Megaupload founder battles for bail in NZ

The man at the centre of what has been billed as the world's biggest case of alleged internet copyright infringement — Kim Dotcom — is today battling for his freedom.

Dotcom, 37, was arrested with three co-accused in a police swoop at his luxury rural mansion just outside of Auckland on Friday.

Today, he faces a bail hearing at Auckland's North Shore District Court, along with US authorities also seeking an extradition order, even though the offences did not take place in New Zealand.

The Crown and the New Zealand police both opposed bail for Dotcom, saying that he poses a flight risk "at the extreme end of the scale".

Prosecutor Anne Toohey said there is also "a significant risk" that Dotcom would also re-offend while on bail.

Toohey said that Dotcom presents a risk by refusing to comply with his arrest, and pointed out that he had once fled Germany. They also said that he has a disregard for authority, , access to huge sums of money, several aliases, dual residency and the ability and means to arrange transport by helicopter and private chartered flights.

The Crown also opposed electronic bail, saying that Dotcom might gain access to the internet, and, with his co-accused, could also restart his business operations, saying that alternative domain names for such websites exist.

Earlier, the court heard that Megaupload presents the largest case of intellectual property theft to date, and that Friday's arrests resulted from investigations on an unprecedented scale, beginning in March 2010 and spanning several different countries.

US authorities, Toohey continued, estimate the "harm" from DotCom's business to be "in excess of US$500 million". The value has been estimated by counting music downloads at 99c each, but could also be higher, as the site also allowed downloads of movies and TV programs.

Criminal proceeds of US$175 million have been alleged, with the site responsible for 4 per cent of global internet traffic.

Dotcom owns 68 per cent of Megaupload, a Hong Kong-based business with 30 staff worldwide, run from servers in the Netherlands, Canada and the US — which explains the involvement of US authorities, including the FBI, Toohey said.

Megaupload and another company were recently charged by US authorities for racketeering conspiracy, various copyright-infringement counts and conspiring to commit money laundering.

However, the lawyer acting for Dotcom, Paul Davidson QC, rejected the prosecution's allegations, adding that Dotcom also rejected that Megaupload.com operated as the Crown claimed, and that there was any media conspiracy.

Davidson described the website as a data- and file-storage facility, which people treated as their storage domain.

While it did involve people uploading film and video files, Dotcom had worked with 180 copyright holders in the US, and had given them the ability to take down breaches. There had been some 15 million breaches during the operation of the site, which contains 12 billion files.

"The vast majority [of files] were entirely legitimate," Davidson said.

The US$175 million of revenue claimed is a gross amount, he said, and takes no account of business costs.

By blocking Google searches for certain material, Dotcom was also working to protect copyright, he said.

Davidson this morning also described the manner of Friday's arrest, when police in a helicopter swooped down on Dotcom's luxury mansion before 7am, with Dotcom in bed as they allegedly "extremely assaulted" his property. Dotcom was later found hiding in a panic room.

Davidson said that Dotcom, whose wife is about to give birth to his fifth child, presents no flight risk, and would accept bail conditions.

Earlier this morning, Judge David McNaughton ordered all media from the court while he dealt with the other criminal proceedings.

Judge McNaughton also said that he did not want "a repeat of Friday's circus", and placed strict rules on the media, allowing only one TV camera and one sound recorder in the court.

McNaughton said that he has had media requests from Spanish, French and Australian organisations to cover the case.

The hearing resumes this afternoon.