Viacom in $1 billion copyright suit versus Google, YouTube

By Kenneth Li and Michele Gershberg

NEW YORK (Reuters) - Media conglomerate Viacom Inc. sued Google Inc. and its Internet video-sharing site YouTube for more than $1 billion on Tuesday in the biggest challenge yet to the Web search leader's strategy to dominate the online video market.

The lawsuit accuses Google and its popular online video unit of "massive intentional copyright infringement" for allowing users to upload popular shows, threatening ambitions to make YouTube a major entertainment and advertising outlet.

The legal challenge from Viacom, home to the MTV and Comedy Central channels, also suggested a wider battle between traditional and Internet media companies that now compete for audiences and advertising dollars.

"This is a seminal event in Media-Internet relations ... and how the value of content will be clarified in the online medium," wrote UBS analyst Aryeh Bourkoff in a client note.

Shares in Viacom slipped 9 cents to close at $39.48 on the New York Stock Exchange and Google shares fell $11.72, or 2.6 percent, to $443.03 on Nasdaq.

Viacom has been the most vocal critic of YouTube during months of negotiating over payment for use of its programming. The Sumner Redstone-controlled company last month demanded YouTube pull over 100,000 video clips uploaded by users.

"YouTube's strategy has been to avoid taking proactive steps to curtail the infringement on its site, thus generating significant traffic and revenues for itself while shifting the entire burden -- and high cost -- of monitoring YouTube on to the victims of its infringement," Viacom said.

YouTube does not prevent copyrighted content from being uploaded onto its site, but will take material down at the request of copyright owners.

Google said it was confident that YouTube respects the copyrights at issue in the Viacom case.

"We will certainly not let this suit become a distraction to the continuing growth and strong performance of YouTube," Google said in a statement.

General Electric Co.'s majority-owned NBC Universal and News Corp. have also criticized YouTube's policies on copyright protection but stopped short of legal action, testimony to the dilemma of media companies forced to choose between embracing a fast-growing outlet for younger audiences and trying to build competing Web vehicles themselves.

"We've dealt with YouTube on a case by case basis to have content taken down," a News Corp. spokesman said, adding that the company supported Viacom's right "to protect its own content in whatever way it needs to."

Viacom found another ally in Time Warner Inc.

"It is clear from this lawsuit that it is time for YouTube to remove unauthorized material from its site," a Time Warner spokesman said. "We are in talks and hopeful we can work together toward a solution that would effectively identify and filter out unauthorized material and license copyrighted works for an appropriate revenue share."

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