• by Wendy Davis  @wendyndavis, February 2, 2009

Winning a standoff against Fox News, the news startup Progress Illinois got its YouTube channel back late last week. But the victory might prove short-lived, if Fox brings new complaints against the liberal news site.

The channel was restored after Fox failed to pursue its claim that Progress Illinois infringed copyright by embedding brief excerpts of Fox News programs in blog posts. Progress Illinois said the clips did not violate Fox's copyright because they were a "fair use" of the material.

Progress Illinois's lawyer, Paul Alan Levy of Public Citizen, said he didn't expect the site to change its procedures. "Progress Illinois intends to continue excerpting from Fox, as it always has, subject to fair use restrictions, just as it always has," he told Online Media Daily. But Fox might have other ideas. "We are continuing to review the situation," a company spokesperson said.

Fox declined to elaborate on its plans, but Levy said that Fox wants an outside company--other than YouTube--to host all Fox News clips. "The third-party service would then incorporate ads from Fox advertisers into any excerpt made from Fox material and Fox would receive the proceeds from the ads," Levy wrote in a blog post about the case.

Fox is believed to be negotiating with video-clipping service RedLasso to serve as host for news clips. Fox and NBC Universal sued RedLasso last year, but the case was resolved after RedLasso agreed to stop distributing the networks' clips until it reached a licensing agreement with them.

If Fox is able to reach a licensing deal with RedLasso (or another video host), Project Illinois' fair use argument might be weakened, because one of the factors that courts examine when determining fair use is whether there is a market for the material.

Fox's dispute with Progress Illinois dates to last November, when Progress Illinois wrote a blog post about corruption in Cook County, Ill. in which it embedded a 30-second excerpt from a show by the local Fox affiliate, WFLD. The post discussed Fox's exposé and linked back to the company's site.

Fox demanded YouTube take down that clip and two subsequent ones. After YouTube received a third complaint, it removed Progress Illinois' channel, resulting in the temporary deletion of around 100 clips, including original videos and footage from all of the major networks.

Progress Illinois responded by filing a counter-notice asserting that it had made fair use of the clips, and therefore was not infringing on Fox's copyright. The site also began using Blip.tv to host clips. When Fox did not respond to the counter-notice, YouTube restored all of the clips.