In barely seven months, video on the Web has moved from being a teaser topic, to an overview for geeks in PCworld magazine, to being mass market core content on the Web. Viacom's US$1 billion legal action launched yesterday in New York against YouTube is just part of the online video retailing revolution. Here's a copy of Viacom's complaint.

Lightbulb reported early on YouTube's IP law exposure: Person of the Year caught in copyright scandal . See also YouTube in copyright licensing negotiations and YouTube's IP revenue sharing model.

As those posts note, Google knew there could be an copyright problem. When buying YouTube in October 2006 it withheld nearly US$220 million of YouTube's acquisition price in an escrow account.

As regards YouTube's intellectual property law exposure, Viacom's press release yesterday acts on Google's hesitancy. Viacom's first sentence is: "YouTube is a significant, for-profit organization that has built a lucrative business out of exploiting the devotion of fans to others’ creative works in order to enrich itself and its corporate parent Google." 

As is usual the press release ends with a profile on Viacom which lists the following spaghetti code: "Viacom’s leading brands include the multiplatform properties of MTV Networks, including MTV: Music Television, VH1, CMT: Country Music Television, Logo, Nickelodeon, Nick at Nite, COMEDY CENTRAL, Spike TV, TV Land, and more than 130 networks around the world, as well as digital assets such as MTV.com, comedycentral.com, VSPOT, TurboNick, Neopets, Xfire and iFilm; BET Networks; Paramount Pictures; DreamWorks; and Famous Music."

Now you don't get as big as Viacom if you don't have secure intellectual property registrations, contracts and revenue streams. Viacom's earnings from video content or television program IP licensing and distribution are enormous.

Obviously there's a lot of dollars at stake for Viacom and others whose revenues depend on such licensing and distribution of video content protected by copyright law. Viacom does not want YouTube free riding off Viacom's video content or television programs. 

Viacom feels it does not need a relationship with YouTube. On 20 February 2006 Viacom signed on to be a content partner with Joost, a new TV and video digital distribution venture using peer-to-peer technology (see Learn to love P2P filesharing). Joost is being created by Niklas Zennstrom and Janus Friis founders of Skype and Kazaa. Viacom's legal action yesterday follows its demand last month that YouTube remove 100,000 potentially infringing videos. Viacom has said in effect "no money, no honey."

For me it is a no-brainer as to who is likely to know more about intellectual property, the founders of Kazaa or the founders of YouTube. YouTube faces very real IP law issues, while not being as exposed as Napster, Grokster and Kazaa were.

• PS: As a result of the 2006 Australian Federal Court ruling against Kazza in Universal Music Australia v Sharman License Holdings Ltd [Kazza case]. Kazaa is related to Sharman License Holdings. Kazaa in late July 2006 agreed to pay A$152 million (US$115 million) compensation for past IP infringements. Kazza also then decided to convert to a legal downloading business offering licensed music. Kazza fought the law, and the law won.
• PPS: Here's a related local development. On 23 February 2007 Blockbuster Inc announced it had agreed to sell its Australian subsidiary and grant master franchise rights to Australian rental chain Video Ezy as part of a plan to divest its foreign operations. That will see Video Ezy acquire about 370 video stores to add to its 518 franchised stores. The ACCC is reviewing whether to oppose the proposal. Unquestionably Video Ezy strategy is driven largely by the arrival online of video. Video Ezy is in a race against at least two other major Australian competitors seeking to build a profitable video online business. This will keep many lawyers busy checking through thousands of film and DVD distribution contracts to see if they contain the necessary rights granted clause permitting online distribution of copyright works.

[UPDATE: 21 May 2007 - See here a copy of the YouTube/Google response to the Viacom Complaint, titled Defendants Answer and Demand for a Jury Trial.]

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