IP INSIDER
paign.” The suit forced Veoh to design
systems to ensure that no videos it
hosted were deleted—even videos
whose creators wanted them deleted.
“We were prevented from doing any of
that, simply because Universal said we
had to store it. When you’ve got 23 mil-
lion users processing data, that’s really
tough. For two years, my IT guys were
walking around, saying, ‘They’re going
to choke us.’ ”
Unlike other companies that decided
it made sense to settle, Veoh could afford
to fight UMG because it had more than
$70 million in venture capital at its dis-
posal. With that in mind—and aware
that investors naturally try to avoid
spending development funds on legal
bills—UMG even attempted to include
the venture capitalists backing Veoh
as defendants in the suit. (Judge How-
ard Matz of federal district court in Los
Angeles rejected that hardball tactic.)
Shapiro’s decision to not back down
proved to be the right one. Matz ruled
in Veoh’s favor on summary judgment,
saying the company had indeed followed the DMCA to the letter, and that
UMG’s copyright claim couldn’t stand.
If users uploaded video with copyrighted material, Matz ruled, it was the
copyright holder’s responsibility to go
after the actual user or to send a take-down notice asking Veoh to remove the
offending content. Veoh, represented
by Winston & Strawn, had a history of
complying with those notices within a
day or two, Matz wrote.
THe DISpUTe be TWeen UMG AnD
Veoh isn’t over yet. UMG, represented by
Irell & Manella, has appealed the district
court ruling to the U.S. Court of Appeals
for the ninth Circuit. Still, at least for the
moment, Matz’s decision is among several developments that suggest a subtle
shift in the ongoing Ip disputes known
collectively as the copyright wars.
Most people now accept that the
phenomenon of watching and sharing
video online is here to stay. That wasn’t
true when Veoh launched. back then,
Shapiro says, major media companies
were dismissive when he proposed
partnerships under which Veoh would
broadcast their content. “The initial
response was quite hostile,” he says. “It
was ‘Absolutely not, we have no inter-
est in a partnership—oh, and by the
way, we just may sue you.’ ” Content
companies firmly believed consumers
had no desire to abandon their big-
screen TVs. “They said, ‘nobody wants
to watch online.’ ”
Today, Veoh hosts content produced
by Warner bros. entertainment Inc. and
CbS Inc., among others. “by now,” Sha-
piro says, “everyone realizes that it’s a
tide, and you have to go with it. You
need aggregators, a centralized place
for consumers to find content. Veoh and
YouTube and many other companies
have created systems that democratize
broadcasting.” How far has the tide
turned? One of the Web’s most success-
ful online aggregators of free TV pro-
gramming, Hulu, was created by nbC
and news Corporation.
Michael Robertson, a friend of Sha-
piro’s and a fellow tech entrepreneur
who founded digital-music site mp3.com,
has followed the Veoh litigation closely.
He says the ruling in the case is unique.
“Often, the record labels sue a start-up
and then the company either runs out of
money, or the investors compel them to
settle,” Robertson says. “There’s actually
not been a lot of cases that have gone to
a ruling from a judge using the DMCA
as a defense.”
Robertson currently runs a com-
pany called mp3tunes.com that allows
users to store their music online and
access it from multiple devices. The
company is currently defending itself
against a copyright infringement suit
brought by eMI Group Limited in
new York’s Southern District. eMI
claims mp3tunes.com’s online storage
system violates copyright law. Robert-
son argues that all his company does is
provide users with “an empty locker”
to store files from their own comput-
ers. Robertson takes a postion simi-
lar to Veoh’s: that mp3tunes.com is
immune from copyright liability under
the DMCA.
QUOTED
“Beat IBM”
Message spelled out using first letter of first word in each of first seven paragraphs contained in companywide memo
distributed by Sun Microsystems CEO Jonathan Schwartz the day the European Commission approved Oracle’s acquisition
of Sun, as reported by CNet.com.
