Viacom's Suit Won't Snuff Out YouTube

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"We think that's a testament to the draw of the user-generated content on YouTube."

What's more, unlike Napster and other file-sharing sites, YouTube isn't just some small startup. Backing by Google, which acquired the site in October for $1.65 billion in stock, will help YouTube withstand a legal battle of great length (see BusinessWeek.com, 10/10/06, "YouTube's New Deep Pockets"). Even after the search goliath's shares took a 2.5% hit following the lawsuit, Google was valued at nearly $138 billion. That means YouTube will have considerably more resources to fight extinction than Napster did. It may even have more resources than Viacom itself. Even if Viacom were to win the more than $1 billion it is seeking in damages—which legal experts agree is a huge and unlikely if—it is not enough to crush Google.

Chill Effect

Perhaps the greatest difference between the RIAA's case and Viacom's is that Viacom doesn't want to stop YouTube from operating. If it did, says Rutchik, Viacom would have asked the courts to shut Google down to ensure that its copyrighted material was not uploaded, or in some cases slightly changed and re-uploaded after being removed. Instead, Viacom asked for damages, a "declaration that defendants' conduct willfully infringes Plaintiffs' copyrights," and an injunction requiring YouTube and Google to, in essence, adopt better technology to prevent or limit their copyrighted material from uploading.

One reason for this could be that Viacom, owner of youth brand MTV Networks as well as Comedy Central, may not want to anger its key demographic in the same way that the RIAA did when it began to sue users of peer-to-peer sites. Another reason, says Rutchik, is that the whole suit is simply a negotiating tactic to make Google more willing to pay Viacom for its content. "No one pays any money or does much of anything unless they are staring down the barrel of a gun," says Rutchik. "This litigation sets the clock moving."

Google has 30 days to file a response. Rutchik guesses that there will be some legal posturing from both sides, but ultimately they will return to the negotiating table and work out a compromise rather than risk losing outright before a judge.

Negotiating tactic or not, there are other possible consequences to Viacom's legal action aside from whatever happens with Google or YouTube. The case could give other startup sharing sites pause and, as a result, "chill innovation," says EFF's von Lohmann. And that's an ending few want.

Holahan is a writer for BusinessWeek.com in New York. With Rob Hof in Silicon Valley.