Will YouTube make Google a magnet for litigation?

A text transcription follows.

This transcript is for anyone with a hearing impairment or who for any other reason cannot listen to the MP3 audio file.

The following is the text spoken by OUT-LAW journalist Matthew Magee.

Hello and welcome to OUT-LAW Radio, the weekly podcast that keeps you up to date on all the twists and turns in the world of technology law.

Every week we bring you the latest news and in depth features that help you to make sense of the ever-changing laws that govern technology today.

My name is Matthew Magee, and coming up on this week's show we look at the landmark deal of the second internet boom: Google's acquisition of YouTube.

But first, the news

• Thousands of UK computer owners are victims of US data theft;
• Swiss government may tap internet phone calls; and
• MySpace founder loses court case over News Corporation sale.

Over two thousand UK computer users have had vital personal information including credit card details stolen, according to London's Metropolitan Police. The theft was conducted via a virus by US-based thieves, said the Met.

The thefts came to light when just one US computer was seized. It contained personal details from 2,300 computers in Britain. Amongst the details were credit card numbers, email addresses, passwords and details of transactions conducted online.

The Met is now trying to identify and contact everyone affected by the scam.

The Swiss government is planning to put wiretaps on internet phone conversations, according to Swiss newspaper reports which say that the software will be supplied by a Swiss company.

Wiretapping landlines and mobile telephones is an established part of crime prevention, but voice over internet protocol calls are a new phenomenon and harder to bug.

Because servers and connections often sit in foreign countries, commonly the US, a country's law enforcement agency can not exercise the same power of discovery that they can over a phone provider's records. Calls can also be harder to trace when they are free, since there is no billing record.

Swiss newspaper SonntagsZeitung reports that the Swiss Department of the Environment, Transport, Energy and Communications is examining the use of software to listen to VOIP conversations.

A judge has dismissed MySpace founder Brad Greenspan's claims that the sale price of the social networking site to News Corporation was too low. Greenspan said he will appeal.

He founded MySpace and is a former chief executive of its parent company Intermix. He filed a suit in February claiming that News Corporation's £580 million purchase of Intermix did not value the business highly enough.

Superior Court judge Carolyn Kuhl dismissed Greenspan's claims, saying that the acquisition was legal and the decision taken by Intermix board members was legitimately taken.

That was this week's OUT-LAW News

Chad Hurley and Steve Chen: Hi YouTube this is Chad and Steve, we are the co-founders of the site. Today we have some exciting news for you. We have been acquired by Google – thanks this is great, two kings have got together and we are going to be able to provide you with even better service and build even more innovative procedures for you.

That was Chad Hurley and Steve Chen announcing in typical YouTube style that company's takeover by Google in a video posted to the YouTube site. The video tells you everything you need to know about YouTube: the deal may have been worth $1.6bn dollars, it might have made founders Hurley and Chen instant millionaires but the pair still made their public pronouncements in an amateur looking handshot video with traffic roaring by in the background.

Today we look behind the defining deal of what people are already calling internet boom 2.0.

The $1.6bn price paid for the video sharing website was staggering for a site that does not turn a profit. Are we seeing the return of the dreaded dotcom bubble? Toby Lewis, a director with Music and Digital Media Consultancy Music ally, thinks we might.

TL: Yes I think it is an absolute example of the bubble mentality that we are now in and obviously we have hit fever pitch one has to question when it is that the founders are going to be able to cash in on their Google shares and one hopes they can do it very quickly.

Jordan Rohan follows Google shares for RBC capital markets in New York. He says talk of a bubble is misplaced.

JR: Google has a $130 billion in market cap and I understand $1.6 billion of stock is not that much even though every lay person in existence knows that a $1.6 is a ridiculous amount of money for a company that was just born two years ago. That's the internet when something becomes a top five or top 10 internet property it is worth a lot of money. Was it good perspective from the perspective of shareholders, well the stock went up $27 on this, so the short term yes. Long term I don't know.

Whether or not the deal is a good one depends on one thing: copyright. YouTube began as a site for people to share the videos they made but it has since turned into a place where film, TV and music clips were viewed on a massive scale.

