For Pennsylvania mom Stephanie Lenz, a closely watched copyright showdown in San Jose federal court is a simple matter of standing up to powerful music moguls and petulant pop stars.

“I figure I have nothing to lose,” Lenz said Friday in a telephone interview with the Mercury News. “The music companies are just going to keep doing this to people. I think it’s my responsibility to stand up to them and say, ‘That’s enough.’ “

Lenz, whose case reached a critical stage Friday, finds herself at the heart of an epic copyright fight over Universal Music’s attempt to force her to take down a YouTube video of her toddler learning to walk with the Prince song “Let’s Go Crazy” blaring in the background.

Calling it a “case of first impression,” U.S. District Judge Jeremy Fogel on Friday considered Universal’s attempt to dismiss Lenz’s lawsuit, which maintains the media giant and Prince are abusing a 10-year-old copyright law intended to curtail movie and music thievery on the Web. Lenz is seeking unspecified damages and a court finding that she did not violate Universal’s copyrights with the YouTube video.

‘Takedown’ letters

The case centers on a so-called “takedown” letter Universal sent to Lenz after she posted the video in February 2007. Music and movie companies send tens of thousands of such letters under the copyright law each year, essentially forcing the material to be at least temporarily removed unless the target fights the request.

Lenz fought back hard, backed by the Electronic Frontier Foundation, a San Francisco-based civil liberties organization. She maintains that the video was a harmless, legal use of a popular song, and that her case exemplifies how a powerful industry can abuse the copyright law, known as the Digital Millennium Copyright Act.

Fogel dismissed a previous version of Lenz’s lawsuit, but her lawyers filed a revised complaint that recasts the case as a test of what copyright holders must consider before sending out takedown letters. Electronic Frontier Foundation lawyers urged the judge to keep the case alive, arguing that companies such as Universal have an obligation to investigate and evaluate a video such as Lenz’s before firing off the threatening letters.

Claim of ‘fair use’

“It’s a tiny, blurry little home movie,” said Corynne McSherry, the foundation’s attorney on the case.

Lenz and her legal team depict the video as a “fair use” of the Prince song. But Universal attorneys insist the company had the legal right to send the letter in Lenz’s case, and that it would be unfair to artists and media companies to force them to undertake lengthy inquiries before asserting copyright violations.

Fogel took the company’s request to dismiss the case under consideration and will rule later.

“The copyright owner is arguing that this is infringing; Lenz says it is fair use,” said Mark Lemley, director of Stanford University’s Law, Science and Technology clinic. “There are no cases directly on this question of user-generated content that incorporates songs as background. Lenz will be the first.”

In the meantime, Lenz is prepared to take her case as far as it goes in the courts. The video is back up on YouTube, but that’s not enough to appease Lenz.

“Somebody needs to tell these music companies they can’t just throw out these (takedown letters) and accuse people of violating federal crimes,” she said. “I didn’t like feeling like I’d done something wrong, even though I knew I hadn’t. It made me panic.”