• by Wendy Davis  @wendyndavis, June 30, 2008

The record label EMI has sued ad network VideoEgg and social networking site Hi5.com for copyright infringement based on music videos uploaded by users.

EMI alleges that the companies turn a blind eye to piracy by allowing people to upload unlicensed clips from groups like Coldplay and Black Eyed Peas. The lawsuit also alleges that VideoEgg directly profits from the clips by attaching video ads to them.

"While each of the defendants has the right, ability and legal obligation to prevent infringement of plaintiffs' copyrighted works, they have allowed infringement to go unchecked, content to profit handsomely from advertisements that appear side-by-side with infringing content," EMI alleges in the lawsuit, which was filed Friday in federal district court in New York.

VideoEgg did not respond by deadline to a request for comment.

VideoEgg provides the technology that allows user-uploaded clips to be distributed on a host of sites, including Hi5.com. VideoEgg also surrounds clips with video ads. The company's Web site tells content owners how to contact the company to request the removal of pirated content. The ad network's CEO Matt Sanchez said the company never received a takedown notice under the Digital Millennium Copyright Act from EMI, according to TechCrunch.

That law contains "safe harbor" provisions that protect Web companies from copyright infringement lawsuits if they remove pirated content at the owner's request. But the Digital Millennium Copyright Act also states that companies that directly profit from piracy may still be liable for infringement even if they do remove objectionable clips.

Here, EMI specifically alleged that VideoEgg was directly profiting from pirated clips by monetizing them with ads. But that statement alone will not necessarily carry the day, because courts have not yet determined whether companies directly profit by running ads alongside pirated clips--as opposed to, for example, selling pirated material.

The question of what constitutes directly profiting has also come up in other lawsuits, including Viacom's 16-month-old copyright infringement lawsuit against Google's YouTube. Among other charges, Viacom alleges that YouTube profited from pirated clips by building its traffic and brand name with content belonging to other parties. That case has not yet gone to trial, and the presiding judge hasn't yet issued any rulings addressing the meaning of direct profit.

EMI also alleges that VideoEgg is not proactively filtering out copyrighted material. VideoEgg has said it relies on technology from Audible Magic to block infringing content.

There is little law regarding whether Web companies' use of filters is a consideration in copyright infringement cases. Viacom has criticized Google/YouTube for not filtering out pirated clips, but the court in that case is still considering the arguments. Some lawyers say that Web companies need not filter out copyrighted material because the Digital Millennium Copyright Act immunizes them as long as they remove pirated clips upon request.