When Google bought YouTube was it putting itself at the forefront of the user generated content revolution, or was is just setting itself up as old media's deep pocketed whipping boy for a rash of future copyright law suits?

YouTube is a staggeringly successful site broadcasting an amazing 100 million videos daily and for free to its users, and nobody doubts that Google will figure out a way to turn its user base into revenue of some kind, but the big question is – can they stay on the right side of copyright holders and turn a profit?

I asked Kim Walker, an intellectual property lawyer with Pinsent Masons, the law firm behind OUT-LAW, whether YouTube actually violates copyright law.

KW: If YouTube is asked by content providers to take infringing material down and doesn't do so within a reasonable period then it can certainly be liable for copyright infringement, otherwise it is primarily the user who uploads the material who will be liable.

MM: So they are operating entirely legally within copyright legislation?

KW: Yes I think so, unfortunately for the content holders that is currently the position.

TL: Its being called user generated content but of course it is nothing of the sort, most of the content on YouTube is not generated by its users, its uploaded by its users so it can be called user submitted content, so we are about to see a process of copyright owners looking to Google and YouTube for permission to withdraw their material. If not by the technology that YouTube provides then they will use cease and desist notices.

MM: So what happens when the dust settles? Is there a queue of lawsuits bearing Google's brightly coloured name? Will copyright holders now chase the company because there are assets behind it, a whopping $130bn stock market valuation worth of assets? Market analyst Rohan thinks it is the American way.

JR: You are going to see some spike in lawsuits, I don't know; the US is a pretty litigious place to begin with, figuring out what a spike is, I think you will certainly see some lawsuits, that makes sense, that's how the US economy works.

MM: Kim Walker thinks that law suits will come from the smaller rights holders.

KW: I am sure that the big content providers will all be queuing up to do deals with Google and I guess the smaller operators who perhaps haven't got the negotiating clout that Universal and EMI and so on have got I guess they are, if they can't do a deal or don't do a deal then they are going to more likely to look for recompense in some other way you know by threatening legal proceedings. 

MM: YouTube has managed to sign deals with movie studios, TV producers and record labels licensing the use of their material on the site for a share of ad revenue. These licences are still opaque though and most believe they will be pretty limited. Walker thinks that some of the companies whose rights are infringed will go even further than lawsuits. He thinks they will try and change the law itself.

KW: Effectively YouTube or Google video has a business model based on allowing material to be up there until someone gets around to complaining and taking it down and I just think the content providers will lobby both in Europe and probably in the US to have the laws tightened so that you know the notice and take down procedures aren't their sole remedy.

MM: As GooTube – as the combined company is already being billed – struggles with the legal ramifications of the deal there is another danger lurking in the shadows. YouTube has been a tremendous success but as it gets tangled up in the courts in the boardrooms of America could other sites perhaps less scrupulous ones steel its crown? Could YouTube lose that valuable essence that drove up its price: its cool?

TL: YouTube is not the only site doing what it's doing, so for example in recent weeks we found another site which I believe is based in France which is exactly the same model but doesn't have the copyright controls on it and so that's now being used by members of the public to upload entire TV and movie catalogues. People are opportunistically creating these sites and sticking a few Google ads and then collecting the revenue until such times the copyright owner finds out about it and gets it shut down. I don't think YouTube can guarantee that it will be the only one its space and it will be fascinating to see when YouTube actually is a user generated content site rather than being a sort of treasure trove of the past 30 years of TV and movie and music content.

MM: That first maverick phase of YouTube's growth is over and a more mature company will emerge from the deal making but right now as we can hear in another clip from Hurley and Chen's video on YouTube making that life changing millionaire deal is quite enough to keep them occupied for now.

[clip of Hurley and Chen laughing]

That's all we have time for this week, thanks for listening.

Why not get in touch with OUT-LAW Radio? Do you have a legal problem you would like us to discuss on air? Do you know of a technology law story? We'd love to hear from you on radio@out-law.com.

Make sure you tune in next week; for now, goodbye.

OUT-LAW Radio was produced and presented by Matthew Magee for international law firm Pinsent Masons