Court documents in the $1 billion lawsuit between Viacom and YouTube were unsealed today, finally shedding some light on key questions: did Viacom have "smoking gun" evidence that YouTube was deliberately profiting from 62,637 Viacom clips that were watched more than 507 million times on the site? Was Google aware of the copyright infringement problems when it purchased YouTube in 2006? Were YouTube's own founders involved in uploading unauthorized materials?

On all three counts, Viacom says yes—and it offers up a host of e-mails to prove it:

"In a July 19, 2005 e-mail to YouTube co-founders Chad Hurley and Jawed Karim, YouTube co-founder Steve Chen wrote: 'jawed, please stop putting stolen videos on the site. We’re going to have a tough time defending the fact that we’re not liable for the copyrighted material on the site because we didn’t put it up when one of the co-founders is blatantly stealing content from other sites and trying to get everyone to see it.'"

"Chen twice wrote that 80 percent of user traffic depended on pirated videos. He opposed removing infringing videos on the ground that 'if you remove the potential copyright infringements... site traffic and virality will drop to maybe 20 percent of what it is.' Karim proposed they 'just remove the obviously copyright infringing stuff.' But Chen again insisted that even if they removed only such obviously infringing clips, site traffic would drop at least 80 percent. ('if [we] remove all that content[,] we go from 100,000 views a day down to about 20,000 views or maybe even lower')."

"In response to YouTube co-founder Chad Hurley’s August 9, 2005 e-mail, YouTube co-founder Steve Chen stated: 'but we should just keep that stuff on the site. I really don’t see what will happen. what? someone from cnn sees it? he happens to be someone with power? he happens to want to take it down right away. he get in touch with cnn legal. 2 weeks later, we get a cease & desist letter. we take the video down.'"

"A true smoking gun is a memorandum personally distributed by founder Karim to YouTube’s entire board of directors at a March 22, 2006 board meeting. Its words are pointed, powerful, and unambiguous. Karim told the YouTube board point-blank:

'As of today episodes and clips of the following well-known shows can still be found: Family Guy, South Park, MTV Cribs, Daily Show, Reno 911, Dave Chapelle. This content is an easy target for critics who claim that copyrighted content is entirely responsible for YouTube’s popularity. Although YouTube is not legally required to monitor content (as we have explained in the press) and complies with DMCA takedown requests, we would benefit from preemptively removing content that is blatantly illegal and likely to attract criticism.'"

'As of today episodes and clips of the following well-known shows can still be found: Family Guy, South Park, MTV Cribs, Daily Show, Reno 911, Dave Chapelle. This content is an easy target for critics who claim that copyrighted content is entirely responsible for YouTube’s popularity. Although YouTube is not legally required to monitor content (as we have explained in the press) and complies with DMCA takedown requests, we would benefit from preemptively removing content that is blatantly illegal and likely to attract criticism.'" "A month later, [YouTube manager Maryrose] Dunton told another senior YouTube employee in an instant message that 'the truth of the matter is probably 75-80 percent of our views come from copyrighted material.' She agreed with the other employee that YouTube has some 'good original content' but 'it’s just such a small percentage.'"

"In a September 1, 2005 email to YouTube co-founder Steve Chen and all YouTube employees, YouTube co-founder Jawed Karim stated, 'well, we SHOULD take down any: 1) movies 2) TV shows. we should KEEP: 1) news clips 2) comedy clips (Conan, Leno, etc) 3) music videos. In the future, I’d also reject these last three but not yet.'"

The limits of the DMCA



The basic argument here is a simple one. YouTube's founders hoped to build a massive user base as quickly as possible and then sell the site. "Our dirty little secret... is that we actually just want to sell out quickly," said Karim at one point. In an e-mail, Chen talked about “concentrat[ing] all of our efforts in building up our numbers as aggressively as we can through whatever tactics, however evil.”

As the e-mails collected in this suit make clear, numerous YouTube employees had direct knowledge of infringing material on the site, and in fact even altered tools like the community "flagging" feature so as to purposely find out about fewer incidents.

The strategy worked. One-and-one-half years after launching, Google purchased YouTube and made all of the founders incredibly wealthy. Given the obvious appeal of unauthorized content on YouTube, Viacom argues that the startup's strategy was, at its core, a decision to profit from copyright infringement. It doesn't matter whether YouTube showed ads on its video pages or not (for years, it did not, apparently concerned about just this issue); to Viacom, the entire business strategy was a way of profiting from infringement.

That's important because the Digital Millennium Copyright Act protects service providers that engage in "storage at the direction of the user." It has been a huge boon to user-generated content sites, and it is YouTube's key defense. But the DMCA puts limits on the generous safe harbors it provides: operators cannot have actual knowledge of infringement, they must take down infringing materials when asked, and they cannot profit from the infringement.

In the very first sentence of the summary judgment motion, Viacom makes clear it will attack YouTube's safe harbor protection head-on: "Plaintiffs Viacom International Inc. et al. (“Viacom”) move for partial summary judgment on Defendants’ liability for copyright infringement and concurrently to invalidate Defendants’ reliance on the Digital Millennium Copyright Act (“DMCA”) as a defense to that infringement."

Viacom argues that YouTube did know about infringement on the site, and not just in a general, "surely there's some infringement going on here" sort of way. No, as the e-mails collected in this suit make clear, numerous YouTube employees had direct knowledge of infringing material on the site, and in fact even altered tools like the community "flagging" feature so as to purposely find out about fewer incidents.

Under this argument, YouTube is like Grokster, the P2P site whose case went all the way to the Supreme Court and resulted in a seminal ruling that shut down the site on the grounds that the huge majority of its activity produced infringement.

But there's a second argument. Viacom also claims that YouTube is not covered by the law for a more fundamental reason: it is not engaged in "storage," as a file locker might be, but is in the business of displaying and broadcasting content, which also includes making numerous back-end copies. This behavior involves YouTube in "direct infringement of copyrights."

This appears to be the weakest part of Viacom's case, and it's unclear why the company would bother making it in the wake of a federal court's recent Veoh ruling. That decision noted (correctly, in our view) that automated back-end processes to cache or transcode or display a video did not involve the site operator in such direct infringement.