Google,Viacom Settle 7-Year Dispute - Analyst Blog

Google Inc. (GOOG) recently announced that it has resolved a seven year old patent violation lawsuit with Viacom Inc. VIA. The litigation was settled out of court just before the hearing next week. The terms of settlement were not disclosed. Reportedly, neither party has to pay any compensation to the other.

Viacom, an American international entertainment content company owning MTV Networks, Nickelodeon and Paramount film studios, had accused Google of posting nearly 79,000 copyrighted videos from Viacom programs like The Daily Show and others without consent.

In 2007, Viacom filed a lawsuit concerning copyright infringement against Google-owned Youtube, and demanded a compensation of $1 billion for the illegal uploads. Viacom alleged that Google had earned profits from the broadcasts. But Google argued that it abided by the Digital Millennium Copyright Act and allowed content owners to track their broadcasted content and delete unauthorized videos when informed.

The court dismissed the case in 2010 but it was partly restarted by an appeals court. In April last year, Viacom's compensation plea was once again rejected by U.S. District Judge Louis Stanton in Manhattan and the result was declared in favor of the defense. Viacom filed a plea yet again last year.

Lawsuits are a costly affair as it not only hurts company financials but also negatively impacts a brand. It is therefore sensible and cheaper to enter licensing agreements and sell more content without the fear of getting sued.

The settlement is a sign of the transformed landscape regarding copyright infringement on the web. Since high upload volumes makes it practically impossible for Google to track the times unauthorized content is uploaded by a user, it has devised a system according to which the copyright holder can track its own videos to either remove the content or let it run with ads. Google is protected when users engage in such activities under the Digital Millennium Copyright Act, so settling and partnering with it is actually the best option open to Viacom.

The settlement could also signal the beginning of Google's Internet TV plans, through which conventional TV programs can be streamed directly via the Internet. It also reflects a budding association between the two companies due to their common interests in advertising and technology. Therefore the settlement can be viewed as a positive for Google.

Note that Google is primarily a search company where it is way ahead of the second and third players Yahoo! Inc. YHOO and Microsoft Corporation MSFT, respectively. But Google has made great strides in the video format through YouTube in an attempt to grab a higher share of digital advertising dollars.

Google currently holds a Zacks Rank #3 (Hold).