Viacom lawsuit could imperil Internet models

By Eric Auchard and Duncan Martell - Analysis

NEW YORK/SAN FRANCISCO (Reuters) - A $1 billion (518 million pound) lawsuit filed against Google (GOOG.O) and its video-sharing site YouTube by media giant Viacom (VIAb.N) could undermine a key tenet of how the Internet industry does business.

The lawsuit filed on Tuesday accuses Google and YouTube of "massive intentional copyright infringement," threatening the Internet search leader's aim to turn the site into a major distributor of entertainment and an advertising outlet.

The legal attack transforms the back-and-forth angling for negotiating power between old and new media, which defined the video piracy dispute over the past year, into a fundamental challenge to what copyright means in the digital age.

"Up until now, I have been a believer that Viacom was seeking fair compensation for its copyrighted material," Forrester analyst James McQuivey said.

"I now think Viacom is opening the door to challenge the whole basis of the Digital Millennium Copyright Act," he said, a portion of which offers protection to Internet companies that wind up making copyrighted material available online.

The Digital Millennium Copyright Act (DMCA) of 1998 has served as the legal standard defining U.S. copyright law in the digital age, offering a defence widely relied upon by Internet companies against copyright lawsuits.

The law limits liability for firms that act quickly to block access to pirated materials once they are notified by copyright holders of specific acts of infringement.

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