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The predicted backlash against the infringement of copyright by video sharing sites has begun, with Universal Music launching legal action in the US against both Grouper.com and Bolt.com.

Universal, whose artists include U2 and Mariah Carey, is seeking compensation of up to $150,000 for each incident of copyright infringement, as well as demanding that the sites cease using their content.

Universal has accused both sites of building up their traffic by encouraging users to share music videos without gaining permission from the artists or compensating the company for the use of its content.

A Universal spokesman explained the company’s position:

“Grouper and Bolt... cannot reasonably expect to build their business on the backs of our content and the hard work of our artists and songwriters without permission and without compensating the content creators."

The growth of user-generated video sharing sites has presented major media companies with a dilemma. Such sites mean their artists can be exposed to new audiences, but they carry the risk of undermining copyrights held by the companies.

One notable absentee from the lawsuit, YouTube, has managed to placate Universal by agreeing to pay licensing fees and share associated advertising revenues for use of its artists’ work.

Recent research by comScore showed that Bolt.com had 8.1 million unique visitors in August while Grouper had 1.8 million. YouTube, by comparison, had 72.1 million visitors.

Grouper was bought by Sony earlier this year, while Bolt remains a private company. Both are significantly smaller than YouTube, which Mark Cuban expects to be in the firing line, at some point.

Cuban has suggested that the content owners may sue the smaller players in the video sharing space, to be able to force through deals with Google/YouTube, on their terms.

One look at last year's Grokster vs MGM case suggests that there's no way any of these sites will be able to successfully argue that 'hey, we're just a platform'. Grokster lost, despite the valiant efforts of Wayne Rosso and, coincidentally, Mark Cuban, who supported Grokster (with hard cash).

Watch this space, legal eagles.

Graham Charlton

Published 18 October, 2006 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

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