Viacom Slaps YouTube, Google with Lawsuit

Perhaps it was inevitable. On March 13, Viacom sued YouTube and Google for “massive intentional copyright infringement.” The owner of the Daily Show, Comedy Central and other popular entertainment properties is seeking $1 billion in damages and an end to the infringing behavior. The suit challenges both the wisdom of Google’s decision to purchase YouTube and the viability of YouTube’s business model.

The suit was filed in the U.S. District Court for the southern district of New York. The complaint runs to 27 pages in a PDF document. If you’d rather not read the entire filing, Viacom issued a press release to cover the most egregious violations. The charges center around 160,000 clips of Viacom’s programming that have been available on YouTube without Viacom’s consent. Viacom maintains that these videos have been viewed more than 1.5 billion times.

That represents a serious loss of revenue for Viacom; on top of that, Google and YouTube are profiting from these videos because of the ads running on YouTube (I’ll provide more details on that in a bit). Indeed, Viacom maintains that their business model is based on building traffic and selling advertising off of unlicensed content,” which is “clearly illegal and is in obvious conflict with copyright laws.”

To judge from the rest of the press release, Viacom feels as if it was forced to go to court. It has been negotiating with Google and YouTube for months in an attempt to come to a satisfactory licensing agreement. In February it demanded that YouTube take down 100,000 videos that it believed infringed its copyrights, and YouTube agreed to do so. But since then Viacom has found many more infringing videos; it has also discovered that many YouTube users will re-post infringing videos after they are removed, making only minor changes, sometimes within hours of the original video being removed.

Does Viacom’s case have merit? The question is more than academic, since Viacom is hardly the only content producer whose copyrighted material is showing up on YouTube. Some have wondered if this could lead to a huge class action lawsuit; others contend that it’s unlikely other entertainment companies will start suing the wildly popular video hosting web site. While I am definitely not a lawyer, I’ll do my best to walk you through the various points of the complaint, as well as the background leading up to it.

When asked for a statement, Google sounded pretty confident that it would prevail. Company spokesman Steve Langdon said that “We have not received the lawsuit but are confident that YouTube has respected the legal rights of copyright holders and believe the courts will agree. YouTube is great for users and offers real opportunities to rights holders: the opportunity to interact with users; to promote their content to a young and growing audience; and to tap into the online advertising market. We will certainly not let this suit become a distraction to the continuing growth and strong performance of YouTube and its ability to attract more users, more traffic and build a stronger community.”

I’ve already mentioned Viacom’s demand that YouTube take down 100,000 video clips in February. Even at that point, Viacom was attempting to negotiate some sort of licensing agreement with Google. Google and YouTube have already succeeded in negotiating such agreements with Warner Music Group, CBS, Universal Music Group, Sony BMG Music Entertainment, and most recently, the BBC. Still, it’s widely known that Google held back $220 million from its purchase of YouTube in an escrow account specifically to deal with any lawsuits that may come up.

Another point worth keeping in mind while considering this lawsuit is that YouTube is not the only game in town for Viacom when it comes to online video. In late February the company struck a deal with online video start-up Joost to license its programming content. Joost, created by the founders of Skype and Kazaa, uses a peer-to-peer model, but aims to show high-quality video in a copyright-friendly format. While Viacom’s licensing deal with Joost doesn’t include some of Viacom’s most popular programs, at least at first, those may eventually be involved – and their value is likely to be diluted if anyone and everyone can watch those same videos on YouTube.

But getting back to Viacom’s lawsuit, the big question is whether YouTube has been acting in a legal manner to protect copyright. One assumes that they’ll use the defense that they’re a common carrier, and therefore not responsible for how their community uses their service. That particular defense isn’t always successful (the various lawsuits concerning peer-to-peer networks come to mind). But are they a common carrier?

