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YouTube’s Newfound Clout

With Google in its corner, YouTube rewrites the rules in the fight between old media and new media.

Less than two years old, YouTube has become a purveyor of pop culture, a subject of controversy, and a virtual playground for copyright infringement. Bought by Google in November 2006, the website that allows people to freely share video clips online now faces an uphill battle against the world of intellectual property law.

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In July of 2006, journalist Robert Tur filed the first copyright infringement suit against YouTube. Since then, a Japanese entertainment trade group has filed a complaint, a Brazilian court has ordered the site to pay fines, and even Time Warner has been threatening YouTube with lawsuits.

But unlike many other skirmishes about intellectual property on the Internet, the set of legal arguments in which YouTube is embroiled will have implications far beyond just the website and its current users.

“I believe YouTube’s lawsuits will be precedent setting,” says Michael S. Sherman, chair of the entertainment group for Jeffer Mangels Butler & Marmaro, a Los Angeles-based law firm.

Online copyright protection is still a relatively new legal area. The most substantial piece of legislation dealing with the issue, the Digital Millennium Copyright Act, is only eight years old. There is not a lot of case history, and relatively few cases where two multi-billion dollar companies have slugged it out over the details. Any lawsuit between YouTube and a large media company would be exactly that, and the result of the lawsuit would have far reaching implications.

YouTube is not unique in what it does. The Internet is full of websites where media clips are uploaded and shared. Most of them, however, are small enough that they don’t attract enough traffic to warrant litigation. YouTube is making waves because of its size, says Sherman. “It’s probably the largest site of that type.”

That, and the fact that it’s profitable. Google’s decision to buy YouTube in November 2006 for $1.65 billion declared two things to the world: that the site was making money, and it expects it to make more. By paying such a huge sum, Google was practically begging for litigation.

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“Having the financial wherewithal to pay damages made YouTube a much bigger target,” explains Sherman.

Then again, if it’s raining lawsuits, being bought buy Google is a pretty good umbrella. When the Internet giant bought YouTube, it filled a war chest with $200 million specifically to fight copyright lawsuits and settle with people whose videos and music were being uploaded illegally.

Largely, lawsuits brought YouTube for copyright infringement won’t want YouTube shut down. They may not even seek content to be taken down — they will likely just seek compensation. Now that YouTube is more than a small start-up, the lawsuits that are brought against it will ask for a large piece of the action.

Still, Sherman says, “No one wants to litigate if they don’t have to. It’s not a good business model.”

Safeguards are being put in place on both ends to prevent litigation. YouTube warns its users not to upload copyrighted information, and is taking steps to let users know that they, individually, could be held responsible for copyright infringement.

Content owners are beginning to look towards embedded rights management software to prevent misuse of their material, and Google announced that it is working on a filter to identify copyrighted material.

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By being proactive and clearly discouraging the use of pirated material, a company can help protect itself from liability. But preventative technology is not ubiquitous, and in many situations companies can still be held liable for what their users do.

When Napster was in its prime, the music-sharing site allowed users to freely exchange music, copyrighted or not, with other users. After a storm of controversy and litigation from the music industry, however, the original Napster had to shut down. When it reemerged, it was a fundamentally different company that was riddled with restrictions and charged its users for its service. Other file-sharing sites like Grokster and Morpheus have followed the pattern of surging popularity, cease-and-desist letters, and eventual restructuring.

Filing suit against YouTube, on the other hand, is not so simple. With Google — market cap, $148 billion — behind it, YouTube will not be intimidated by the old media giants’ strength. Instead, it has been seeking compromise.

YouTube/Google has been pursuing symbiotic arrangements with many large media companies, striking revenue-sharing deals with CBS, Universal Music Group, Warner Music, and Sony BMG Music Entertainment. In October, CBS even began experimenting with their own channel on the YouTube site.

And other companies are catching on. Just before Microsoft released its new media player, Zune, it made a deal with Universal to share some of the revenue in exchange for licensing its music. Neither side tried to squash the other the way the music industry leaned on Napster. Instead, they pursued what was in everyone’s best interest.

It is clear that a solution will be needed for the legal handling of websites such as YouTube, which disseminate such huge volumes of media in such an unregulated way. In the clash of old media and new media, that solution may be a trend of cooperation, and YouTube itself may be leading the way.