Technology Spot

MegaPorn, MegaVideo, MegaLive, MegaPix, and Megaupload are all Kim Schmitz: entrepreneur, father, former hacker, former street racer, and former outlaw.

Depending on who you ask, all of these sites and brands created by Schmitz--a well-known hacker in Germany who is said to have officially changed his name to Kim Dotcom--are either part of the simple and successful Internet file-storage business he founded in 2005, or they're an extension of a vast online piracy empire that includes some of the most visited video sites on the Web--right there along with YouTube and Hulu. According to legal documents filed in California, where Schmitz, 37, is engaged in a copyright battle, he rents cyberlockers to the masses, and nobody disputes that many millions of people from across the globe use Megaupload to store or access unauthorized copies of TV shows, feature films, songs, porn, and software.

For years now, executives at the major film studios and television networks have quietly complained that Megaupload is making a fortune off of their work by selling subscriptions to his locker services without paying them a dime. Megaupload denies the accusations, but in Hollywood many fear that the service is a far bigger threat to their business than the popular and controversial file-sharing service, The Pirate Bay.

Streaming sites only require a couple key clicks before a user is able to store or stream pirated video over to their PC. The fear at some of the film studios and TV networks is that because cyberlockers are easier to use than BitTorrent and other peer-to-peer software, they could find their way into less tech-savvy audiences than previous file-sharing systems and cost the industry lost video sales.

Relatively unknown in the United States, Schmitz is notorious around the world among those hired to protect films and TV shows from online piracy. Because of his German accent, prodigious girth (he's said to weigh more than 300 pounds), and his record of convictions for computer hacking and insider trading, some in Hollywood jokingly refer to him as Dr. No or Dr. Evil, fictional villains from the James Bond and Austin Powers films, respectively.

That image of Schmitz as a powerful piracy overlord seems to have been partially created by Schmidt himself.

Schmitz can be seen in YouTube videos driving a Mercedes-Benz at more than 200 mph on public roads while competing in a street race known as the Gumball 3000. On one of his cars is a license plate that reads "God." In other clips, Schmitz bathes in grand marble tubs, suns himself on yachts, and cavorts with bikini-clad women. It's no joke to antipirates, who believe Schmitz is paying for his lifestyle with money that rightfully belongs to filmmakers. Yet, the major Hollywood movie studios have inexplicably done little to try and stop Megaupload or the other large and allegedly illegal cyberlocker services, such as Rapidshare. According to film industry sources, that will change soon.

Decision makers at the Motion Picture Association of America (MPAA), the trade group representing the six largest Hollywood film studios, will pay close attention to a copyright complaint filed in January against Megaupload. Perfect 10, an adult-entertainment company with a reputation for a hair-trigger on copyright litigation, accuses Megaupload of encouraging users to upload pirated content to the company's cyberlockers. Last week, a U.S. District Judge in Los Angeles denied Megaupload's motion to throw out Perfect 10's suit and ruled there was ample evidence to bring a copyright case against Schmitz and the company.

Some in Hollywood have said in off-the-record conversations that they were surprised Megauploaded responded to the complaint. Why? Mystery, it seems, was its best defense. Megaupload was believed to be based in Hong Kong and rumored to operate servers in obscure corners of the world. The company ignored past requests to remove pirated material from its service and seemed satisfied to thumb its nose at copyright laws as it operated in the shadows. Even Schmitz' role at Megaupload, despite his personal flamboyance, was unclea

In a 2009 Forbes article, Megaupload spokesperson Bonnie Lam denied any connection existed between the company and Schmitz. But in response to an inquiry from CNET about the Perfect 10 case, Lam confirmed on Tuesday that Schmitz is part of the company's leadership.

"Perfect 10 is on a mission to intimidate legitimate Internet businesses into paying Perfect 10 for settlements," wrote Lam, who said she was writing from Megaworld headquarters. "Perfect 10 has picked the wrong target with Mega and we will fight for the rights of our users...One of the tactics of Perfect 10 involves one of our founders, Kim Schmitz, who recently changed his name to Kim Dotcom. He was convicted for hacking and insider trading in Germany almost a decade ago. Perfect 10 wants the court to believe that Kim's prior convictions are an indicator for criminal conduct regarding Mega.

