Viacom sues 'GooTube' for $1 billion

Parent of MTV, Comedy Central hits Google with first major copyright infringement suit. Will other media firms follow?

By Paul R. La Monica, CNNMoney.com editor at large

NEW YORK (CNNMoney.com) -- Viacom sued Google and its online video subsidiary YouTube for $1 billion Tuesday, the first big lawsuit against the online video site and its parent for copyright infringement.

Experts predict more lawsuits to come.

youtube_hurley_chen.03.jpg
YouTube co-founders Steven Chen and Chad Hurley have to deal with their first major lawsuit for copyright infringement. Viacom is suing YouTube and its parent company Google for more than $1 billion.
google_chmn_ceo_dr_eric_schmidt.03.jpg
Google CEO Eric Schmidt defended his firm's purchase of YouTube and said it was eager to partner with media firms at two investment conferences earlier this month.
How do you feel about Viacom's $1 billion lawsuit against YouTube?
  • Media companies need to protect their rights
  • YouTube and media companies should negotiate a deal
  • YouTube shouldn't be liable at all
  • Not sure

In the lawsuit filed Tuesday in the U.S. District Court for the Southern District of New York, Viacom (Charts), owner of MTV and Comedy Central, said that "almost 160,000 unauthorized clips of Viacom's programming have been available on YouTube and that these clips had been viewed more than 1.5 billion times."

In addition to damages, Viacom said it wants an injunction prohibiting Google and YouTube from further copyright infringement.

Google said that it and YouTube had yet to see the lawsuit but added they feel "confident that YouTube has respected the legal rights of copyright holders and believe the courts will agree."

Viacom first demanded that YouTube take down videos from shows on Viacom-owned networks that were posted on the site without Viacom's consent. Google (Charts) bought YouTube for nearly $1.7 billion last year.

Viacom is the first major media firm to sue Google and YouTube for copyright infringement. Other media companies, including GE (Charts)-owned NBC Universal, CBS (Charts), and Universal Music Group, have decided to partner with YouTube, the world's most popular online video site. But Viacom said that it decided to sue Google and YouTube "after a great deal of unproductive negotiation."

"Obviously, they couldn't come to an agreement. Viacom must have felt its back was against the wall and had to pull the trigger and file a lawsuit," said Barry Cohen, partner in the intellectual property practice with Thorp Reed & Armstrong LLP, a law firm based in Pittsburgh.

While other media firms, notably CBS, say they see promotional value in having snippets of their programs posted on YouTube, Viacom has led the charge against YouTube since it feels entitled to advertising revenues tied to viewing of its programming. YouTube typically serves more than 100 million video streams a day.

"Their business model, which is based on building traffic and selling advertising off of unlicensed content, is clearly illegal and is in obvious conflict with copyright laws," Viacom said in a statement Tuesday.

Viacom CEO Philippe Dauman told investors at an industry conference last week that traffic to Viacom-owned sites has surged since the company asked YouTube to remove its content.

Industry experts predict that other media companies might also decide to sue Google and YouTube.

"Every copyright holder has to be seen to defend their rights or otherwise they risk surrendering them altogether," said Brian Wieser, senior vice president at Magna Global, a media buying firm based in New York. "So even where there are minor infractions, if you are not defending a trademark or other copyrighted content, you risk losing those rights. It's too important."

Since Google currently has more than $11 billion in cash on its balance sheet, that also makes it a bigger target for media companies.

"If Google and YouTube don't demonstrate that (they're) taking concerns that media companies like Viacom have by implementing filtering technology and being willing to negotiate fair pricing for distribution and ad revenue sharing, then other media companies will pile on with lawsuits," said James McQuivey, principal analyst for television and media technology with Forrester Research.

One lawyer said the case hinges on who should be responsible for keeping watch over copyrighted content on the Web. Is it the responsibility of sites like Google and YouTube to proactively remove pirated videos or should the onus be on media companies to ask online video sites to take down illegal videos after they've been posted.

"The real question is going to be who needs to do the policing on the Internet. That's what this is a battle of," said Mark Litvack, a partner in the intellectual property practice of Los Angeles-based law firm Manatt, Phelps & Phillips "Do I think this is the last lawsuit? Probably not. Not until the rules are firmly set."

But intellectual property lawyer Cohen said he wasn't sure if other media companies would be eager to sue Google and YouTube, which some jokingly refer to as "GooTube." He pointed out that since several media firms have already partnered with Google and YouTube, they may find that it is wiser to embrace "GooTube" rather than take an antagonistic stance against the online video kingpin.

"You're not going to stop technology. You're not going to stop advancement," Cohen said. "Everyone will keep an intense eye on this case, but you still have to do business with Google and YouTube since they are the 800 pound gorilla."

YouTube's massive reach, particularly with younger consumers, presents a unique problem for media firms. Even though media giants obviously would like to receive revenue from videos posted on video-sharing sites, such as YouTube, getting a video seen on YouTube can lead to increased exposure.

For example, many credit YouTube with the recent resurgence in popularity of NBC's "Saturday Night Live" since the SNL skit "Lazy Sunday" from 2005 became a smash hit on YouTube after it was posted there.

"Marketing people love YouTube and legal people hate it and inside media companies marketing people are actively working with them while legal companies are actively thinking of suing," said Magna's Wieser.

Still, the big media companies are also investing heavily in their own online video sites and are partnering with other video upstarts. Viacom, for example, has purchased iFilm and Atom Entertainment in the past two years and earlier this month announced a deal to allow YouTube competitor Joost to host videos from Viacom-owned networks.

To that end, Forrester's McQuivey said that the lawsuit against Google and YouTube could benefit other smaller online video firms. But it was a shame that Viacom and Google couldn't agree on a deal without litigation, he added.

"Now everybody is going to suffer. We are going to tie up the exciting revolution of consumer video in the courts," he said.

Google said, however, that it did not expect the lawsuit to affect YouTube's business. "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," the company said in its statement.

One lawyer suggested that Viacom's suit is just a tough negotiating tactic and that ultimately, Viacom, Google and YouTube would resolve their issues out of court.

"Part of Viacom's plan is to send a message that content is extraordinarily valuable. You can't simply take it for free," said David Gurwin, chair of the entertainment and media practice at Buchanan Ingersoll & Rooney, a law firm based in Pittsburgh.

"But both sides have things to gain and things to lose out of a lawsuit. It's always risky and at the very least it would be time-consuming and expensive. My guess is that they probably will settle out of court," Gurwin added.

Google stock sank 2 percent on Nasdaq while Viacom gained about 0.6 percent on the New York Stock Exchange, both in afternoon trading.

Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.