Megaupload's Kim Dotcom is a victim of Hollywood-induced persecution, with significant aids coming from the United States and New Zealand governments, the U.S defence lawyer of the Internet tycoon said earlier this week.

In an interview with London-based The Inquirer, Ira Rothken said on Monday that Mr Dotcom's legal woes were reflective of the swift actions unleashed by powerful Hollywood figures to arrest the advances of innovative tech entrepreneurs like his client.

Mr Dotcom was arrested on January 2012 in his New Zealand mansion on allegations from the U.S Department of Justice that his online storage site, Megaupload.com, had facilitated the illegal exchanges of copyrighted digital contents.

According to the U.S. Federal Bureau of Investigation (FBI), some $US500 million of losses were incurred by American makers of movies, music and softwares due directly to the operation of Megaupload, which has been closed down shortly after Mr Dotcom was taken into custody.

He is currently on bail and is preparing for his defence of the extradition case that Washington has lodged against him in a New Zealand court.

Mr Rothken told The Inquirer that the case against his client is doomed to fail, pointing to earlier decisions from an NZ court which highlighted the irregularities that attended the Kim Dotcom affair since day one - from the defective warrants used in the raid to the personal materials that authorities had seized from Mr Dotcom's residence.

Even if his client will end up facing the U.S. justice system, Mr Rothken said Washington's case will not prosper because "there is no criminal statute for secondary copyright infringement in the U.S."

"This is experimental criminal prosecution and in an effort to beat us and overcome what we believe is a lack of merit on the core claims," he added.

Mr Rothken further explained that the world is actually witnessing the conspiracy to take the legitimate business of his client, which he described as the "Megaupload cloud storage site."

He lamented that "the U.S., with the assistance of New Zealand, has implemented draconian procedures," to kill a completely legitimate online business operation.

The repercussions from these alarming actions, coming from powerful governments and business interests, could be grave, the American lawyer cautioned.

"(The Megaupload case) demonstrates the tension between the Hollywood copyright militia and the policy issues of copyright balance that are needed for internet innovation," he noted, adding in the event that Mr Dotcom loses the case, tech innovation will hurt the most.

"Ruling in favour of Hollywood will reduce the availability of cloud storage sites and cause problems for small businesses and individuals who are in the greatest need for competition in the marketplace," The Inquirer quoted Mr Rothken as saying.

The interview was published days before a U.S. court ruled on Wednesday that the case against Mr Dotcom and his Megaupload cohorts can proceed.

According to Reuters, East Virginia District Court Judge Liam O'Grady dumped an earlier plea by Mr Rothken to quash the proceedings, arguing that a procedural error had occurred when Megaupload was indicted before a U.S. court.

The defence lawyer of Mr Dotcom reminded the court that Megaupload was based in Hong Kong and had no known U.S. address.

Judge O'Grady, however, said that he saw no such error pointed out by Mr Rothken though the court has allowed that some loopholes have attended the case files by U.S. government.

The court cited that unnecessary delays could be used as legal basis for denial of due process.