Viacom targets venture capitalists behind YouTube

SAN FRANCISCO (MarketWatch) — As part of its effort to prove that the business model behind Google Inc.’s YouTube unit depends on copyright infringement, Viacom Inc. has targeted early investors who seeded the video-sharing service and cashed in when they sold it roughly two years ago.

4:00pm 10/07/2008
 18.84, -1.62, -7.9%)
in their early days, first invested in YouTube in 2005. As a result of the start-up’s sale to Google in late 2006 for $1.65 billion, Sequoia received Google shares valued at $504 million, according to court filings.

Artis Capital Management received shares worth $83 million as a result of the sale, and TriplePoint received shares worth $6.4 million, according to court filings.
Viacom is seeking documents related to ‘proposed indemnification for copyright infringement’ relating to the Google-YouTube merger.
In court filings, Viacom said that it’s specifically seeking documents related to the firms’ “actual and potential” investment in YouTube, Google’s acquisition of the start-up and a “proposed indemnification for copyright infringement relating to this merger.”
Viacom’s effort to obtain the documents is part of an ongoing legal fight with Google that began last year.
The media conglomerate alleges that YouTube’s financial viability depends on making copyrighted works available without proper permission. Google has countered that it respects copyright, and it is developing technology to help copyright owners manage how and when their property appears on services such as YouTube.
Catherine Lacavera, Google’s senior litigation counsel, said that Viacom’s effort to obtain documents from YouTube’s early investors is “not out of the ordinary” for such litigation.
Viacom spokesman Jeremy Zweig declined to comment. Sequoia Capital spokesman Mark Dempster did not respond to a request for comment.
Viacom’s lawsuit, filed in March 2007 in New York, has proven to be a nagging headache for Google. In July of this year, Viacom won a ruling that ordered the search giant to hand over data reflecting the video-watching habits of YouTube users, igniting privacy concerns. See related story.
Now the traditionally secretive venture-capital firms that seed startups like YouTube are being pressed into divulging internal information. Viacom said in court filings that it cannot rely on YouTube to produce the documents, which date from an early, “transient” period when it was housed in a garage and at its investors’ offices. End of Story

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