March 13 (Bloomberg) -- Viacom Inc., producer of the ``Daily Show,'' sued YouTube and owner Google Inc. for more than $1 billion for violating its copyrights, challenging the business that made YouTube the most-popular video-sharing site.
The suit, brought in federal court in New York, alleges ``massive intentional'' copyright infringement.
Viacom escalated the dispute after failing to reach an agreement over the posting of more than 150,000 shows such as ``South Park'' and ``The Colbert Report'' on YouTube. The suit, which follows court challenges by News Corp. and producer Mark Cuban, is the most aggressive action against the Web site.
``Viacom is taking a very strong stance,'' said James Goss, an analyst at Barrington Research in Chicago who has an ``outperform'' rating on Viacom. ``The issue is control over what you own. With the lawsuit, they want to draw a line in the sand as the whole process develops.''
Viacom said YouTube users have posted unauthorized clips of shows, which also include Nickelodeon's ``SpongeBob SquarePants'' and MTV's ``MTV Unplugged.'' The snippets have been viewed 1.5 billion times, Viacom said.
YouTube showed ``brazen disregard'' for copyright, Viacom said in the suit, and has ``deliberately chosen not to take reasonable precautions to deter the rampant infringement on its site.''
Google said it hasn't received the lawsuit. ``YouTube has respected the legal rights of copyright holders and believe the courts will agree,'' the company said in a statement.
Arm Twisting
YouTube, bought by Google for $1.65 billion last year, agreed in February to remove more than 100,000 Viacom clips from its Web site after the companies failed to agree on payments for use of the shows, Viacom said at the time.
``They are trying to twist YouTube's arm as much as possible to extract better economic terms,'' said Youssef Squali, a Jefferies & Co. analyst in New York who rates Google ``buy'' and said he doesn't own the shares. ``YouTube seems to be infringing on their copyrighted content and they don't like the economic split.''
More than 133 million people visited YouTube in January, 14 times more than a year ago, according to Reston, Virginia-based Web-use tracker ComScore Networks Inc.
Division
YouTube's audience is dividing broadcasters who are debating whether the benefits of added viewers outweighs the copyright infringement.
YouTube's actions ``fundamentally threatens not just plaintiffs but the economic underpinnings of one of the most important sectors of the United States economy,'' New York-based Viacom alleges in the complaint.
The suit was filed less than a week after Google Chief Executive Officer Eric Schmidt said media companies will have no choice but to put their TV shows and movies on video sites such as YouTube.
``The growth of YouTube, the growth of online, is so fundamental that these companies are going to be forced to work with and in the Internet,'' Schmidt said in an interview on ``Conversations with Judy Woodruff'' at Google headquarters in Mountain View, California.
Earlier this month, YouTube was ordered by a federal judge in Dallas to identify a user who posted films such as the new horror movie ``The Host'' distributed by Cuban. In January, News Corp.'s Twentieth Century Fox subpoenaed YouTube to identify the person who was uploading pirated copies of the television shows ``24'' and ``The Simpsons.''
CBS Corp., also chaired by Sumner Redstone and owner of the most-watched television network, called it a ``huge promotional vehicle.'' NBC has an agreement with YouTube and posts shows such as ``The Apprentice'' on the site.
Failures
Viacom's lawsuit says Google failed to control YouTube or force it to implement copyright-protection measures such as filters. Instead, Google has begun a feature on its own site in which a search for videos leads users to YouTube.
Viacom also accuses YouTube of implementing features that hinder the ability of copyright owners to search for their videos and taking a ``hands-off policy'' to monitoring its site.
``YouTube has the power and authority to police what occurs on its premises,'' the Viacom complaint says. ``YouTube proactively reviews and removes pornographic videos from its library, but refuses to do the same thing for videos that obviously infringe plaintiff's copyrights.''
In addition to the cash damages, Viacom wants a court to order Google and YouTube to prevent illegal videos from being posted on the site.
``This is an initial attempt to move negotiations along,'' Robert Peck, an analyst at Bear Stearns & Co. in New York, said today in a note. ``Both sides would be better served with an agreement.''
To contact the reporters on this story: Susan Decker in Washington at
sdecker1@bloomberg.net ; Jonathan Thaw in San Francisco at
jthaw@bloomberg.net
Last Updated: March 13, 2007 11:52 EDT
