Both Veoh and YouTube say they are not breaking any laws under the Digital Millennium Copyright Act and cite so-called "safe harbor" provisions of the DMCA as their escape hatch.
Each says it immediately removes protected works upon notice from the copyright holder. And they also terminate users for uploading infringing works, another safe harbor clause.
Veoh, for example, says that, as of July, it had terminated 1,096 users for repeatedly posting infringing works.
Most social-networking sites are built around the safe harbor clauses.
But how they protect a company from infringement claims has not been conclusively decided in court, not even in the Napster case. Napster went bankrupt before the case was fully litigated.
"The Napster case provides little guidance on whether these services are vulnerable or not," said Fred von Lohmann, a staff attorney with the Electronic Frontier Foundation. "Precisely, the Napster case did not address these safe harbor clauses."
On Aug. 9, Veoh asked a San Diego federal judge to declare it wasn't violating the law, in hopes of preventing an anticipated Universal lawsuit.
"Veoh lacks the ability and the right to directly supervise the content provided by the 85,000 video publishers that frequent and populate its site and utilize its software," the company told the court.
Veoh added that it fingerprints files using digital "hashes" in order to prevent exact copies of removed files from being reposted by another user.
Veoh said that Universal Music doesn't understand online video, according a written statement from Veoh CEO Steve Mitgang.â€¨
â€¨ "UMGâ€™s action is not surprising and reflects their limited understanding of Veoh and of the online video space as a whole," Mitgang wrote." Veoh is recognized by many media companies as a DMCA-compliant company and is committed to respecting the rights of content owners. In fact, weâ€™re currently working cooperatively with major media companies and the MPAA to develop standards for copyright protection. Itâ€™s unfortunate that UMG prefers to continue their pattern of litigation rather than contribute to the important discussions going on within the new media industry."
A spokesman for Universal, Peter Lofrumento, said in a statement that Veoh's business plan "is based on theft" and "deprives UMG and its artists and songwriters of compensation for their work."