You can read the judgement, embedded at the bottom of this post. The short version is that an appeals court has ruled that a 2010 decision, which essentially gave YouTube a complete victory, may not hold up.

That 2010 decision ruled that YouTube and Google were protected by the Digital Millennium Copyright Act. The gist: That even if YouTube and Google knew users were uploading stuff that violated copyright, as long as they didn’t know about specific stuff, and took down clips when copyright owners complained, they’d be okay.

Not good enough, according to the appeals court: “we vacate the order granting summary judgment because a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website material.”

Translation: Back to the drawing board, with a case that could have a big impact on the media and tech industries. The 2010 YouTube/Viacom decision was one of several rulings that gave tech companies significant leeway under the DMCA, and has put the onus on copyright holders to police the Web for violations. If this goes the other way, a lot of Web companies, big and small, may have a lot of problems.

Meanwhile, note that Viacom and Google have figured out ways to conduct business even while the suit slogs through the court system — earlier this week, YouTube announced a deal to rent films from Viacom’s Paramount film unit. I’ll plug in comment from Viacom and Google if they provide one.

Update: Here’s the word from a YouTube spokesperson: “The Second Circuit has upheld the long-standing interpretation of the DMCA and rejected Viacom’s reading of the law. All that is left of the Viacom lawsuit that began as a wholesale attack on YouTube is a dispute over a tiny percentage of videos long ago removed from YouTube. Nothing in this decision impacts the way YouTube is operating. YouTube will continue to be a vibrant forum for free expression around the world.”

And this from Viacom: “We are pleased with the decision by the U.S. Court of Appeals. The Court delivered a definitive, common sense message — intentionally ignoring theft is not protected by the law.”

viacom youtube appeal

Viacom and Google, who have been tangling over copyright violations at YouTube since 2007, will be at it again today at a federal courthouse in New York. The two sides will start oral arguments for Viacom’s appeal of the case, which Google won decisively in a 2010 ruling.

In the past, both sides have tried digging up evidence to discredit each others’ arguments, and while both came up with plenty of embarrassing stuff, they couldn’t find a smoking gun.

So now we’re back to the basic question of the case: How much protection does the Digital Millennium Copyright Act offer YouTube, or any other site that lets users upload and distribute content they don’t own?

That question has come up to the courts in at least three different suits in recent years: Viacom versus Google, Universal Music Group versus Veoh, and EMI versus MP3Tunes. And in all three cases, federal judges have offered up the same response: The DMCA gives Web sites enormous latitude. As long as the site serves a legitimate function, it can’t be held responsible if users upload stuff they don’t own. If copyright owners find something that shouldn’t be there, and they ask the site to take the offending piece down, the site has to comply. But that’s about it.

So far, that’s very encouraging news for all manner of digerati. And in theory, it’s quite threatening to media companies and other people who create, finance and distribute intellectual property for a living.

But things might not be quite so dire for the media guys. While you can read the recent court rulings as an invitation for a free-for-all, it looks a little different in the real world.

YouTube, for instance, has spent a lot of time and money creating systems to filter content on its site, which hoovers up more than 24 hours of stuff every minute. And it works hand in hand with most big media companies to help them keep stuff they don’t want off the site — and to help them distribute other stuff they do want there.

Included in that list of companies playing very nicely with YouTube — Viacom’s sister company, CBS. And once this suit finally gets settled — which could still take years — my hunch is Viacom will want to work closely with the world’s biggest video site, too.

[Image credit: Sweetheart/Shutterstock]

What does that mean for the rest of us? In a nutshell: It’s yet another victory for Web sites and services that let users upload and access music, movies and other files under the protection of the Digital Millennium Copyright Act.

And it gives Google and Amazon additional cover for the cloud locker services they launched earlier this year, without approval from the big music labels.

In practical terms, though, I’m not sure that the decision does anything beyond maintaining the status quo. Had it gone the other way, it’s possible that it would have threatened lots of popular Web sites and services. But since it doesn’t: Carry on!

The most important news is that a third federal court has ruled on behalf of Web services whose users might use it to upload and/or access files that violate copyright rules.

