaches fever pitch in Washington where Congress is trying to craft tougher legislation.

Lawmakers stopped anti-piracy legislation on Friday, postponing a critical vote in a victory for Internet companies that staged a mass online protest against the fast-moving bills.

The movie and music industries want Congress to crack down on Internet piracy and content theft, but major Internet companies like Google and Facebook have complained that current drafts of the legislation would lead to censorship.

"Our focus now is on completing all the documentation required by crown law ahead of the next court appearance on Monday," Wormald said of the Auckland arrests.

"The team of four FBI staff will also remain working with us for the next few days."

Kim, who turns 38 on Saturday, and the other men made a brief court appearance on Friday will appear again on Monday. They face extradition and a trial in the United States.

On Friday, in a show of support, hackers attacked and temporarily disabled a number of government and entertainment company websites, including the U.S. Justice Department's website.

U.S. Justice Department officials have said that the estimate of $500 million in economic harm to copyright holders cited in a U.S. indictment was at the low end and could be significantly more.

The allegations included copyright infringement as well as conspiracy to commit copyright infringement, conspiracy to commit money laundering and conspiracy to commit racketeering. Two of the offences carry a maximum penalty of 20 years.

The companies charged, Megaupload Ltd and Vestor Ltd, were both registered in Hong Kong and owned either in large part or solely by Dotcom.

Megaupload has boasted of having more than 150 million registered users and 50 million daily visitors, according to the indictment. At one point, it was estimated to be the 13th most frequently visited website on the Internet.

Users could upload material to the company's sites which then would create a link that could be distributed. The sites, which included video, music and pornography, did not provide search capabilities but rather relied on others to publish the links, the U.S. indictment said.