Article

Viacom Hits YouTube With $1B Infringement Suit

March 14, 2007

By Sara Stefanini, published by IP Law 360

Tuesday, March 13, 2007 --- Viacom International Inc. on Tuesday hit booming online video forum YouTube Inc. and Google Inc. with a $1 billion lawsuit for allegedly trampling hundreds of thousands of copyrights, becoming the first to take the highly anticipated action.

In the lawsuit, filed in the U.S. District Court for the Southern District of New York, Entertainment giant Viacom, along with a group of its affiliates, denounced YouTube’s system of shifting the burden of searching and removing copyrighted material onto the intellectual property holder instead of policing its own Web site.

YouTube has posted close to 160,000 clips from popular Viacom-owned shows and movies, including “The Daily Show with Jon Stewart,” “The Colbert Report,” “An Inconvenient Truth,” “South Park” and “Laguna Beach,” since February, according to Viacom. Those clips have been watched about 1.5 billion times, the suit alleges.

“YouTube has harnessed technology to willfully infringe copyrights on a huge scale, depriving writers, composers and performers of the rewards they are owed for effort and innovation, reducing the incentives of America’s creative industries, and is profiting from the illegal conduct of others as well,” Viacom said in its complaint.

Viacom filed the lawsuit after months of negotiating, a company spokesman said. In February, YouTube agreed to take down 10,000 Viacom-owned video clips.

The big question in the case is who should be obligated to police what goes up on YouTube, said Mitchell Weinstein, head of the IP practice at Levenfeld Pearlstein LLC.

“Is YouTube/Google obligated to review every clip that is loaded onto the site for possible copyrighted content, or do the copyright owners (such as Viacom) have to identify each and every clip or other piece of copyrighted material and ask that it be taken down,” Weinstein said. “Frankly, there is just so much content that is loaded on YouTube, that it would be virtually impossible without the help of software to identify and remove any copyrighted content.”

The lawsuit mirrors the fight waged just a few years ago over music copyrights, which broke out when Napster.com started providing free MP3downloads online, said Parker Bagley, an IP partner at Milbank, Tweed, Hadley & McCloy LLP. Lawsuits eventually shut the free music market down, forcing it to charge money for the downloads.

“I think it’s been inevitable that there would be a case like this,” Bagley said. “It’s been well known that a lot of content providers have been taking issue with what YouTube is doing. It’s very analogous to Napster. It seems very clear that there has been copyright infringement.”

As with the Napster case, the lawsuit could hurt YouTube’s future prospects, said Julie Katz, a principal at Walsh & Katz Ltd.

“In the long run, the outcome could seriously impact the YouTube movement by either shutting down this form of public communication and exploration, or widening the opportunities for others to use the idea and compete with YouTube,” Katz said.

Viacom is not the first company to have confronted YouTube about its purported copyright infringements, but is the only one to have taken the issue to court, he said.

Other content providers, such as Universal Music Group and British Broadcasting Corp., have negotiated settlements and licensing agreements with YouTube and Google, which bought the video site in October for $1.65 billion.

Viacom, however, has more at stake than the more established television broadcasters, Bagley said.

The company owns youth-targeted stations and companies such as MTV, Country Music Television, Comedy Central, Black Entertainment Television and Paramount Pictures Corp., making its products extremely attractive to YouTube’s young audience, he said.

Another reason is that unlike Viacom, other content providers, like Time Warner Inc. and News Corp., have interests on both ends of the dispute and would benefit from rulings in either direction, noted James Nguyen, an IP partner in Foley & Lardner LLP’s entertainment & media industry team.

Time Warner, for instance, owns a movie studio and television stations, but also cable companies and Internet services, he said. News Corp., likewise, owns the Fox movie studio and television station, as well as Fox Interactive Media, which owns online community MySpace.com.

Tuesday's lawsuit could mean that new complaints will soon follow, Katz said.

Since launching a “test case” is extremely expensive, many smaller companies wait for a bigger company to open the doors.

Many of these companies have likely been waiting to file lawsuits, in part to see who is actually benefiting from YouTube’s postings, the Web site or the copyright owner, and in part to let the damages pile up, said Manny Pokotilow, a managing partner at Caesar Rivise Bernstein Cohen & Pokotilow Ltd.

The suit could also affect the sale of new media Web sites like YouTube, driving their prices down, Bagley said, noting that Google’s stock slipped immediately after Viacom announced the suit on Tuesday.

Although YouTube claims to give content providers the freedom to search for and take down any copyrighted material, the company makes it extremely difficult for providers to actually do it, according to Viacom.

While a copyright owner may find one infringed video, chances are that many more copies will go up as soon as that one is removed, it said. Plus, YouTube makes it harder to actually search its library and find infringed material by letting users post hidden videos and share them with friends, the complaint said.

Viacom also accused YouTube of deliberately failing to apply copyright protection measures “in order to coerce rights holders to grant it licenses on favorable terms.”

“YouTube has the right and ability to control the massive infringement on its site,” the complaint said.

By posting television shows immediately after they air and entire movies before they hit video stores, YouTube is harming Viacom’s profits, the lawsuit claims.

A Google spokesman said the company had not yet seen the complaint, but was certain that YouTube has not infringed on the rights of copyright owners.

"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,” the spokesman said. “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."

Viacom was joined in the suit by affiliates Comedy Partners, Country Music Television Inc., Paramount Pictures Corp. and Black Entertainment Television LLC.

They are seeking $1 billion in damages, along with a declaration that YouTube is willfully infringing on its copyrights and a permanent injunction against YouTube and Google.

The companies are represented in the case by attorneys from Jenner & Block LLP.

The case is Viacom International Inc. et al. v. YouTube Inc. LLC and Google Inc. in the U.S. District Court for the Southern District of New York. The case number was not immediately available.

--Additional reporting by Ben James, Erik Larson and Amanda Ernst

 

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