Except for the time that The US Congress Endorsed the Services We Provide at Virtual VIP, I’ve been pretty clear on just how ill-prepared our government is to address business change and the Internet.

Chalk up another one for the dumb guys.

In shutting down widely popular (and wide purveyor of pirated material) web site MegaUpload yesterday, The US Congress has, once again, deprived a company of due process because they had written law (or in this case granted unreasonable powers to the US Department of Justice) without understanding what they were doing.

The side effect? People who were using MegaUpload for legitimate, legal purposes have a big problem today; their files are simply … gone.

This is an incredibly complex issue. My buddy David Pogue explained it best in this editorial in The New York Times. SOPA (for Stop Online Privacy Act) was a bill before Congress that would have done some important things to curb privacy, but would also have caused huge problems. SOPA is dead for now, but you can bet something like it will be back—and probably should; media authors have a right to be paid for their work.

But usually, on the Internet, a cigar isn’t just a cigar.

There are mixed signals everywhere. Elvis Costello has all but told his fans to steal his latest album. Some movie studios want you to pirate their movies. Other movie studios distribute their copyrighted works for free—except when they don’t.

And it isn’t only the movie business struggling with the idea of what should be paid for, by whom, and when. I’ll skip music for today; I’ve written on trouble in the music business many times. But look at book authors: Julien Smith Is Giving Away The Flinch. but only sort of, and speaking of my pal at The New York Times … well, he’s come around, but there was a time when the subject of copyright was too complicated for David Pogue to discuss well.

OK, some facts:

  • It’s “illegal” to download copyrighted material. Maybe. You can always claim you didn’t know you were doing something wrong, using words like “I saw a file and I downloaded it”
  • It’s illegal to post copyrighted material on the Internet for others to download. I suppose you could take a stab at the same “I didn’t know it was illegal” defense, but since every movie you’ve ever bought on a DVD shows to a big warning when you play it and it takes considerable expertise to get movies off DVDs, that one’s pretty stupid
  • It’s illegal to host copyrighted material without consent of the copyright holder. MegaUpload was hosting plenty of that and if they knew it (they claim they did not, but it’s hard to believe), then THAT MATERIAL needed to be removed—ideally by them, but otherwise, and after due process was exercised, by a law enforcement agency.
  • But just because MegaUpload was hosting some illegal stuff—even a great preponderance of illegal stuff—there was no reason and little viable legal argument for shutting down their entire service. Have you ever signed a contract and seen a clause that covered “Possible Invalidity” and specified that if one part of the contract was ever found to be illegal it had no impact on the other parts? Same idea.

But all any of this leaves us with is a great big “so what’s supposed to happen next?

I first covered this issue here in August 2009; it’s quite possible you’re a pirate and don’t even know it. And since then I’ve pointed out people as well-heeled as über venture capitalist Fred Wilson have admitted to being pirates, and media distributors like Netflix are just hurting things. And all of those examples just make the problem more complicated, without suggesting solutions.

Here are two:

First, look at what comedian Louis CK did to distribute his latest concert video. Now ask yourself: it just wasn’t that hard, so why don’t media companies understand this kind of business change?

Second, read this article. Ignore the part about how BitTorrent is taking on Dropbox for supremacy in multi-computer storage market, and ask yourself why?.

I’ll tell you why: because claiming that your technology is useful for other things (“you can share files you have the right to share and not just those you shouldn’t be“) isn’t the same as actually creating a product that encourages doing so.

This is a brilliant move on the part of BitTorrent, whether they actually get anywhere versus Dropbox, or not. It’s real business change. And a pretty decent legal maneuver, too.

And it could be a step in moving toward a different way of handling media and copyright that even moribund copyright holders could understand and get behind.

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