Google Stashes Away $200 Million For Lawsuits With YouTube

By Jonathan Thaw

Nov. 15 (Bloomberg) -- Google Inc.'s decision to establish a reserve of more than $200 million for possible lawsuits against YouTube underscores the company's concern over the use of copyrighted clips at the video-sharing Web site.

Google, the most-used Internet search engine, said yesterday it set aside 12.5 percent of the shares issued to buy YouTube for one year to "secure certain indemnification obligations."

The company is trying to protect itself against lawsuits over copyrighted material on YouTube, a Web site where people watch everything from fountains made with Diet Coke and Mentos to dancing men on treadmills. YouTube is removing clips of shows including NBC Universal's "The Office" and creating software that lets media companies pull unauthorized videos or share in advertising sales.

"It's inevitable that they'll be making use of copyrighted material," said Lee Bromberg, an intellectual property attorney at Boston-based law firm Bromberg & Sunstein. It's 'awfully hard' to get permission from everyone whose content may appear on the site, he said.

Chief Executive Officer Eric Schmidt said last week Google 'has talked to everybody' about licensing video. His remarks came a day before Mountain View, California-based Google said in its quarterly report that 'substantial harm' may result from copyright lawsuits.

Shares of Google rose $8.27 to $489.30 yesterday in Nasdaq Stock Market composite trading and are up 18 percent this year.

YouTube's Policy

YouTube officials weren't available to comment, the company's outside public relations firm said. Google spokesmen Gabriel Stricker and Ricardo Reyes didn't respond to phone calls or e-mails seeking comment.

YouTube says it removes material from the site when copyright owners protest. It would be impossible to screen each of the 65,000 clips added each day, and the law is designed to protect the company from having to do that, spokeswoman Julie Supan said in a Nov. 6 interview.

Unauthorized clips are being scrubbed from YouTube. A search this month for NBC's 'The Office,' a spoof documentary about a paper supplier in Scranton, Pennsylvania, produced a message that said, "This video has been removed at the request of copyright owner NBC Universal because its content was used without permission."

The clips, posted by users, were removed even as NBC and YouTube work together. YouTube agreed in June to promote NBC's fall television lineup and create an official NBC channel on the site. NBC, a unit of Fairfield, Connecticut-based General Electric Co., agreed to promote YouTube on the air. Kathy Kelly-Brown, a spokeswoman for NBC Universal, didn't have a comment on the network's relationship with YouTube.

Music Videos

YouTube is also brokering other deals. The San Bruno, California-based company signed licensing agreements with music companies including Warner Music Group, Universal Music Group and Sony BMG Music Entertainment in the past two months.

YouTube also is showing news, sports and entertainment clips from CBS Corp., owner of the most-watched U.S. television network. New York-based CBS is the first TV network to test YouTube software that identifies copyrighted clips on the site. CBS can then decide whether to take down the content or leave it and share advertising revenue.

YouTube will need more of those agreements to preserve the site's diversity, a feature that spurred its popularity.

"You could go there and be fairly confident you could find anything," said Greg Sterling, an analyst at Sterling Market Intelligence in Oakland, California. If users find too many error messages or too much that has been taken off the site, that could create a 'real vulner- ability,' he said.

To contact the reporter on this story: Jonathan Thaw in San Francisco at .

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