In this case, it’s MP3Tunes fending off EMI Music. But it’s the same basic story as the Veoh/Universal Music and YouTube/Viacom cases: A judge has ruled that the DMCA doesn’t require Web services to figure out which files that users upload have the right to be there.

Assuming all of those rulings stand up (Viacom is appealing the YouTube decision, and this one will likely go back into the court system, too), this will give Web sites enormous flexibility. The rulings don’t give users unlimited access to stuff they don’t own, though, and they do require sites to pull down files if copyright owners complain.

In this case, Judge William Pauley ruled that MP3Tunes, which operates a “locker” music service similar to the ones Google and Amazon launched earlier this year, was liable for some copyright infringement, because it didn’t remove specific songs EMI had flagged. And he said MP3Tunes founder Michael Robertson was also liable, because he knowingly uploaded songs he didn’t own.

That means Robertson and his company could still end up paying significant penalties, even though they won most of their case.

Pauley’s ruling also briefly blessed the construction of the locker service itself. In short, he said that users have a right to upload their own songs to the cloud and play them back, even if the service they used to do it doesn’t have an arrangement with the music labels.

That’s good news for Google and Amazon, because they don’t have deals with labels for their services. But it didn’t seems like they were going to need them, anyway.

Though music executives huffed and puffed after the lockers launched, they haven’t taken legal action against the companies. They also haven’t pursued mSpot, a small start-up that offers something similar.

I’ve seen some reports that suggest that Pauley’s ruling gives Google and Amazon the ability to do a “scan and match” service, where users don’t have to laboriously upload their songs to a locker — instead, the service would simply look at what’s on their hard drive, and give them access to a copy stored on the site.

That’s what Apple’s new iTunes Match service does (among other things). And Apple hammered out a deal with the labels to make that happen.

But as far as I can tell, the only additional leeway that Pauley gives to Google and Amazon is the ability to save storage space on their own servers, by using “deduplication” technology — a “standard data compression algorithm that eliminates redundant digital data.”

That’s not nothing — it’s always nice to save storage space — but it won’t fundamentally change what they’re offering to consumers, who will still have to spend a long time moving their stuff into the cloud.

Big picture: If the idea of storing all of your music on a remote server — so that you can listen to it whenever you want, wherever you want — is appealing, this ruling is good news. It’s also good news if you like watching videos on YouTube, listening to songs on Tumblr, or using lots and lots of other Web sites that depend on stuff users upload. But since you can do all of that already, you’re not going to notice a change.

“To all our international friends, we’re sorry you can’t use turntable right now due to licensing constraints,” Turntable told users via Twitter. “Trying to get you back in asap.”

The bad news: I wouldn’t count on international access opening up again for a long time.

The good news: This is good news. It’s another sign that Turntable is trying to figure out how to use the Digital Millennium Copyright Act as a way around having to negotiate onerous music licenses, which improves its chances for survival.

Turntable, which lets people play and listen to just about any song they want, is trying to position itself — legally, at least — as a “non-interactive” Web radio, which would be shielded by the DMCA.

But the DMCA only covers use in the U.S., and there’s no equivalent licensing option available overseas. Which means either hammer out license deals in every country it wants to operate in, or turn the company into a U.S.-only operation.

This is exactly what Pandora, which also uses the DMCA for licensing, had to do back in 2007. And that seems to have worked out okay.

It’s worth noting that although Pandora is now on a $200 million revenue run rate, and reopening international operations is part of the company’s long-term plans, it is cautioning investors not to expect anything soon.

“Copyright and licensing laws vary from country to country, making international expansion a complex task, and we expect the process for securing licensing rights will require a number of years,” Pandora warns, via an SEC filing. “We are working to obtain the appropriate rights with economics that work for us, with the objective of eventually launching Pandora internationally.”

Meanwhile, whether Turntable will be able to convince the music industry that it is indeed protected by the DMCA remains an open question. It has been trying to comply with the restrictions on the fly, making adjustments as it soars in popularity. Recently, for instance, it stopped allowing users to play music in “rooms” without other listeners.

Will those be enough? We don’t know.

