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March 13, 2007

Google and its online video subsidiary YouTube have been sued by Viacom today. The lawsuit is for $1 billion, the first and largest amount against the online video site and its parent company for copyright infringement.

In the suit filed this morning in the U.S. District Court for the Southern District of New York, Viacom 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 in the future.

With this, Steven Chen and Chad Hurley, co-founders of YouTube, have to deal with their first major lawsuit for copyright infringement. Viacom first demanded that YouTube take down videos from shows on Viacom-owned networks that were posted on the Web site without Viacom's consent.

Google acquired YouTube for nearly $1.7 billion late in 2006.

Viacom is the first major media firm to sue YouTube and Google over alleged copyright infringement. Other media companies, including GE-owned NBC Universal, CBS and Universal Music Group have decided to partner with YouTube, the world's most popular online video site.

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 over 100 million video streams a day. "YouTube's 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 today.

Industry analysts predicted 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 v.p. at Magna Global, a media buying firm based in New York.

Wieser added "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.

Google's stock was lower by about 1 percent in morning trading on Nasdaq this morning.

Company officials at Google and YouTube were not immediately available for comment.

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Source: CNN Money