Media conglomerate Viacom sued Google 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," threatening its ambitions to turn YouTube into a major distributor of entertainment and outlet for advertising.
Shares in Viacom , home to the MTV and Comedy Central channels, gained while Google shares fell.
Sumner Redstone-controlled Viacom has been the most vocal critic of YouTube as it sought to negotiate payment for use of its programming. Last month, the company demanded YouTube pull over 100,000 video clips uploaded by users to its site.
"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 onto the victims of its infringement," Viacom said.
Google said it was confident that YouTube respects the copyrights at issue in the Viacom case.
Not Become Distraction
"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's majority owned NBC Universal and News Corp.'s have also criticized YouTube's copyright protection policies but have stopped short of taking legal action, testimony to a media industry quandary between embracing a fast-growing outlet for younger audiences or trying to build a competing Web vehicle themselves.
YouTube does not prevent copyrighted content from being uploaded onto its site, but will take material down at the request of copyright owners.
"We've dealt with YouTube on a case by case basis to have content taken down," a News Corp. spokesman said, adding the company supported Viacom's right "to protect its own content in whatever way it needs to."
Viacom contends that almost 160,000 unauthorized clips -- from excerpts of comedy talk show "The Daily Show with Jon Stewart" to pieces of children's programs like "SpongeBob SquarePants" -- have been uploaded onto YouTube's site and viewed more than 1.5 billion times.
The decision to sue Google followed "a great deal of unproductive negotiation," the company said.
Viacom filed the suit in the U.S. District Court for the Southern District of New York, seeking an injunction against further violations and damages.
Bought Last November
Google bought YouTube last November for $1.65 billion, aiming to capitalize on its explosive audience growth, built from sharing both homemade and professionally produced videos.
YouTube has reached licensing deals with major record labels, but still faces the ire of major media companies. Google has promised new technology to help identify pirated videos uploaded by users, but has not given a firm timetable for its introduction.
"If there's anything central to Google's business model, it is being at the center of everything," said Forrester Research analyst James McQuivey. "This has the potential to put them on the periphery."
Viacom and peers like NBC Universal, in which France's Vivendi owns a minority interest, are also investing heavily in their own Internet video sites in an effort to benefit from the migration of television audiences to the Web.
"Viacom's Web traffic is increasing nicely since it pulled content from 'GooTube,"' said analyst Richard Greenfield of Pali Capital.
"There is certainly an opportunity for YouTube to do a deal with Viacom, but Viacom does not have to have a YouTube deal," Greenfield said.
Google's dominance in Web search had already made it a magnet for lawsuits brought by copyright and trademark holders.
The Silicon Valley company faces outstanding lawsuits in the United States and Europe by major book, magazine and online news publishers as well as small-time Web site operators.
Google has prevailed in high-profile suits against it by auto insurer GEICO--owned by billionaire investor Warren Buffett's holding company Berkshire Hathaway--over trademark infringement, and in a demand by the U.S. Justice Department that Google comply with a request for consumer Web search data.