Here, via Twitter, is some skepticism from a knowledgable observer with skin in the game: Sony CFO Rob Weisenthal. “I love turntable.fm but it is tough to see how the DJ is DMCA compliant,” he wrote this morning, before inviting followers to join him in “The Hip Hop Lounge.”

And here’s the counterargument: Surf-singing dude Jack Johnson’s Brushfire Records music label giving the service a big wet kiss.

Brushfire’s stance is the right one, obviously. Of course music labels should embrace a service that lets music fans turn other music fans on to new music. But that doesn’t mean it’s going to happen.

I’d say it’s astonishing no one has done it before, but it’s not: The music business has a long tradition of resisting good ideas. So how did the Turntable.fm guys finally get the industry on board?

They haven’t. The start-up doesn’t have deals in place with any labels or publishers.

[Record-scratch sound here.]

This doesn’t mean that Turntable.fm is illegal. The company believes it’s obeying the law, and it might be right. But this thing has gotten so buzzy, so fast, that it’s going to be hard for the label lawyers to stay away.

Here’s how Turntable got started, how it works, and why it might be able to stick around. But if you haven’t already, go play with it now, just in case.

The backstory:

Turntable started as Stickybits, which did something hard to explain involving barcodes and geotagging, and seemed more like an art project than a business. Last year it raised nearly $2 million.

This spring, CEO Billy Chasen abandoned that idea and used his remaining money to build Turntable. This one is easy to describe.

Here goes: You and up to four other people take turns streaming just about any song you want for anyone who wants to listen, for free, in one of the site’s “rooms.” A deal with MediaNet, a digital content provider, gives Turntable access to millions of songs, and if the song you want to play isn’t there, you can upload your own MP3 to the site and play that. There’s a chat feature so you can compare notes, and you can “follow” your pals.

That’s about it. There’s a “gamification” element where you can collect points and rewards for playing music people like, but that’s definitely secondary. The real thrill is sharing music, and discovering music.

The law:

So how can any of that be legal without label deals? In short, Chasen believes he’s able to run the service under the protection of the Digital Millenium Copyright Act (DMCA) — the same law that lets Pandora operate without label deals — as a “non-interactive” Web radio service.

That description will seem odd to most people who’ve used Turntable. Because the service doesn’t seem like radio at all, and it is most definitely interactive.

You pick the songs you want to play, and the order you want to play them. And if you’re really into it, you’ll change that on the fly, based on the song the person before you just played.

But if you spend enough time mucking around with Turntable, you’ll start to run into small constraints here and there. You can’t play music in a room by yourself, for instance. And there’s a limit on the number of times you can play a song by a single artist per hour. And you can’t see the next song another user has cued up.

None of these limits seem like real limits, because they don’t detract from the service’s core appeal. But these are all rules that “DMCA-compliant” Webcasters work under, and they’re evidence that Chasen is trying to do the same thing. If it works, he’ll simply pay music owners a flat fee for each song he streams every month, just like Pandora does.

The precedent:

In addition to Pandora, Chasen has another model to work with here: 8tracks, a three-year-old service that also lets you play any music you want, and listen to other people’s music, for free, using a DMCA license. The main difference is that instead of playing the songs live, you create “mixtapes,” which other users play back on their own time.

8tracks never got the same kind of buzz that Turntable is getting, but it has diligently built up a fan base, and now draws more than two million users a month. Just as important, it’s been able to stay out of legal trouble. I think it’s a pretty great story.

There’s a technical difference between 8tracks and Turntable, too: 8tracks relies on songs its users own and upload, while it seems like most people on Turntable are using the tracks Chasen and Medianet provide. That distinction seems like a small one, but some music biz folks I’ve talked to have pointed to that as a red flag.*

The problems:

The risk for Turntable is the same one every music start-up without label deals faces: Not that a court will find them guilty of something, but that they’ll have to spend a lot of time and money on lawyers.

And while it seems blindingly obvious that Turntable.fm is a great thing for the music business — it lets music fans tell other music fans about music they like, the best possible advertising — I wouldn’t put it past a label or two to gripe about the service. Particularly if it makes the leap from the digerati into the mainstream.

