According to Google CEO Eric Schmidt, Google willingly paid a $1bn premium to acquire YouTube back in 2006. And if Viacom has its way, he’ll soon be paying another $1bn ‘premium’.

In the search giant’s legal battle with the media giant over copyright infringement, Viacom has fired a potentially devastating salvo: it claims it has evidence that YouTube employees were uploading copyrighted content without authorization.

That’s according to an article published by CNET’s, whose sources also claim that “internal YouTube e-mails indicate that YouTube managers knew and discussed the
existence of unauthorized content on the site with employees but chose not to
remove the material

If Viacom does indeed have these emails, Google’s legal defense — that it is protected by the Safe Harbor provisions of the Digital Millennium Copyright Act — may be shattered. If YouTube was aware of infringing content and refused to remove it, and indeed may have even employed infringers, it may be difficult for YouTube to meet the key criteria that must be met for YouTube to be protected by the Safe Harbor provisions. Specifically, such circumstances would appear to create ‘actual knowledge‘ of infringing activity on YouTube’s part, something that service providers can’t have if they seek indemnity for third party infringement under the DMCA.

Needless to say, Google isn’t happy about the leak of this information and a YouTube spokesman told that “the characterizations of the supposed evidence, made in violation of a court
order, are wrong, misleading, or lack important context and notably come on the
heels of a series of significant setbacks for the plaintiffs
“. Nonetheless, the stakes are getting pretty high in this case and if Viacom’s rumored smoking guns do exist, one has to wonder whether Google will aggressively move to settle sooner or later.

Unfortunately for Viacom, a victory against Google would likely only be a one-time jackpot. And that means it will still need to continue developing and experimenting with digital strategies. US courts thus far seem inclined to extend the Safe Harbor provisions of the DMCA to online video sharing services like YouTube. While the judge in the YouTube case is not required to apply the favorable rulings received by companies like Veoh, it does appear that some of Viacom’s strongest arguments are not as strong as they might have seemed in the past. So while smoking guns could boost Viacom’s chances of prevailing in this dispute in some fashion, it can’t rely on smoking guns forever.

Assuming that courts continue to apply the DMCA to video sharing services and the United States Congress doesn’t step in to legislate otherwise, the Viacoms of the world will still need to figure out how to thrive in a digital world. Smoking gun or not.

Photo credit: Scubabix via Flickr.