Viacom sues Google for $1 Billion

[weldon]

I highly doubt Viacom will win this lawsuit considering youtube isn't actually selling the material that is posted up on their site.

Unfortunately for YouTube, that isn't a defense. It doesn't matter if they sell content, just as it doesn't matter if they have advertising.

@IJ Reilly - I've been out of town, but I see you found the lawsuit. Again, don't be distracted by the mentions of advertising revenue. What's really important is that they have infringing content on their site. The ad revenue goes to "direct benefit" which is one of several ways in which YouTube can be disqualified from the safe harbor provisions in the DMCA. I'm pretty sure they will be disqualified because the "service provider" definitions that mark out the boundaries of the safe harbor in the first place aren't broad enough to include a YouTube-like service. They're also going to get nailed for the editorial review of content on the site which shows that they are aware of what users are doing. I also suspect that they'll get reprimanded for not making the automated tools available under a RAND license regardless of content licensing partnerships.

All the language about "profiting handsomely" is meant to persuade that Viacom is being abused by a big, rich Internet giant that built wealth on the backs of legitimate companies like Viacom. At best, it is one data point that the courts could consider in examining the safe harbor provisions, but I don't think it will be the only thing, or even the main thing, that disqualifies YouTube.

 

[IJ Reilly]

@IJ Reilly - I've been out of town, but I see you found the lawsuit. Again, don't be distracted by the mentions of advertising revenue.

No thanks to you. And you're still a long way from making a convincing argument that the references to advertising revenue in the suit are a "distraction."

Anyway, a good commentary on this lawsuit appeared in the LA Times over the weekend. In part:

Viacom vs. 800-pound Google

Media companies sued the Napsters of the Web out of business, but the Internet search giant is a different beast.

By Fred Vogelstein
FRED VOGELSTEIN is a contributing editor at Wired magazine.

I LOVED NAPSTER. I listened to music more because of it. I bought more music because of it. And I count myself among the many who would have gladly paid $20 a month for the privilege to keep using it. ITunes is great, but Napster combined whimsy, variety and convenience in perfect combination. Tough luck for me. The courts, pushed by the recording industry, decided that what I, and many music consumers, wanted was against the law. Napster was being used to steal and illegally share music. That's wrong. So they sued it out of existence.

So when Viacom decided to sue Google last week for the sins of YouTube, its prize online video acquisition, I was tempted to think: "Here we go again." Viacom owns the Paramount and DreamWorks movie studios, and the MTV, Comedy Central, VH1 and Nickelodeon cable channels. It's angry that a lot of its video content — specifically, many episodes of "The Daily Show," "The Colbert Report" and "South Park" — is showing up unauthorized on YouTube. Indeed, Viacom says in its suit that YouTube is nothing short of a rogue operation — just like the Recording Industry Assn. of America talked about Napster.

"YouTube has harnessed technology to willfully infringe copyrights on a huge scale…. YouTube's brazen disregard of the intellectual-property laws fundamentally threatens not just plaintiffs, but the economic underpinnings of one of the most important sectors of the United States economy."

That's pretty scary rhetoric from one of the biggest media companies in the world. Chairman Sumner Redstone is one of the toughest executives anywhere. It seemed as if Silicon Valley and Hollywood — which appeared to have reached detente — were gearing up for war again.

...

So, why the lawsuit? Simple. Billions of dollars are at stake, and the law — the Digital Millennium Copyright Act — is vague. It was passed in 1998 before anyone could have anticipated the world we live in now. Viacom sees its business model — producing movies and supplying programming for television channels — under attack and thinks it can get an edge either in negotiations with Google or, more broadly, by using the courts.

It better rethink. When it comes to lawsuits, Google is unlike any company Viacom has ever encountered. On issues of copyright, trademarks and the like, Google likes a fight. Talk to Google Chief Executive Eric Schmidt or founders Larry Page and Sergey Brin, and they will tell you that central to their mission of organizing the world's information is the belief that the laws surrounding intellectual property need to be updated to reflect the Digital Age. It should be no surprise that Google has hired more than 100 in-house lawyers and an army of outside firms that are specialists in this kind of law.

Look at that trademark suit with insurance giant Geico a few years back. Yahoo settled immediately because it rightly feared that a court fight with a Warren Buffett-controlled company might be bad for business. Google fought it for a year before settling. Or remember the Department of Justice's subpoena for consumer Web-search data last year? Microsoft and Yahoo complied immediately. Google pushed back in court and forced the request to be significantly narrowed. It is spending hundreds of millions of dollars to digitize almost every book on the planet and make them searchable, even though no clear payoff is in sight and a huge court battle with book publishers in the U.S. and in Europe is looming.

As for financial staying power, Viacom is a pipsqueak compared with Google. Its revenues are about the same, at $11 billion, but Google is far more profitable, has no debt and has 10 times more cash — $11.2 billion to be precise. Napster had no money for a protracted legal battle. Google could take on Viacom — and the rest of the entertainment industry, for that matter — until the Supreme Court settled the issue.