(It’s important to note here that there are lots of traditional music business folks who are resentful of Pandora’s success, even though the company pays out more than half its revenue to copyright owners.)

If Turntable does sidestep legal challenges, it will have to make money one day, too. This is also an issue, since no one’s actually proved that free, ad-supported Web music can be profitable.

But I’m much less worried about this one. If it gets to that point, the Turntable guys should at least be able to tell advertisers that their ads will be much more effective, since Turntable users spend a whole lot of time looking at their screens.

Does any of this matter?

I’m an unlikely candidate to get swept up in the buzz around a hot Web site.

I’m reflexively cautious about that kind of behavior, and it’s easy to point to buzzy start-ups that shot up, then cratered (Myspace), or never got above the buzz stage to begin with (Chatroulette). And even if Turntable does stick around, it’s possible that it’s just a feature and not a business.

But this one feel pretty special. We’ve had plenty of music sites, and plenty of social sites, but none that mixed them well together. I hope they make it work.

——————————

*Don’t want to bog this down in legalese, but note that Google and Amazon’s music locker service, which doesn’t have the labels’ blessing, relies on music its users provide. But Apple got the labels’ blessing to provide a “scan and match” service, where a single master track could be used by multiple listeners. I wouldn’t be shocked to hear a music label lawyer tell Turntable its model is closer to Apple’s, and requires a separate deal.

In late November, Twitter started contributing its DMCA takedown letters to Chilling Effects, the online clearinghouse jointly organized by the Electronic Frontier Foundation and many universities and law schools.

Chilling Effects says it received records of 11,500 total takedown notices in 2010, as of Dec. 15. Major contributors include Google, Yahoo and Digg.

Techdirt’s Mike Masnick flagged the Twitter takedowns, noting that many of them are for tweets that contain links to copyrighted material. Why go to Twitter and not the content host itself? he asks.

Chilling Effects founder Wendy Seltzer said she believes Twitter has been getting the takedown notices for a while but only recently started submitting them for public posting.

Using Twitter to get out the word about content may well be a growing phenomenon. In August, BitTorrent released a tool for more easily tweeting about torrent files. A friend of mine who’s an avid Green Bay Packers fan recently told me about a Twitter account he follows to find streams of football games he doesn’t have access to on TV.

“It’s interesting that they are receiving takedowns, given that most of what they’re hosting is little 140-character bursts of expression,” Seltzer said on a phone call yesterday. “Copyright holders are pushing the complaint out further, not going after the user who hosted, or even the user who pointed, but going after Twitter because it’s made itself a central location for the collection of information.”

Seltzer said that under the U.S. Supreme Court Grokster ruling, it’s possible that users could end up on the wrong side of the law for inducing infringement by posting a link with the intent to encourage their Twitter followers to access or download infringing material. But as long as Twitter complies with takedown requests, it should be within the safe harbor rules of the DMCA, which protect providers of information tools, said Seltzer. “Twitter doesn’t have an intent to infringe, so they would have a solid argument.”

A spokesperson for Twitter declined to comment, citing mellowness in the office over the holidays.

“Apple’s goal has always been to insure that our customers have a great experience with their iPhone and we know that jailbreaking can severely degrade the experience,” the company said in a statement given to Cult of Mac. “As we’ve said before, the vast majority of customers do not jailbreak their iPhones as this can violate the warranty and can cause the iPhone to become unstable and not work reliably.”

So you’re not going to go to jail for jailbreaking your iPhone, but you may well end up at the Apple Store dealing with an unsympathetic tech. As Greg Joswiak, Apple (AAPL) vice president of iPods and iPhone products and marketing, argued during a rule-making hearing last year, “When you hack the OS and remove all protection, anything can happen….The OS runs everything. And this allows any app, regardless of its functionality, its reliability, or even its safety, to run.”

You can read all of U.S. District Court Judge Louis Stanton’s decision at the bottom of the post, where I’ve embedded the ruling. Short version: Stanton buys Google’s longstanding argument–that the Digital Millennium Copyright Act protects YouTube from Viacom’s claims. And he seems to agree with Google (GOOG) on almost every point. There’s very little in his ruling that Viacom (VIA) will be happy about.

