Viacom lawsuit could imperil Internet models

By Eric Auchard and Duncan Martell - Analysis

NEW YORK/SAN FRANCISCO (Reuters) - A $1 billion lawsuit filed against Google Inc. and its video-sharing site YouTube by media giant Viacom Inc. could undermine a key tenet of how the Internet industry does business.

The lawsuit filed on Tuesday accuses Google and YouTube of "massive intentional copyright infringement," threatening the Internet search leader's aim to turn the site into a major distributor of entertainment and an advertising outlet.

The legal attack transforms the back-and-forth angling for negotiating power between old and new media, which defined the video piracy dispute over the past year, into a fundamental challenge to what copyright means in the digital age.

"Up until now, I have been a believer that Viacom was seeking fair compensation for its copyrighted material," Forrester analyst James McQuivey said.

"I now think Viacom is opening the door to challenge the whole basis of the Digital Millennium Copyright Act," he said, a portion of which offers protection to Internet companies that wind up making copyrighted material available online.

The Digital Millennium Copyright Act (DMCA) of 1998 has served as the legal standard defining U.S. copyright law in the digital age, offering a defense widely relied upon by Internet companies against copyright lawsuits.

The law limits liability for firms that act quickly to block access to pirated materials once they are notified by copyright holders of specific acts of infringement.

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Alexander Macgillivray, Google's associate general counsel for products and intellectual property, said U.S. courts have established clear precedents protecting Internet services from copyright liability when they act to enforce DMCA provisions.

"Here there is a law which is specifically designed to give Web hosts such as us, or ... bloggers or people that provide photo-album hosting online ... the 'safe harbor' we need in order to be able to do hosting online," Macgillivray told Reuters.

But Douglas Lichtman, a copyright attorney and law professor at the University of Chicago Law School, disagreed, saying that the DMCA isn't a "bright-line defense" against wholesale use of copyrighted material, but is sometimes interpreted as such. Lichtman is a consultant to Viacom and advised it on the suit.

"The DMCA is a carefully written, balanced statute that's designed to make certain narrow exceptions, but not be a blank check, to allow you to characterize your business as though it fits within one of those exceptions," Lichtman said.

"In this fight, we will see a little more nuance added to people's discussion of DMCA," Lichtman said.

Charlene Li, an Internet analyst with Forrester Research, said the Viacom lawsuit poses a "tremendous challenge" to the business models underpinning many Silicon Valley start-ups.

"The question becomes, how far must they go to show they are making a reasonable effort?" Li said. "The fact that YouTube was not using readily available copy protection technology is what Viacom is going after."