Investors not liable in Veoh lawsuit

If you’re looking to invest in a video sharing website that risks involving copyright infringement, worry not. A federal judge has declared that investors in Veoh — a YouTube-like website for user-submitted content that also pipes in videos from Hulu — aren’t liable in Universal Music Group’s lawsuit against the site, Ars Technica reports.

The suit resembles Viacom’s legal battle against YouTube, in that Universal claims Veoh built its business "on the back of others’ intellectual property." The record label channels "Napster, Aimster, KaZaA, and Morpheus" in saying the website engaged in massive copyright violations. Veoh, like YouTube, says it can’t control what users upload but responds to takedown requests.

Judge A. Howard Metz wrote in his decision that the investors would only be liable if they actually encouraged copyright infringement. Simply providing money doesn’t put them in legal trouble, he wrote. Further, there’s no duty under common law for investors to actually remove copyrighted content.

If Metz had allowed investors to be named in the suit, it could endanger future ventures where user-generated content is involved. After all, what venture capitalists would want their hands in something that would surely land them in court?

Ars reports that the lawsuit isn’t going Universal’s way. Earlier, the record label argued that Veoh isn’t protected under Digital Millenium Copyright Act "Safe Harbor" provisions because the company doesn’t simply host users’ copyrighted files, it transcodes them — albeit automatically — after being uploaded. Metz struck down that argument last month.