By Tim Weber
Business editor, BBC News website
Did YouTube clear the rights for Shrek?
Google's takeover of video-sharing website YouTube may look like a nifty business move. For the company's legal team, however, it may soon turn into a long and nasty nightmare.
Here's the rub: Besides all the gorgeous and goofy home videos, YouTube (like other video websites) hosts plenty of pirated content.
These copyrighted music and film clips have been uploaded by YouTube members who pilfered the content from television, CDs, DVDs and other websites.
The aggrieved parties are not just the big guys, film studios like Fox or broadcasters like NBC and the BBC.
Many of the rights are owned by thousands of small independent production companies, and by individuals who want to retain control over their own products and the revenues they might generate.
A 'moronic' deal
Until now most copyright holders had little incentive to sue YouTube. The company was young and rapidly burning through its venture capital.
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Now that YouTube is part of the Google empire, with a market capitalisation of $129bn (£70bn), there is a serious incentive to let the lawyers off the leash.
As Marc Cuban, a famously outspoken internet entrepreneur - and founder of broadcast.com - put it just before the deal was sealed: "Google [would] be crazy to buy YouTube. No doubt about it. Moronic would be an understatement of a lifetime."
YouTube, he predicted on his Blog Maverick website, will "get sued by thousands of rights holders" and could become a "deep pocketed target" for fake-a-lawsuit companies.
Google's big juicy carrot
Things don't have to be quite so gloomy.
After all, as Mr Cuban himself acknowledges, both YouTube and Google have just struck a series of revenue-sharing deals with some of the big copyright holders.
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And with regards to the little guys, Google will try to entice them with a similar carrot: We have the big audience, and the distribution technology to host your videos; in return you will get a share of any advertising money we make around your content.
But not everybody will accept the deal.
And those who want to get really nasty will not stop at suing Google.
They will go after the people who uploaded the pirated content, the YouTube members - just like the record companies who tracked down those using Napster, Grokster and other filesharing software to distribute copyrighted music.
A series of high profile law suits could be enough to scatter YouTube's main asset, its network of members.
The safe harbour
Google and YouTube obviously don't see themselves as content pirates.
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They argue that they act fully within the law, based on general "fair use" standards, and more importantly the safe harbour provisions in section 512 of the US Digital Millennium Copyright Act (DMCA) of 1998.
The act was designed to ensure copyright protection works in the digital age - although its authors clearly did not anticipate today's dynamic and on-demand digital world.
Section 512 helps "service providers" to avoid liability for acts of copyright infringement committed by third parties; it gives them a safe harbour.
It's a complicated piece of legislation, but here is one example of how it is supposed to work:
A service provider (YouTube) stores material (a pirated movie clip) on its system at the direction of a user (YouTube member). Meeting these conditions may help it qualify for the safe harbour provision - at least as long as YouTube makes it easy for copyright holders (a film studio) to complain about the infringement, and quickly removes pirated material that has been brought to its attention.
The harbour's murky waters
Google's problem is that things are not quite that straightforward.
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Susan Freedman, a copyright expert at law firm Nixon Peabody, says that "Google is pushing at the boundaries of what these laws mean".
The statutes are less than crystal clear and "are typically one step behind the technology," she says.
So far the US courts have failed to rule what most of the DMCA's statutes actually mean.
Already, though, a couple of "512" defences have gone disastrously wrong - for file-sharing services Napster and Grokster.
Law v reality
Section 512 also clearly states that the service provider must not receive a financial benefit directly attributable to the infringing activity.
How will it play in the courts if Google has made advertising dollars on the back of pirated material on YouTube?
Nobody knows, says Laurin Mills, another copyright expert at Nixon Peabody. "It's a collision of a really good idea and a copyright law that was written before anybody thought of any of [Google's] applications."
YouTube will continue to get sued, predicts Mr Mills, not least because every "fair use" case is absolutely unique, its outcome depending on the context of each clip.
Burnt twice, not shy
Google has been burnt before. Google Print was a plan to scan all books and make them searchable.
Authors and publishers around the world unleashed their fury on the search giant.
French news agency AFP went to court to have its content removed from Google News.
In Belgium the website was forced to take down content published by local newspapers.
Should Google lose a major YouTube court case and its share price suffers as a result, the company will have to brace itself not just for a deluge of lawsuits from copyright owners but disappointed shareholders as well.
No doubt Google will have to work hard to steer YouTube into safe waters.
Solid content identification, video watermarking, royalty reporting and clearer upload guidelines for YouTube members are a must.
There is just one drawback: For some members that could take all the fun out of YouTube.
Without fun, they might go elsewhere.
And then Google's deal would look much less like a bargain.