"But Perfect 10 is wrong," Lam continued. "Since his convictions Kim has a clean record and under (Germany's) Clean-Slate legislation his prior convictions have been wiped. Today Kim is married and the father of three young children. He has matured, learned from his past mistakes and is a successful businessman...Kim is one of many shareholders at Mega and not involved in most day-to-day business decisions."

Don't believe it, argues Perfect 10's lawyers. In the porn studio's complaint, they wrote that Schmitz is all there is behind Megaupload. "Each of the entity defendants herein is the alter ego of Schmitz," Perfect 10 said in a court filing. "Schmitz formed Megaupload for the specific purpose of engaging in the business of illegally storing, displaying, and distributing the intellectual property of others. On information and belief, Schmitz alone profits from the revenues derived from these entities."

Perfect 10 also alleges that Schmitz owns and controls a U.S. hosting service. According to numerous reports, a company called Carpathia Hosting, based in Ashburn, Va., manages Megaupload and many of the other mega sites. Carpathia executives did not respond to repeated interview requests.

One might have reason to question assertions made about Schmitz given his record. He first made a name for himself as a computer hacker who was convicted of credit card fraud. In 2001, Schmitz was accused of securities fraud for buying up shares of an ailing company and announcing he would dedicate 50 million Euros into revamping the business. As a result, the company's stock price soared and he quickly sold his shares for a profit. Only trouble was he never had the 50 million Euros.

What copyright owners plan to do about Megaupload is unclear. The U.S. Senate is considering legislation that would give the government power to block access to overseas sites accused of trafficking in pirated or counterfeit materials. Comcast and Verizon are some of the major Internet service providers that have recently agreed to step up antipiracy efforts but for the time being those agreements only affect material downloaded via peer-to-peer services and has nothing to do with streaming services like Megaupload.

As for Schmitz himself, news reports from New Zealand indicate he is living in a $30 million mansion near Auckland. Megaupload's Lam said he's been granted permanent residency there. The Kiwis have reportedly taken to Schmitz after he paid for a huge fireworks display over Auckland Harbor last New Year's eve.

In one of his YouTube clips, Schmitz is videotaped driving at high speeds until he's stopped at a checkpoint. Slowly he rolls back into traffic undetected and then speeds off. He chortles and says, "Dr. Evil always gets away with it."

In a 2009 Forbes article, Megaupload spokesperson Bonnie Lam denied any connection existed between the company and Schmitz. But in response to an inquiry from CNET about the Perfect 10 case, Lam confirmed on Tuesday that Schmitz is part of the company's leadership.

"Perfect 10 is on a mission to intimidate legitimate Internet businesses into paying Perfect 10 for settlements," wrote Lam, who said she was writing from Megaworld headquarters. "Perfect 10 has picked the wrong target with Mega and we will fight for the rights of our users...One of the tactics of Perfect 10 involves one of our founders, Kim Schmitz, who recently changed his name to Kim Dotcom. He was convicted for hacking and insider trading in Germany almost a decade ago. Perfect 10 wants the court to believe that Kim's prior convictions are an indicator for criminal conduct regarding Mega.

"But Perfect 10 is wrong," Lam continued. "Since his convictions Kim has a clean record and under (Germany's) Clean-Slate legislation his prior convictions have been wiped. Today Kim is married and the father of three young children. He has matured, learned from his past mistakes and is a successful businessman...Kim is one of many shareholders at Mega and not involved in most day-to-day business decisions."

Don't believe it, argues Perfect 10's lawyers. In the porn studio's complaint, they wrote that Schmitz is all there is behind Megaupload. "Each of the entity defendants herein is the alter ego of Schmitz," Perfect 10 said in a court filing. "Schmitz formed Megaupload for the specific purpose of engaging in the business of illegally storing, displaying, and distributing the intellectual property of others. On information and belief, Schmitz alone profits from the revenues derived from these entities."