Even though YouTube and Google executives knew the site had plenty of clips that violated copyright, “mere knowledge of prevalence of such activity in general is not enough” to support Viacom’s claims, Stanton wrote in a 35-page decision.

That’s because the DMCA, signed into law early-on in the first Web boom in 1998, grants “safe harbor” to service providers that don’t know about specific copyright violations and that fix copyright violations when they learn about them. Since YouTube relies on users to upload clips to the service and takes down clips if copyright holders complain, it’s in the clear, Stanton says.

If the ruling holds up, it’s a big blow to traditional copyright laws. Or spun another way, it’s a huge victory for technology companies using the DMCA as a defense.

Google’s statement:

Today, the court granted our motion for summary judgment in Viacom’s lawsuit with YouTube. This means that the court has decided that YouTube is protected by the safe harbor of the Digital Millennium Copyright Act (DMCA) against claims of copyright infringement. The decision follows established judicial consensus that online services like YouTube are protected when they work cooperatively with copyright holders to help them manage their rights online.

This is an important victory not just for us, but also for the billions of people around the world who use the web to communicate and share experiences with each other. We’re excited about this decision and look forward to renewing our focus on supporting the incredible variety of ideas and expression that billions of people post and watch on YouTube every day around the world.

Viacom’s statement:

We believe that this ruling by the lower court is fundamentally flawed and contrary to the language of the Digital Millennium Copyright Act, the intent of Congress, and the views of the Supreme Court as expressed in its most recent decisions. We intend to seek to have these issues before the U.S. Court of Appeals for the Second Circuit as soon as possible. After years of delay, this decision gives us the opportunity to have the Appellate Court address these critical issues on an accelerated basis. We look forward to the next stage of the process.

So what about all of those interesting and entertaining documents both sides filed in the three-year suit and released to the public earlier this year? As I argued earlier, the bulk of them weren’t really relevant at all, and Stanton spends almost no time discussing them.

One worthwhile exception: He does use one email from Viacom attorney Michael Fricklas to help bat away the network’s complaint that YouTube was the equivalent of Grokster, the file-sharing network beaten down in a 2005 Supreme Court decision.

“The difference between YouTube’s behavior and Grokster’s staggering,” Fricklas wrote in a 2006 email. And Stanton agrees.

msj_decision

Earlier this week, the three companies filed amicus briefs in support of Google and YouTube, which are defending themselves against a $1 billion copyright lawsuit by Viacom. In the briefs, they urge the judge presiding over the case to dismiss Viacom’s suit, claiming to do otherwise is to violate protections given Google under the Digital Millennium Copyright Act.

From the briefs:

[Viacom's] legal arguments, if accepted, would retard the development of the Internet and electronic commerce, create uncertainty for service providers regarding their legal exposure for alleged infringements, and inhabit the growth and development of user-centric online models that, day after day, make the Internet and the world more democratic.

The expression of support by Yahoo (YHOO), Facebook and eBay (EBAY) for Google follows a similar move by Hollywood. Earlier this month, Warner Bros., NBC Universal, Disney, the Screen Actors Guild and Directors Guild of America filed amicus briefs of their own arguing, as Viacom (VIA) has, that Google (GOOG) is not protected by the DMCA, which shields Internet service providers from liability for copyright violations committed by users.

The friends of the court in this case, then, are aligned on both sides. All that remains is to determine whether the DMCA protects YouTube. And Viacom is confident that the court will determine that it does not.

“The courts have been clear that creating and building a Web-based business on the intellectual property of others is illegal,” a Viacom spokesperson told Bloomberg. “That is exactly what YouTube did in its formative years. Nothing in this case threatens the principles of the DMCA or the ability of legitimate Internet-based businesses to flourish.”

On Friday, Judge Marilyn Patel, who in 2000 issued the injunction that shut Napster down, dismissed Real’s antitrust claims against Disney (DIS) and other movie studios over their alleged collusion to block RealDVD, the company’s “legal” DVD ripper.

The studios and the DVD Copy Control Association, she found, were well within their rights to band together to prevent what they believed to be illegal copying of their content. Real was foolish to think otherwise, and its claim that it has suffered significant losses because of its inability to sell a product of questionable legality is, in a word, ludicrous.

