YouTube Founders Knew Illegal Content Was Driving Explosive Growth

YouTube's founders were well aware of infringing material on their website -- and its potential to drive growth, newly released court records show. But U.S. District Judge Louis Stanton will have to decide how specific the founders' knowledge of the infringing content was to determine if the site broke the law.

"Viacom is arguing that YouTube did have knowledge of infringement," says Ben Sheffner, a copyright lawyer and blogger. "The big legal question is how specific that knowledge must be in order to lose the [Digital Millennium Copyright Act's] safe harbor."

The new disclosures are part of a court-ordered data dump after both Viacom (VIA) and YouTube asked the judge for summary judgment in its favor. As lawyers and industry-watchers comb the filings, there's an increasing sense that YouTube may be found liable for copyright infringement, thanks to damaging emails unearthed through the discovery process.

"Viacom cited overwhelming evidence that YouTube knew that there was rampant infringement on the site," Sheffner notes. "YouTube counters that, well, maybe that's true in very general terms, but we couldn't know if any particular video was infringing (especially because Viacom uploaded some videos themselves)."

Google (GOOG), which now owns YouTube, has long said that YouTube is protected by the fair use provisions of the Digital Millennium Copyright Act (DMCA), which places the burden on content owners like Viacom to notify the site of violations. YouTube says it has terminated 400,000 accounts for copyright infringement.

"Save Your Meal Money for Some Lawsuits!"

Viacom has produced some fairly damaging emails that show YouTube founders Chad Hurley (pictured), Steve Chen and Jawed Karim knew early on there was copyrighted material on YouTube and that it was contributing to the company's rapid growth. There are emails in which the founders debate the consequences of hosting such content and make queasy-sounding jokes about upcoming lawsuits. At one point, YouTube co-founder Chad Hurley advises his colleagues: "Save your meal money for some lawsuits!" according to Viacom's filing.

On another occasion, Chen chastises co-founder Karim for uploading illegal content onto the site himself. "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 [a key DMCA "safe harbor" argument] when one of the co-founders is blatantly stealing content from other sites and trying to get everyone to see it."

In one email noted by CNET, Chen seems to dismiss the legal ramifications of knowingly hosting copyrighted CNN video: "[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 gets in touch with cnn legal. 2 weeks later, we get a cease & desist [takedown] letter. we take the video down."

Google: YouTube Founders Lacked "Legal Training or Counsel"

There's no way Google can deny that YouTube's founders knew about copyrighted content on the site -- and knew that it was spurring traffic dramatically. But in its filing, Google tries to paint YouTube founders as naive in the company's earliest days.

"In the site's first months, YouTube's 20-something founders grappled with how best to address situations in which it seemed that users had uploaded videos in violation of YouTube's rules," Google's lawyers wrote. "Working out of Hurley's garage, and lacking legal training or counsel, the founders first installed an ad hoc monitoring program" as well as a "community flagging system," the brief continues.

"Quickly realizing that those approaches were flawed, and having secured financial backing from investors, YouTube consulted with outside counsel, installed a formal DMCA program, and brought in an in-house lawyer with a background in copyright law," Google wrote.

Ultimately, this case will come down to how Judge Stanton interprets federal copyright law, but there's no escaping the fact that he'll have to scrutinize YouTube's explosive early growth to determine if -- as Viacom contends -- that growth was driven primarily on the back of copyrighted content.

Says Sheffner: "The judge will have tell us what the law is about how specific the knowledge of infringement must be to lose the safe harbor."