I have been following this since it started with eyebrows rising at every new development.
That KDC should be able to sue the government and the police is the right decision. However, the real bad guys here are the USA / FBI / MIAFIAA who bullied the NZ Government into acting in this unjust manner. The whole thing was a shake-down, plain and simple.
Shame on the NZ government for allowing themselves to be bullied - all they can see is the Free-Trade-Agreement carrot being dangled, always out of reach... "You want a FTA? Then you must act on this terrorist who *allegedly* infringed on copyright". This started with the Three-Strikes file sharing law.
Shame on you USA, you have manipulated/bribed another sovereign state into doing your dirty work and now they cop the consequences. Nothing new there I suppose.
As much a "bit of a douche" KDC is - I admire him for giving everyone a shake-up, he is showing businesses that it's a brave new world of business models, not the 1950's heyday of *AA.