Which is not to say that consumers should not have the right to copy and back up films they have legally purchased, just that the courts have never looked favorably on those who claim that right through a technology that bypasses DVD copy protection and consequently violates the Digital Millennium Copyright Act.

“Real’s purported injury stems from its own decision to manufacture and traffic in a device that is almost certainly illegal under the DMCA,” Patel wrote. “In the circumstances of this case, there is no allegation Real could make that would give it antitrust standing.”

Court Opinion Dismissing Realnetworks Antitrust Case

PREVIOUSLY:

• RealNetworks Still Barred From the DVD Backup Business. Why Does RealNetworks Want to Be in the DVD Backup Business?
• RealDVD Launch Buffering…Buffering…
• Rent. Rip. Restraining Order.
• StealDVD? Well, You Were Asking for It…
• Sue. Rent. Rip. Return.
• Rent. Rip. Return.

Both sides filed the requests, as has been expected for some time, at the end of last month and is a sign that years of laborious discovery and depositions have come to a close.

There’s not much to the filings themselves:

• Google’s (GOOG) document reiterates the company’s initial argument. The search giant says it doesn’t knowingly store or play copyrighted clips on the site, and if it does, it is protected by the Digital Millennium Copyright Act. Google also cites last fall’s ruling in the Veoh/Universal Music Group case, in which a court ruled in favor of the video-sharing site.
• Viacom’s (VIA) document reiterates its initial argument, which is that Google and YouTube knew what they were doing and profited from it, which means the DMCA does not protect them. And perhaps it says something more interesting. Hard to tell, since U.S. District Court judge Louis Stanton has redacted more than a page of the document, as you can see here:

Wonder what that says? Me too.

Viacom filing:
Via 1710
Google filing:
Goog1710

Under the terms of the agreement, Psystar will pay Apple (AAPL) damages totaling $1,337,550 for all the copyright, DMCA, and breach of contract claims against it and another $1,337,500 in attorney fees and additional damages. In return, Apple will drop all its trademark, trade dress and unfair competition claims against Psystar. Cupertino has also agreed not to “seek to execute on the money judgments…until any and all appeals in this matter are concluded or the time for filing any such appeal has lapsed.”

Not that Apple is likely to collect that money, anyway. As I’ve noted here before, Psystar’s total assets, according to its bankruptcy filing, are no more than $50,000.

The agreement if full, below.

Apple Psystar Settlement Agreement

Depends on who you ask, of course.

Executives at Veoh say Judge A. Howard Matz has given them a new lease on life, and at least some of the company’s investors are doing some chest-beating. Universal, the world’s largest music label, says it’s confident it will win an appeal.

You can get the same split opinion by asking two different companies that happen to be locked in a similar fight. Executives at Google’s (GOOG) YouTube, which is trying to fend off a copyright suit filed by Viacom (VIA), say the Veoh ruling bolsters their case. You can guess what Viacom says.

The gist of the fight: Universal says Veoh didn’t try hard enough to keep illegally uploaded material off the video site; Veoh says it made a good-faith effort. Matz agreed with Veoh and tossed out Universal’s claims.

Even if you disregard the posturing, it’s fair to say there’s a genuine debate over the ruling’s meaning. Veoh, along with some of my bloggy colleagues, is treating the decision as the final word on Web copyright disputes, or at least those that involve the Digital Millennium Copyright Act.

And Matz certainly slapped Universal around. But it’s worth noting that copyright owners have lost Web cases in the Ninth District before, but ultimately won on appeal. Ask Grokster, the now-defunct file-sharing network that dissolved after a 2005 Supreme Court ruling.

You can read all of Matz’s judgment at the bottom of this post. But this excerpt, in which he argues that simply having illegal material on your site isn’t a crime, and neither is knowing about it (at least, in a general sense), gives you a good idea of Matz’s thrust and tone:

No doubt it is common knowledge that most websites that allow users to contribute material contain infringing items. If such general awareness were enough to raise a “red flag,” the DMCA safe harbor would not serve its purpose of “facilitat[ing] the robust development and world-wide expansion of electronic commerce, communications, research, development, and education in the digital age,” and “balanc[ing] the interests of content owners, on-line and other service providers, and information users in a way that will foster the continued development of electronic commerce and the growth of the Internet.”