Perfect 10 also alleges that Schmitz owns and controls a U.S. hosting service. According to numerous reports, a company called Carpathia Hosting, based in Ashburn, Va., manages Megaupload and many of the other mega sites. Carpathia executives did not respond to repeated interview requests.

One might have reason to question assertions made about Schmitz given his record. He first made a name for himself as a computer hacker who was convicted of credit card fraud. In 2001, Schmitz was accused of securities fraud for buying up shares of an ailing company and announcing he would dedicate 50 million Euros into revamping the business. As a result, the company's stock price soared and he quickly sold his shares for a profit. Only trouble was he never had the 50 million Euros.

What copyright owners plan to do about Megaupload is unclear. The U.S. Senate is considering legislation that would give the government power to block access to overseas sites accused of trafficking in pirated or counterfeit materials. Comcast and Verizon are some of the major Internet service providers that have recently agreed to step up antipiracy efforts but for the time being those agreements only affect material downloaded via peer-to-peer services and has nothing to do with streaming services like Megaupload.

As for Schmitz himself, news reports from New Zealand indicate he is living in a $30 million mansion near Auckland. Megaupload's Lam said he's been granted permanent residency there. The Kiwis have reportedly taken to Schmitz after he paid for a huge fireworks display over Auckland Harbor last New Year's eve.

In one of his YouTube clips, Schmitz is videotaped driving at high speeds until he's stopped at a checkpoint. Slowly he rolls back into traffic undetected and then speeds off. He chortles and says, "Dr. Evil always gets away with it."

In a 2009 Forbes article, Megaupload spokesperson Bonnie Lam denied any connection existed between the company and Schmitz. But in response to an inquiry from CNET about the Perfect 10 case, Lam confirmed on Tuesday that Schmitz is part of the company's leadership.

"Perfect 10 is on a mission to intimidate legitimate Internet businesses into paying Perfect 10 for settlements," wrote Lam, who said she was writing from Megaworld headquarters. "Perfect 10 has picked the wrong target with Mega and we will fight for the rights of our users...One of the tactics of Perfect 10 involves one of our founders, Kim Schmitz, who recently changed his name to Kim Dotcom. He was convicted for hacking and insider trading in Germany almost a decade ago. Perfect 10 wants the court to believe that Kim's prior convictions are an indicator for criminal conduct regarding Mega.

"But Perfect 10 is wrong," Lam continued. "Since his convictions Kim has a clean record and under (Germany's) Clean-Slate legislation his prior convictions have been wiped. Today Kim is married and the father of three young children. He has matured, learned from his past mistakes and is a successful businessman...Kim is one of many shareholders at Mega and not involved in most day-to-day business decisions."

Don't believe it, argues Perfect 10's lawyers. In the porn studio's complaint, they wrote that Schmitz is all there is behind Megaupload. "Each of the entity defendants herein is the alter ego of Schmitz," Perfect 10 said in a court filing. "Schmitz formed Megaupload for the specific purpose of engaging in the business of illegally storing, displaying, and distributing the intellectual property of others. On information and belief, Schmitz alone profits from the revenues derived from these entities."

Perfect 10 also alleges that Schmitz owns and controls a U.S. hosting service. According to numerous reports, a company called Carpathia Hosting, based in Ashburn, Va., manages Megaupload and many of the other mega sites. Carpathia executives did not respond to repeated interview requests.

One might have reason to question assertions made about Schmitz given his record. He first made a name for himself as a computer hacker who was convicted of credit card fraud. In 2001, Schmitz was accused of securities fraud for buying up shares of an ailing company and announcing he would dedicate 50 million Euros into revamping the business. As a result, the company's stock price soared and he quickly sold his shares for a profit. Only trouble was he never had the 50 million Euros.

What copyright owners plan to do about Megaupload is unclear. The U.S. Senate is considering legislation that would give the government power to block access to overseas sites accused of trafficking in pirated or counterfeit materials. Comcast and Verizon are some of the major Internet service providers that have recently agreed to step up antipiracy efforts but for the time being those agreements only affect material downloaded via peer-to-peer services and has nothing to do with streaming services like Megaupload.