Steve Bryant of Googlewatch does an excellent job of covering the major points of the Viacom lawsuit. There are a number of points in the lawsuit that argue against YouTube being considered a common carrier. First, YouTube doesn’t simply provide “storage space, conduits, or other facilities” to its users, according to Viacom; it copies the videos to its servers, adds thumbnails, and indexes the metadata. That’s certainly more than your average web host would do, and Viacom argues that it is enough to implicate YouTube as the party who “commits the infringing duplication, public performance, and public display” of the copyrighted material.

Another key point is that YouTube does proactively police its site when it comes to certain videos. It usually won’t remove copyrighted material unless informed by the copyright holders, but it will go after porn and take it down without anyone asking it to do so. This shows that the company is able to apply some standards on its own. Google has a potential counterargument: pornography may be easier to police than copyrighted material because it is easier to detect through filters on keywords and/or skin tones.

Something that could really get YouTube into trouble is the fact that it offers protections to companies that sign licensing agreements, but apparently won’t extend those same protections to other copyright holders. “By limiting copyright protection to business partners who have agreed to grant it licenses, YouTube attempts to coerce copyright owners to grant it a license in order to receive the protection to which they are entitled under copyright laws.”

So what happens if YouTube really is responsible for the videos on its site? Well, Viacom insists that most of the company’s value is from the infringing videos; that YouTube knows about the works and the fact that they are infringing (which may be debatable); and that YouTube is profiting from the infringing works because “YouTube derives advertising revenue directly attributable to the infringing works, because advertisers pay YouTube to display banner advertising to users whenever they log on to, search for, and view infringing videos.” In short, according to Viacom, YouTube is committing theft and illegally profiting from Viacom’s work. It remains for Viacom to prove this in a court of law.

Google and YouTube seem certain that they are protected by the Digital Millennium Copyright Act (DMCA), because they remove infringing materials as soon as they are informed of them. Viacom is arguing that YouTube is not entitled to that protection. But there’s more going on here than what is in the complaint.

As a number of analysts have observed, the lawsuit will test what kind of company and business model is entitled to DMCA protection. That has implications for the future of copyright online, and for many other video sharing sites that are not as popular or well-known as YouTube. Some have even suggested that now is the time for the smaller sites to step into the fray and start making deals with content producers to allow licensed videos to show on their web sites.

One could argue that Google is in the wrong for not being more proactive about protecting copyrighted works, especially when it has promised to do so. Before it was purchased by Google, YouTube was planning a deal with Audible Magic, a company that makes software that can detect copyright infringing material by comparing it to the contents of a database. It seemed to work well, at least in demos. Why did Google insist on trying to go ahead with its own software? Could it not have used Audible Magic’s software, at least as a stopgap to appease copyright holders?

These issues will have to be dealt with. But I’m not convinced that Viacom filed this complaint with the intent of taking the lawsuit to court. I think it is fishing for better terms in its licensing negotiations with Google and YouTube (yes, I know, that’s hardly an original thought).  I also think it’s not including something fairly elemental in the math of its complaint.

There have been a number of studies on the effect of illegal music downloads on the sale of music. The music industry has screamed that the illegal sharing is costing them money, but there have been few if any studies that support this. In fact, a study whose findings were published as recently as last month () showed no noticeable effect on the sales of music. So why is Viacom so sure that it is losing out when its copyrighted videos appear on YouTube?

Indeed, it could even be argued that YouTube is helping to build Viacom’s audience. The kinds of people who use YouTube are young and tech savvy, exactly the target market that Viacom is trying to reach. Just because they saw something on YouTube doesn’t mean they won’t seek the same thing out elsewhere; quite the opposite. Since YouTube’s videos are limited to 10 minutes in length, and TV shows run longer, it seems just as likely that a YouTube viewer will later look for a full dose of his or her favorite “appetizer” from YouTube by going straight to the source – Viacom.

Certainly it’s wrong to violate copyright. But Viacom, YouTube, and Google may yet pull something right out of this. Let’s just hope they eventually negotiate an agreement (and a business model) that we all can live with.

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