Except in this case, the content is created in America by Americans, and the underlying property rights are widely recognized internationally. So yes, if none of those things were true your example might not be a strawman, but as it stands...
They provided a file hosting service, like Dropbox or Google Drive or Skydrive.
Judge Mooner, I'm pretty sure, doesn't own rights to Sinead O'Connor's music and yet DOJ is not currently suing YouTube because of http://www.youtube.com/watch?v=t77DexLMjOU
The rules for determining if a file sharing services like YouTube or DropBox or Megaupload violates copyright are not as clear as you seem to imply which is why e.g. Viacom lost it's case against YouTube (http://en.wikipedia.org/wiki/Viacom_International_Inc._v._Yo...)
It's far from clear that Megaupload violated U.S. law, let alone New Zealand's.
I'm continuously amazed at how the Internet defends a certified scumbag who profited hundreds of millions of dollars off other people's work. Everyone does like free stuff I suppose.
If I understand you right, then the issues is not with the service that MegaUpload offered, but with the way that they marketed their services and encouraged new users.
And marketing is important. Where I live (Sweden), we have quite strong laws regulating marketing activities. For one, marketing directed at kids (like games) are strictly unlawful, as it is deemed to have a negative impact on society. Same for advertisement regarding alcohol or tobacco. By the early 2000, they considered if they could enforce the same laws against international cable networks that sold and broadcasted inside Sweden, but decided that such enforcing of Swedish law could not be enforced outside the national border.
They got their hands dirty and actively participated in paying to "seed" their own service with popular copyright-protected movies, TV shows, etc.
IIRC they also paid for data center services hosted within the U.S. to ensure Americans had quick access to those services (including the deliberately-seeded IP-regime media files).
You'll note that the Feds aren't going after Google Drive, Youtube, Dropbox, iCloud, whatever Microsoft's cloud offering is called, etc., and yet those services are just as capable of uploading media and hosting it publically.
I am continuously surprised by the number of internet users who are typically opposed to his type of behavior, but support his immorality because he helps them get free things.
What a terrible argument. I have to support government thuggery, or else I'm a freeloading terrorist? I've never had a MU account, and I definitely don't look to Kim Dotcom's actions for moral guidance; but, I reckon I support the notion that the DOJ ought to follow the law. If that means that Dotcom gets away with something, well then so be it. Fix the law, don't just ignore it or make it up as you go.
Are you talking about youtube here?
The media companies themselves do the patrolling and their actions, through a special dashboard YouTube provides them, result in the widespread takedowns you see. They can do their own flagging and also review potential matches by a ContentID-type system that checks uploads against signatures of files the media companies upload to claim as theirs.
They do what?