While the saga surrounding the extradition of internet mogul Kim Dotcom to the United States is far from over, one part of the drama is due to get underway tonight NZ time as negotiations start over the millions of gigabytes of Megaupload's data frozen by the FBI.

The negotiations between Dotcom and six other associates are due to begin in a Virginia District Court as to the future of the 25 petabytes of data which is being held by hosting firm Carpathia.

Megaupload, digital rights groups and Carpathia have called for it to be released to users.

However, film studios have opposed the release, saying pirated material is likely to be found in the giant cache of data.

Megaupload was the world's biggest file-sharing website and claimed it was responsible for 4 per cent of internet traffic. Dotcom and his co-accused are wanted in the United States on charges of internet piracy, copyright infringement and wire fraud.

Megaupload attorney Ira Rothken said the company was working to stop the data from being erased.

"We're cautiously optimistic at this point that because the United States, as well as Megaupload, should have a common desire to protect consumers, that this type of agreement will get done."

Megaupload was shut down on January 19 in a series of raids motivated by what the US government said was evidence of massive copyright infringement by the firm.

The US authorities froze Megaupload's assets, leaving it unable to pay for the upkeep of the data users had uploaded to its farm of more than 1000 servers.

An extradition hearing set down for August will look at whether Dotcom had committed an extraditable offence and whether that would violate New Zealand law.  

United States district court judge Liam O'Grady has been reported as saying that he did not know if there would ever be a trial after being told MegaUpload had never been formally served with criminal papers by the US.

- © Fairfax NZ News