Universal Music, the world's largest music company, filed suit in federal court Tuesday against Veoh Networks, a video- and file-sharing site, accusing it of massive copyright infringement that deprives the company and its artists of sales and royalties.
The Los Angeles federal court suit begins another chapter in the music and movie industries' long-running attempt to control unauthorized online sharing of copyright material.
Popular media-sharing sites such as YouTube, Veoh and Torrentspy sprang up after the lawsuits that devastated early music-swapping companies such as Napster and Kazaa.
Tuesday's lawsuit, which seeks millions in damages, accuses upstart Veoh of being "a massive copyright infringer that has built its business on the back of others' intellectual property."
Veoh, a video-sharing service financially backed by Time Warner and Michael Eisner, combines online uploading and sharing of video files (a la YouTube), with the ability to download files and share clips using peer-to-peer software.
Veoh "follows in the ignominious footsteps of other recent mass infringers such as Napster, Aimster, Kazaa and Morpheus, engaging in high-tech theft in the name of 'sharing,'" according to the suit.
The San Diego-based video-sharing service takes "mass infringement on the internet to a new and dangerous level by supplying the public with an integrated combination of services and tools that make infringement free, easy and profitable for Veoh," the lawsuit alleges.
The case blends elements of Viacom's March 13 lawsuit in New York federal court against Google's YouTube, and the music industry's just-concluded lawsuit against Napster.
Like Napster, the Veoh upstart has created and maintains a proprietary peer-to-peer network, according to the suit. Veoh's is called "Veohnet" and operates with free Veoh software, according to the suit.
The software "enables the 'sharing' and 'downloading' of copies of videos that are stored on the computers of other Veoh members who are part of Veoh's P2P network," the lawsuit claims.
Napster was found liable in 2002 of facilitating copyright infringement by providing a venue to allow millions of users to download copyright music from each others' computers.
That case ended Friday when German media-behemoth Bertelsmann AG paid the National Music Publishers Association $130 million to settle claims it contributed to copyright violations by financially propping up Napster with $85 million in loans.
The shared allegations against Veoh and YouTube include the facilitation of wanton copyright violations.
In the YouTube case, filed in New York district court, the social-networking site, like Veoh, is accused of not having "authorization, permission or consent to use the registered copyrighted works owned by plaintiffs that have appeared and continue to appear on the YouTube site."
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."