Google honks Segway horn back at Viacom

Copyright scofflaw Google and the creative industries are locking horns once again, in a billion dollar legal case with implications for what internet companies can and can't do – or at least, American internet companies. Essentially, the case boils down to how much a service provider is allowed to "know" about infringement before it becomes part of the problem, and therefore liable.

Viacom and a clutch of other companies including the Premier League, filed suits against YouTube in 2007, which Google had acquired the previous year. Nobody disputes that most of YouTube's content infringes copyright; it's there without a licence. Viacom asked for $1bn in damages, but a judge ruled last year that Google was shielded from liability under provisions in the Digital Millennium Copyright Act (DMCA), and had shown good faith by responding to takedown requests from Viacom.

Viacom is appealing, arguing the intent of Congress (and the letter of the law) in designing such shields was not to permit such wholesale infringement. Google's defence has just been published. But first, some background is useful.

In the 1990s, lawmakers around the world gave broad legal protection to internet service companies, who could argue that they weren't liable for damages from infringement that took place on their networks, or through their services. Politicians did this in the hope that the new businesses would grow and expand, and not be strangled at birth by costly litigation from fearful copyright holders. The policy makers did so in the expectation that creative industries and internet companies would strike a mutually beneficial arrangement, cash would rain down from heaven, and everyone would live happily ever after. The DMCA was the US Congress's attempt to strike some kind of balance.

A dozen years later, nobody would regard the way things have turned out as ideal. The internet has turned out to be a basket-case for revenue generation, with even the officially-blessed Hulu video site – co-owned by Disney, NBC and News International – bringing in a paltry $263m in revenue last year. And with very little money around, nobody is prepared to invest in innovative service delivery. Service providers and hosters (such as Google) hold fast to their get-out clauses, which they argue permit them to look the other way, and copyright holders focus on policing infringement rather than innovation. The results of the policing are often absurd, but without them precedents would be set for take-without-asking uses. Although creators' rights are upheld by international treaty – it is a basic human right – loosening the law in each state would turn each territory into a Pirate Utopia, so the rights would become meaningless.

Viacom's appeal focuses on three main points. The Act, it argues, obliges the provider to act on "actual" knowledge of infringement, rather than "red flag" (ie, specific takedown requests). The provider must not benefit financially from infringement, and it must limit itself to storing material at the user's direction only. You can see why it wants to shift from actual to general. While the DMCA gives a copyright-holder the power to take down a piece of material, they must make an individual request for each infringement – leading to a hugely costly burden. Individual filmmakers, for example, as we can see here, must play whack-a-mole with the YouTubes and other sites.