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The Grokster decision that Tur relies on refined an earlier landmark decision, which gave copying technologies some leeway if they provided substantial non-infringing uses as well. Under the new inducement theory, this protection disappears if the product exists for the primary purpose of inducing infringement, as evidenced by the product developer's intent to encourage and profit from such infringement.

In determining that the P2P companies in Grokster had induced infringement, the Supremes looked to the facts that the companies in the case had targeted the former users of Napster, had failed to implement any kind of filtering mechanism to remove copyrighted content, and had made money by selling advertising that was served to users as they "shared" files over the P2P networks. Since the companies served ads to users of the networks, and since the primary use of the networks was to infringe, the court reasoned that the companies had an intent to induce further infringement in order to increase their revenue by increasing the number of ads served. (Give it a second - it might actually start to make sense after a while.)

Here, YouTube has attempted to separate and remove copyrighted material, and has responded to notices promptly. (Tur never gave YouTube any notice of the presence of his copyrighted work, so the company never had a chance to respond to his claims of infringement before the suit was filed.) Moreover, there are a significant number of freely distributed videos on YouTube, either amateur, professional or licensed. All in all, it doesn't appear, except for the sticky issue of advertising, like YouTube is inducing infringement. Since there are also substantial uses for the service that don't violate copyright law, YouTube likely also falls under the old exception for copying technologies.

The fact that YouTube didn't focus on these substantive points in any great depth could signify that it fully expects to succeed in blocking the suit with the DMCA's safe harbor provision. The safe harbor argument is a more desirable one for the company, since it has the potential to end the suit without extensive discovery concerning the ratio of infringing to non-infringing uses and the like. This will save the company some cash, and could prevent future lawsuits once the determination is made that it is an online service provider. Once that happens, YouTube could put the brakes on any future suits by pointing to previous safe harbor decisions and arguing for dismissal.

Under both the Grokster and safe harbor arguments, the real issue is whether YouTube has received a financial benefit as a direct result of the infringing activity. Right now, the site displays ads, but they are independent of the content on the page. Thus, there isn't a strong argument that they are directly related to any infringement occurring on the site.

That all means that this current suit will most likely turn out in YouTube's favor. From a strategic point of view, this would discourage other small content producers from suing, since the small chance of monetary gain wouldn't justify the expense of the suit. Together with the licenses that YouTube has been able to string together thus far, that would go a long way towards eliminating the company's overall litigation risk.

On the flip side, if Google steps in and begins targeting ads to the specific type of content - which is, after all, its specialty - it could remove the protections that YouTube currently enjoys. If say, a page containing a copyrighted clip of the latest Star Wars flick on YouTube includes advertisements for Star Wars paraphernalia, then content-owners could argue that YouTube has an incentive to encourage more such clips so they can sell more such ads, thus demonstrating an intent to induce infringement. Plus, it would also violate the statutory prohibition on direct financial benefit from infringement required for claiming the DMCA safe harbor.

Under this scenario, the service could become liable under Grokster, as well as lose its safe harbor under the DMCA. This would open the company up for the landslide of lawsuits by small-time content producers that Mark Cuban predicted, and would render the big-name licenses that YouTube acquired effectively moot.

And, if that turns out to be the case, Google just bought itself a $1.6 billion albatross.®

Kevin Fayle is an attorney, web editor and writer in San Francisco. He keeps a close eye on IP and International Law issues.

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