Legal debate aside, the ruling does give a practical benefit for Veoh. It allows the company to fetch a higher price on the auction block.

CEO Dmitry Shapiro has been shopping the site to bidders over the summer, and as of a few months ago, he was willing to accept less than the $70 million investors like Time Warner (TWX), Goldman Sachs (GS) and former Disney (DIS) CEO Michael Eisner have poured into the site.

Selling a Web video site in 2009 is a tough challenge without a handicap, but the lawsuit was a big one. It was a huge time-and-money suck–Veoh may have spent as much as $6 million fighting the case in the last two years–and more important, the unresolved case was a huge liability. Who wants to buy a lawsuit?

Now, Shapiro says, Veoh’s options include not selling at all. He insists that some of Veoh’s existing backers are willing to recapitalize the company and that new investors might join in as well.

I’ll take him at his word, but if I had to bet, I’d wager that Veoh ends up getting acquired sooner than later. Maybe quite soon–the company has a board meeting today.

Wonder what they’ll talk about?

VEOH –

Still here? How about that? You get a bonus video! (But be warned: Pacino chews up a lot of scenery here, and there is some impassioned cursing.)

On information and belief, PSYSTAR alleges that APPLE intentionally embeds code in the Mac OS that causes the Mac OS to malfunction on any computer hardware system that is not an Apple-Labeled Computer Hardware System. Upon recognizing that a computer hardware system is not an Apple-Labeled Computer Hardware System, the Mac OS will not operate properly, if at all, and will go into what is colloquially known as ‘kernel panic.’

PSYSTAR is informed and believes, and thereon alleges, that APPLE is engaged in anticompetitive conduct that prevents the proper operation of the Mac OS on any computer hardware system that is not an Apple-Labeled Computer Hardware System–a Mac OS Capable Computer Hardware System–thereby forcing customers of the Mac OS to purchase–and only purchase–an Apple-Labeled Computer Hardware System if they wish to have the Mac OS operate sans kernel panic or an infinite loop.”

That’s an intriguing allegation. Risky though, since it’s also an admission that Psystar has circumvented the technological copyright-protection measures built into OS X, just as Apple claims in its amended complaint against the company. Apple contends Psystar has done so illegally, in violation of The Digital Millennium Copyright Act. Psystar says that’s impossible because the kernel panic-forcing code at issue here isn’t a copyright-protection measure.

Who’s right? Who knows? But if it’s Apple, then Psystar presumably is guilty of circumventing Apple’s copyright protection systems under the DMCA. And that’s a felony, because Psystar profited from the circumvention.

The judge disagreed. And his reasons for doing so will undoubtedly come into play in the Viacom case and others as well. “Veoh has simply established a system whereby software automatically processes user-submitted content and recasts it in a format that is readily accessible to its users,” the judge wrote. “Veoh preselects the software parameters for the process from a range of default values set by the third-party software. … But Veoh does not itself actively participate or supervise the uploading of files. Nor does it preview or select the files before the upload is completed. Instead, video files are uploaded through an automated process which is initiated entirely at the volition of Veoh’s users.”

Google (GOOG) was understandably quite pleased with the ruling: “It is great to see the Court confirm that the DMCA protects services like YouTube that follow the law and respect copyrights,” Zahavah Levine, YouTube’s chief counsel,” said in a statement.

Viacom (VIA) was equally displeased, understandably. “Even if the Veoh decision were to be considered by other courts, that case does nothing to change the fact that YouTube is a business built on infringement that has failed to take reasonable measures to respect the rights of creators and content owners,” the company said in a statement. “Google and YouTube have engaged in massive copyright infringement–conduct that is not protected by any law, including the DMCA.”

The issue: Viacom wants to get paid more than Google wants to pay it for all of those fuzzy, two-minute clips from programs like “The Daily Show” that users post to YouTube. The companies tried to negotiate a deal, but the talks failed, so Viacom is suing for $1 billion.