As for Schmitz himself, news reports from New Zealand indicate he is living in a $30 million mansion near Auckland. Megaupload's Lam said he's been granted permanent residency there. The Kiwis have reportedly taken to Schmitz after he paid for a huge fireworks display over Auckland Harbor last New Year's eve.

In one of his YouTube clips, Schmitz is videotaped driving at high speeds until he's stopped at a checkpoint. Slowly he rolls back into traffic undetected and then speeds off. He chortles and says, "Dr. Evil always gets away with it."

Google's top legal officer today posted a scathing indictment of adversaries Apple, Microsoft, and Oracle for pursuing "bogus" patent claims that may serve to drive up the costs of phones using Google's Android mobile operating system.

Google Senior Vice President and Chief Legal Officer David Drummond paints a picture of rivals envious of Android's success, noting that more than 550,000 Android devices are activated daily.

"But Android's success has yielded something else: a hostile, organized campaign against Android by Microsoft, Oracle, Apple, and other companies, waged through bogus patents," Drummond writes in a post under the heading "When patents attack Android."

The three rivals are pecking away at Android, suing Google for violating various patents in creating the popular operating system. Oracle filed suit a year ago, accusing Google of infringing on patents related to Java, which the database company acquired when it took ownership of Sun Microsystems in early 2010.

Microsoft has taken a different approach, suing device makers who use Android, including Barnes & Noble, which makes the Nook electronic reader, and Motorola. The software giant has also induced several companies, most notably HTC, to pay patent licensing fees for using Android to avoid being sued.

In late June, Apple was part of the consortium of technology companies, along with Microsoft, that won the bidding with a $4.5 billion offer to take ownership of Nortel's portfolio containing some 6,000 patents and patent applications for wireless, wireless 4G, data networking, optical, voice, Internet, and semiconductor technologies. Applestaked $2.6 billion of that offer. The group outbid Google.

Drummond writes that all those legal actions and patent purchases don't merely thwart Android.

"Patents were meant to encourage innovation, but lately they are being used as a weapon to stop it," Drummond writes.

Apple, Microsoft, and Oracle officials all declined comment to CNET. But later in the day, Microsoft's general counsel and senior Vice President Brad Smith suggested in a tweet that Drummond misrepresented Microsoft's intentions with regard to buying Novell patents, acquired earlier this year through a partnership that includes Microsoft, Apple, and Oracle.

"Google says we bought Novell patents to keep them from Google. Really? We asked them to bid jointly with us. They said no," Smith wrote.

To back up Smith's assertion, another Microsoft executive produced an e-mail that seems to back up a claim that Google turned down an offer to be part of the winning bid for Novell patents last year. Microsoft corporate communications chief Frank Shaw posted a photo of the following e-mail dated October 28, 2010, from Kent Walker, Google's general counsel, to Microsoft's Smith on his Twitter feed:

Drummond begins his post by noting what strange bedfellows Apple and Microsoft make.

"I have worked in the tech sector for over two decades. Microsoft and Apple have always been at each other's throats, so when they get into bed together you have to start wondering what's going on."

"I have worked in the tech sector for over two decades. Microsoft and Apple have always been at each other's throats, so when they get into bed together you have to start wondering what's going on," Drummond writes.

He sees their banding together to acquire the Nortel patents as a direct assault on Android, which has quickly surpassed both the iPhone and devices running the Windows Phone and the previous Windows Mobile as the top selling smartphone operating system in the United States. He goes on to note that smartphones might face up to 250,000 "largely questionable" patent claims, which serve as a "tax" on the devices.

"Instead of competing by building new features or devices, they are fighting through litigation," Drummond writes.

Of course, that's the common cry of the accused in patent litigation. Rather than acknowledge infringing, defendants accuse plaintiffs of trying to stifle innovation in the courts.

And Google is clearly not above using some of the same tactics to protect itself from patent litigation. The company also bid on the Nortel patents. And it's reportedly looking into buying wireless technology company InterDigital for its wireless patent portfolio.

"We're also looking at other ways to reduce the anticompetitive threats against Android by strengthening our own patent portfolio," Drummond writes, without mentioning specific companies.

