Summary:

A fundamental question around content in the Web 2.0 world is: Who should be in charge of policing online copyright? So far, two federal jud…

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A fundamental question around content in the Web 2.0 world is: Who should be in charge of policing online copyright? So far, two federal judges have held that the copyright owners are responsible for that task. No appeals court has yet weighed in on this issue. Today, Viacom (NYSE: VIA) filed a 72-page appeal brief [PDF] asking an appeals court to overturn its defeat in a $1 billion copyright infringement lawsuit against YouTube (NSDQ: GOOG).

The appeal argues forcefully that it’s YouTube that should be held responsible for infringing videos on its site-even if Viacom didn’t identify the particular web-site addresses of the copyrighted videos. Viacom lawyers say that YouTube’s founders and employees had plenty of other evidence at hand, and could have taken more action to protect Viacom’s copyrights.

In June, U.S. Judge Louis Stanton issued a 30-page ruling [PDF] that handed a total victory to YouTube. The ruling argued that general knowledge of infringement alone-no matter how bad the infringement was-doesn’t make YouTube responsible for it. YouTube was squarely protected by the “safe harbor” offered by the Digital Millennium Copyright Act, he found. What Viacom needed to do was send specific URLs that identify copyright-infringing material, Judge Stanton ruled. Whenever Viacom (or anyone else) issued a proper takedown notice, YouTube complied, the ruling pointed out.

Viacom is something of an outlier among content companies at this point. While this litigation has dragged on, YouTube has struck many deals with content companies that involve leaving up on its site copyrighted videos posted by users, and then splitting the ad revenue with the copyright owner. In short, YouTube and those content companies have discovered a profitable way to avoid the kind of all-out copyright fight that Viacom is now pursuing.

Indeed, Viacom, which originally filed this lawsuit in 2006, is only asking for damages through 2008. That means it is tacitly saying that it doesn’t have a problem with the way the YouTube of today-which has more sophisticated video fingerprinting software-operates.

Viacom’s appeal practically oozes with frustration at how much evidence the company says Judge Stanton ignored. YouTube was desperate to maintain its “illicitly acquired audience,” Viacom’s lawyers say. They go on to claim that YouTube knew its best stuff was mostly copyrighted; in the brief, Viacom lawyers quote YouTube’s lead product manager as saying that “probably 75-80% of our views come from copyrighted material.”

Viacom also claims that YouTube simply waited for takedown notices rather than employing other, more proactive copyright-enforcement options. A community “flagging” system for copyrighted videos was tried but quickly discarded, the lawyer say; and the company wouldn’t install the digital-fingerprinting software that the entertainment industry desired. (YouTube today has its own fingerprinting software that scans for infringing videos.)

If Viacom were to get its loss overturned and ultimately win, the stakes for YouTube would still go beyond the $1 billion damage demand. First of all, other copyright holders wouldn’t hesitate to line up with damage demands against the world’s biggest video website; and second, it would suggest that future video services would have to create a copyright policing regime that’s tighter than YouTube’s.

YouTube’s response to Viacom’s appeal is expected sometime in the next several months.

The question is how strongly Viacom’s arguments-that YouTube’s founders’ motives weren’t pure, and that they could have done more-will resonate with the appellate court. They’ll be held up against YouTube’s argument-the same one that Google consistently makes today-that it simply can’t address copyright infringement properly without the cooperation of copyright owners. Not only was Viacom reluctant to send specific web-site addresses-even after litigation began, Viacom’s own lawyers appear to have had some difficulty determining which YouTube clips were put up by a Viacom affiliate or employee and which were pirated.

Fundamentally, this lawsuit is still about who should have to police copyright on the Internet. Viacom doesn’t want to be burdened with that job. The WSJ reported in 2007 that Viacom was paying more than $100,000 a month to a service provider to hunt down its clips and send take-down notices to YouTube.

A case raising very similar issues to the YouTube case, Universal Music Group v. Veoh, is on appeal in California; that appeal is further along and will likely be argued before YouTube’s. 

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