Original URL: http://www.theregister.co.uk/2006/10/16/google_youtube_court/

Google's ads could kill YouTube

One lawsuit at a time

By Kevin Fayle

Posted in Financial News, 16th October 2006 16:27 GMT

Valley Justice Google's intention to drive advertising profits through the acquisition of this year's hottest web property may actually be the move that ends up killing the golden GooTube.

YouTube recently answered a copyright infringement complaint brought against it in a federal court in California and presented an argument that, while not exactly novel, may just get it off the hook.

For the moment, it looks more likely than not that YouTube will escape liability under the Supreme Court's recent Grokster decision. The only problem is advertising. If Google targets ads too aggressively, it risks pushing YouTube out of the safe harbor that it probably enjoys at the moment. This would put the service on the hook for copyright infringement, and could justify Mark Cuban's condemnation of the YouTube purchase as "moronic." On the other hand, if Google proceeds cautiously and works within the sometimes amorphous confines of copyright law, it could make Cuban's statements look more like sour grapes than prescient prognostication.

The suit in question was brought by Robert Tur, a helicopter pilot and journalist, and alleges that YouTube caused the infringement of his copyrighted footage of rioters dragging Reginald Denny out of his truck and hitting him with a brick during the Rodney King riots in Los Angeles. Tur centers his claim on the US Supreme Court's decision in the Grokster case that opened companies up to infringement liability based on an inducement theory.

That infamous decision stated, in essence, that anyone who distributes technology with the intent to promote the use of that technology to infringe copyrights will be liable for the acts of infringement committed by users. Thus, companies that "induce" infringement by distributing their products will now suffer the legitimized wrath of the content owners, despite a longstanding protection for developers of copying technologies such as VCRs, DVD burners, etc.

Tur argues that, since YouTube has created a vehicle for users to upload copyrighted material and share it with others, the site falls under the inducement theory put forward by the Grokster decision and opens YouTube up to a big stinking heap of infringement liability. YouTube has countered by claiming an exemption under the "safe harbor" provisions of that old perennial favorite, the Digital Millennium Copyright Act.

The safe harbor is one of the few decent provisions of the oft-maligned addition to US copyright law. Basically, it gives a provider of "online services" - a fairly murky term in its own right - immunity from infringement liability resulting from material stored on its servers by users, as long as the provider satisfies some basic requirements. The provider must designate an agent to respond to notices of infringing material. Upon receiving such a notice, or any other actual or imputed knowledge of infringement, the provider must act quickly to remove the infringing material. And, most importantly for YouTube's and Google's present situation, the provider must not make any money "directly attributable to the infringing activity."

YouTube has argued that it meets these requirements, and then some. The company claims to respond promptly to infringement notices, and states that it has established a DMCA agent and provided numerous links on the site directing users to the agent. It also has a policy of closing the accounts of repeat copyright violators.

Wisely, YouTube makes no mention of the advertising currently on its site, nor does it discuss the fact that it recently became the property of the king of targeted Internet advertising. It's generally best to keep such trifles out of the court's attention for as long as possible.

The company does go on to try and win favor with the court by listing additional ways that it attempts to protect copyright. The answer states that the company educates users about how to comply with copyright law. In addition, YouTube says it has implemented "technological mechanisms," including a "Content Verification Program," that are meant to locate and tag content so that it can be removed and blocked from future re-posting.

The YouTube legal staff also point to content licenses that YouTube has struck with content owners, although it neglects to mention the most recent deals that the company struck just prior to the Google acquisition. Finally, YouTube argues that the ten minute limit on posting lengths helps prevent infringement, although it must be said that many movies and shows are simply strung together in ten minute pieces and available in their entirety.

Now, it's no surprise that YouTube trotted the safe harbor argument out - it's the company's best shot at a win, and it constitutes an initial legal barrier that could nip the suit in its nascent little bud without any expensive presentation of evidence. It is surprising, though, that YouTube didn't address the underlying merits of the complaint, since the company has a strong argument on that front as well.

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.