Drummond's post pays homage to an investigative piece by NPR's "This American Life" last month titled "When Patents Attack," chronicling how software patents have gone from a protective measure for technology companies, to a big business for nonpracticing entities--companies that licenses patents but doesn't actually have any other business.

Lately that behavior's centered around the the targeting of mobile app developers on both Apple and Google's mobile platforms by entities like Lodsys and MacroSolve. Earlier this year these intellectual property holders began targeting companies big and small for allegedly infringing on patents held, offering up licensing deals at the risk of litigation if such a deal could not be struck. As a result, Apple tried to step in and shield developers on its platform, saying its own license covers the activity being targeted. Groups like Article One Partners have also served as conduits for groups looking to get patents from Lodsys and MacroSolve invalidated, using crowdsourced research that aims to find prior art.

Research in Motion finally answered the pleas of the BlackBerry faithful for a new device with a promotional blitz today, announcing multiple phones for different carriers around the world. In the U.S., AT&T has committed to selling three BlackBerrys, including a next-generation Torch, the touch-screen version of its smash-hit Bold phone, and a touch-screen-only phone called the Torch 9860. Sprint Nextel said it too will be carrying the Bold and a variant of the all-touch-screen phone called the Torch 9850.

In fairness, I haven't had a chance yet to play with the new BlackBerrys. But there are serious business and technology issues that should make you think twice before you buy one of the new ones unveiled today. From an operating system destined for irrelevancy to the continued lack of worthy applications, this latest line of smartphones from RIM may be dead on arrival. If you need to change phones, and your company isn't forcing you to use a BlackBerry, you're better off moving over to the iPhone or an Android smartphone.

Sounds harsh, but I'm not the only one down on the BlackBerry. According to a survey taken by NPD Connected Intelligence, roughly a third of those asked about their next smartphone said it would be either an Android handset or iPhone. A paltry 8 percent said they were looking for a BlackBerry. It's hard to say that cost is the issue. While pricing isn't available, they will likely be priced competitively with the iPhone and other high-end smartphones.

The latest BlackBerrys run on the newest version of its operating system, BlackBerry OS 7. While an improvement over past operating systems, in reality it represents only a minor update over OS 6, found in the original Torch that debuted a year ago. It was originally known as OS 6.1, but was renamed to 7 because the company claimed the update was so big. A more cynical person would suggest RIM was engaging in overly enthusiastic marketing to better sell its devices.

Big update or not, it's not going to be around for very long. RIM said it is moving to its next-generation operating system, called QNX, next year. The software already powers the PlayBook tablet, which despite getting panned by reviewers, worked smoothly as an operating system.

If customers buy a BlackBerry now, they're left with an operating system that will be out of date halfway through their two-year contract. Nokia is dealing with the same dilemma as it manages its transition to Microsoft's Windows Phone operating system. In the meantime, the company is positioning its older Symbian platform as a mass-market smartphone phone.

There are other issues. Despite many attempts, RIM still hasn't answered the increasing demand for applications. The iPhone and Android devices can do more than the basics of phone calls and Internet browsing, and it's something that RIM continues to neglect. BlackBerry offers only a fraction of the number of applications available to iOS and Android users.

Last month, RIM said its App World had hit 1 billion application downloads, a significant milestone for the company but still behind its rivals. Apple earlier in the month said it had passed the 15 billion download mark, while Google said in May that more than 4.5 billion applications were downloaded through Android Market.

To be fair, RIM has hopefully addressed the hardware issues that have long plagued the devices, giving the new line a boost in specifications such as application processing speed and memory. RIM officials promised much of the same with the original underpowered Torch, but they appear to have delivered with the newest wave of SnapDragon-powered phones.

William Stofega, an analyst at IDC, said that the improved design of the Bold Touch will likely keep some of the BlackBerry faithful in the fold.

"It definitely fills a void in the portfolio that they didn't have with the Storm," he said.

And BlackBerry remains a good platform if all you're interested in is access to e-mail and a higher level of security. It will remain a fixture in government agencies and companies with sensitive security requirements.

But if you're looking to do more than simple e-mail and Web browsing, BlackBerry may not be your best bet.