All of which leads to the following theory: Maybe a knockdown, drag-out court battle is exactly what Google is hoping for here. The resolution would provide desperately needed legal clarity, help fuel Google's insatiable appetite for changing the world and be good for consumers and businesses — all at the same time. Do you think Viacom thought about that before it pulled the trigger on the lawsuit? I doubt it, and I think it is going to be sorry for having not done so.

http://www.latimes.com/news/opinion/sunday/commentary/la-op-vogelstein18mar18,0,2431029.story

 

[weldon]

No thanks to you. And you're still a long way from making a convincing argument that the references to advertising revenue in the suit are a "distraction."
Anyway, a good commentary on this lawsuit appeared in the LA Times over the weekend. In part:
http://www.latimes.com/news/opinion/sunday/commentary/la-op-vogelstein18mar18,0,2431029.story

Well, sorry you're annoyed with me. I didn't have a public link to share with you. It wasn't intentional just to spite you and say I've got it and you don't. I'm sorry you seem to have taken it that way.

The reason I keep trying to downplay the ad revenue stuff is because it doesn't matter to the law if they make one penny or a billion dollars. All the hyperbole in the language of the complaint is there for persuasion and to garner sympathy for their position ("look at those rich jerks!"). And again, it only matters in the limited context of deciding if YouTube qualifies as a service provider. We just had another comment from someone who thought they would get off because they don't sell videos. The money part of it is the last consideration.

Here's how I think the process will go...

1) Does YouTube have infringing content?

Yes. Viacom will win on this point and I think the courts will order a remedy that includes providing their anti-piracy tools to anyone that wants them with some RAND license terms.

2) If #1 is true, is YouTube exempt from liability for this infringing content per the Online Copyright Infringement Liability Limitation Act? (the "safe harbor")

Here's where it gets sticky. YouTube will argue Yes and Viacom will argue No. There are four ways to qualify as a service provider. You can be...

• a transitory communications network
• a systems cache
• a hosting service for user content, or
• a search provider

A) communications network

doesn't apply to YouTube (this is meant for companies like Level3, AT&T, etc. that primarily just provide the pipe in their capacity as an ISP.

B) a systems cache

doesn't apply because YouTube is more than a cache. This is meant to protect a company like Akamai that sells caching servers that hold content close to users, but are totally unaware of what the content actually is. The server just decides to hold or cache content based on a computer algorithm that decides what might be asked for next.

C) user content

Here YouTube has a defense and a good argument. Unfortunately, I think that YouTube will be shown to be more than a simple hosting company because they have editors that peruse the site looking for content to highlight. They pay attention to the most viewed content. They actively look for porn. My suspicion is that Viacom will find the "smoking gun" in an email or something that clearly shows YouTube is aware of the infringing content. This will hurt YouTube.

D) search

Google obviously involves search, but YouTube is more than video search ala images.google.com is to image search.

Summary: I think YouTube will be considered as something different than what the service provider definitions allow. Case over. YouTube is guilty. Viacom gets a payday.

3) If YouTube is innocent on #2, has YouTube done anything that would disqualify them from being classified as a service provider under the DMCA?

Here are the exemptions...

To obtain the safe harbor the OSP must:

* not have actual knowledge that the material or an activity using the material on the system or network is infringing (512(c)(1)(A)(1)).
* not be aware of facts or circumstances from which infringing activity is apparent (512(c)(1)(A)(2)).
* upon obtaining such knowledge or awareness, must act expeditiously to remove, or disable access to, the material. (512(c)(1)(A)(2) and 512(c)(1)(C))
* not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity (512(c)(1)(B)).
* have a Designated Agent registered with the US Copyright Office to receive notifications of claimed infringement (often called takedown notices). If the designated agent receives a notification which substantially complies with the notification requirements, the OSP now has actual knowledge and must expeditiously disable access to the work. The OSP must make available to the public through its service, including on its web site substantially this information:
o the name, address, phone number and electronic mail address of the agent.
o other contact information which the Register of Copyrights may deem appropriate.
* adopt, reasonably implement, and inform subscribers and account holders of a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers (512(i)(1)(A)).
* accommodate and not interfere with standard technical measures used to identify and protect copyrighted works (512(i)(1)(B)).

I'm getting worn out so I'm not going to respond to each bullet point in detail, but here's my general opinion...

Viacom will show that YouTube has knowledge, and that they are aware of the general circumstances. They don't remove infringing content until notified, even when aware of it. These first three points will get them in trouble. They will get nailed on the direct financial benefit as well (this is where ad revenue finally comes into the picture, but it could also include their being sold to Google at a high valuation). They have an agent, no problem. They don't do a good job of finding repeat violators. They are in trouble here. Copyright protection measures is a non-issue because they don't provide DRM cracking tools to help people upload content to YouTube. If they find a customer service email that tells someone how to get a clip off a DVD, they are toast.

So you see, I think ad revenue is considered way down the list in the third step here and I firmly believe that YouTube is going to get hammered on a lot of points way before ad revenue comes up.

I thought the article was a mixed bag. It sounded like it was written by a tech reporter who was whining about not being able to download music illegally, rather than a legal or business reporter. I didn't like that part.

I did think the article made an excellent point that Google appears to be willing to contest these copyright law issues, take things to court, and aggressively defend themselves. I just think that YouTube is different enough from their search business that they won't be able to defend themselves very well (like they have with the book scanning project, for example). They have been very successful in defending themselves against copyright infringement for search so far, but they still have some big issues coming up regarding the use of trademarked and copyrighted keywords used in AdWords.