Last month, the Australia New Zealand Internet Awards, which "celebrate the achievements of organisations, businesses and individuals that have made significant contributions to the development and use of the Internet in Australia and New Zealand," gave an award to Mega, the file-storage service launched by Kim Dotcom.

The award was in the Privacy category, which this year was separated by the judges from the award for Security (which went to a slightly unnerving bit of bundled parental spyware created for Vodafone in Australia). Given the striking revelations about internet surveillance this year, Mega, which offers its users end-to-end encryption, was not a very surprising winner.

And then, last week, it was reported that a pirated e-book of Eleanor Catton's Booker Prize-winning The Luminaries had been detected on Mega. Fury ensued. The Publishers Association fired out a press release headed Award wining author ripped off by Kiwi company and the New Zealand Society of Authors also lamented the news.

Mega identified the two instances of the infringing e-book and, clearly mindful of the furore, removed them immediately, without waiting for a formal takedown notice as it normally would. That didn't greatly mollify the critics. It seemed a classic clash of two public goods -- privacy and author copyright -- with a spicy side of cultural nationalism.

I've previously been strongly critical of Mega's proposed Mega Box music service (which may well have been abandoned, such has been the silence on the subject), but the core Mega service is as prone to any other online file-locker to its users uploading content without the right to do so. More so, given its use of encryption. If you're going to let these useful businesses operate at all, you do so with that risk.

The idea of making internet sevices summarily liable for what their users send and receive might sound attractive to publishers, but that amounts to such companies surveilling and second-guessing their users. New Zealand rejected such an approach back in 1997, when Trevor Rogers' absurd Technology and Crimes Reform Bill failed to even make it out of select committee stage. Speaking to the bill, Information Technology minister Maurice Williamson said:

"while the supply of objectionable material such as child pornography over the Internet is abhorrent, this Bill would not have provided effective control or prevention. "If anything, the bill had the potential to produce confusing judgements, make enforcement difficutl and in hindsight would be viewed as a quick fix that had no sustainability."

What such companies can very much be expected to do is respond swiftly and in good faith to takedown notices, which Mega seems to have been doing. The prospect of a more sophisticated system of automatic takedowns like that offered by YouTube to film and music rights owners seems remote. YouTube-style Content ID technology is impossible in such a setting. And, as any Flying Nun act who've had their video blocked in error by Warner Music will testify, these things don't always work as intended.

That such a newsworthy book is being pirated is pretty much a given. Anyone who really wants to get Catton's book without paying for it will soon enough find multiple copies indexed on BitTorrent sites.

But here's the thing: this story was "broken" for local media by Cameron Slater on his Whaleoil blog, as part of a long-running campaign of enmity towards Dotcom on Slater's part. (See also: Slater's adolescent feuding with journalist David Fisher, who has written extensively about the circumstances of Dotcom's arrest at the behest of the US government).

Slater blared thus:

To have Kim Dotcom, a cheerleader for New Zealand and his 'New Zealand' company MEGA essentially provide a platform for people to distribute a fellow Kiwi's hard work – and a Booker Prize winning one at that, well … it's not on. It is a clear example of why he can't just sit there and claim no responsibility for any of it. His MEGA service clearly aids and abets the stealing of Copyrighted [sic]works, thereby denying the artists and publishers of their well earned income.

Slater, who has previously lifted images for his blog from the New Zealand Listener and responded with abuse and taunting when asked to desist, seems an unlikely friend to rights owners.

But according to Mega CEO Vikram Kumar, the infringing e-book file has only ever been accessed by the same customer who uploaded it. That customer registered with a throwaway email address.

Kumar says Mega was able to identify the file URL from the Whaleoil blog post, even though it was partially obscured. But where did Whaleoil get it from?

As I understand the Mega service, it's not possible to discover such a URL unless you have created it -- that is, if you are the uploader -- or it has been advertised to you by the uploader, who wishes to share the file. So there's the two ways that Slater could have got the link on which he based his story.

It does all start to look like a Mega strange business.