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Thursday, 15 March 2007

Viacom Sues YouTube for USD1 Billion

In Monopoly, sometimes somewhere along the way, the "vicissitudes" of life do take place. You go to jail. You end up on someone else's place and you pay them rent. This. That. And as the game goes on, the stakes climb up. So how does Monopoly relate to today's topic? Plenty.

Here's the basic proposition: Google's purchase of YouTube was aimed to cash in on the large online viewership, with one goal in mind: Generate a better business proposition for its AdSense programme. I may be mistaken, but consider the fact that prior to the purchase, Google already had Google Video in its arsenal. Why did it need another Flash Video community? The answer would probably be the brand name that YouTube had generated amongst bloggers.

Enter Viacom. Viacom alleges that there are some 160,000 music videos that are circulating on YouTube.

The Viacom Building @ #1, Astor Plaza
Picture: The Viacom Building @ #1, Astor Plaza
[source: indyken's photostream @ Flickr]

Justin Hughes, director of the Intellectual Property Law Program at Benjamin N. Cardozo School of Law, suggests that Google should have anticipated this problem in purchasing YouTube, because of its business model which allows users to infringe copyright.1

At present, the burden of policing infringing material on a web server is on the copyright owner. The USA Digital Millennium Copyright Act of 1998 requires a webmaster to remove infringing material from a web server only after being served notice by the copyright owner. If the removal is "expeditious" then the Act provides a "safe harbour" for the webmaster.2

Personally, I feel that Viacom would not have pursued the court case against YouTube if YouTube had not been purchased by Google for the following reasons.

  1. Financial Viability
    Quite frankly, if YouTube had not been sold to Google, it would not have been such a profitable target. Just as parents are the target of child kidnapping, Viacom is eyeing a rich payout from Google -- not YouTube.

  2. Support
    Let's face facts. The entertainment industry is worried about dwindling power. While the big corporations spend billions of dollars seeking out new artistes and grooming them up, helping them shoot their music videos, churning out their music CD's, etc, along come the new age pirates who upload tonnes of music videos and MP3 albums to RapidShare et al. The big boys were getting fed up of the DMCA. Something had to give sooner or later.

  3. Deterrant Factor
    Viacom is sending a message to all the other small timers who aspire to be the next YouTube: Cool your horses, or you may be the next. But what it does not realise is that YouTube can continue to operate until a court order is obtained. If, on the other hand, it wishes to get an interlocutory restraining order, Viacom may have to put up security for costs -- not that that would be much of a problem.

However, in the event that the lawsuit does go on, of course Viacom would have to justify its claim of USD$1 billion. How can it show that it is justified in claiming such a big sum? The answer lies in IP valuation -- the art of putting a price to a "work". IP valuation approaches are varied and it is clear that there is no one cohesive approach. Perhaps, this topic will be dealt with in a later article. For now, suffice to say that there are three main means of valuation: the cost method, the market method, and the income method.3

Has this been useful? Send me work.


1. Source: Viacom Sues YouTube for $1 billion, MSN Money, 13 March 2007 [link]

2. Ibid.

3. For my personal reference, and I believe for the reader's benefit as well, I would say that WIPO has a set of documents about IP valuation. [link]. Also check out [this link]
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