All Things Digital

Looks like Google has a new club with which to smite Viacom and the $1 billion lawsuit it’s brought against YouTube. A federal judge has ruled that online video-hosting site Veoh is not guilty of copyright infringement for material uploaded by users in a case that has marked similarities to Viacom’s against Google and YouTube. IO Group, whose videos had been uploaded without permission to Veoh, claimed that the company was liable for those infringing videos. Specifically, it argued that Veoh, because it transcodes those videos to Flash before hosting them, does not qualify for the safe harbor provisions of the 1998 Digital Millennium Copyright Act, which would otherwise have shielded it from liability as long it removed infringing material when alerted by a copyright holder.

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.”

Entrepreneur Mark Cuban once said “only a moron would buy YouTube,” the implication being that Google was exactly that for purchasing the popular video site. And some would say it is. To date, the company has seen little but accusations of copyright infringement, litigation and skyrocketing legal fees from its investment. It’s been two years since the $1.65 billion acquisition and Google (GOOG) has yet to truly monetize YouTube. And, interestingly enough, that doesn’t seem to bother the company at all. In an interview with Mad Money, Google CEO Eric Schmidt said the Google was comfortable with YouTube being a loss leader. “Eventually we’d like to make money out of it,” Schmidt said of YouTube. “But if we don’t, the fact that so many people come to YouTube means they ultimately come to Google and click on ads. So we don’t worry about all that traffic going to YouTube. I’d be worried if people weren’t using YouTube. But since it’s an enormous success globally we know we will benefit.”

Plus, said Schmidt, Google’s attention is best focused where the real money is, or will be soon: mobile advertising. “We can make more in mobile than desktop, eventually,” Schmidt said. “The reason is because the mobile device is more targeted. Think about it: You carry your phone with you everywhere. It knows all about you. We can use that to do a very, very targeted ad. Over time, Google will make more money from mobile advertising.”

Well, this certainly wasn’t what Hasbro had in mind when it sued Scrabulous for copyright infringement. No, I’d guess boycotts, malicious attacks on the official online version of Scrabble, and the rebirth of the knockoff of the classic board game under a new name were about the last things on Hasbro’s mind. Yanked from Facebook earlier this week in response to a legal request from Hasbro, Scrabulous has returned to the social network with a new name and a new look. Rebranded as Wordscraper, Scrabulous still recalls Scrabble, but with its new design and rules it may now be different enough from the board game to deflect Hasbro’s lawsuit.

“Copyrights are not supposed to protect board games,” intellectual property attorney Pete Kinsella told CNet News.com. “What copyrights protect is the expression of an idea rather than the idea itself. The law allows people to design around things, and particularly when there isn’t patent protection, the law has great incentive to design around things by making things somewhat different.”

Which is an unfortunate state of affairs for Hasbro (HAS): The newly launched Wordscraper has, in a very short time, already signed up 3,569 users. And it will surely gather more as word of its debut spreads. What will the game company do now? What will it do if Wordscraper’s creators release it as a true board game?

“Scrabble: Every Word’s a WINNER!”

Except for Scrabulous, apparently. The online knockoff of Hasbro’s 75-year-old word game has been removed from Facebook at the game-maker’s request. “In response to a legal request from Hasbro, the copyright and trademark holder for Scrabble in the U.S. & Canada, the developers of Scrabulous have suspended their application in the U.S. and Canada until further notice,” Facebook explained in a statement.

Not exactly a surprise, given recent events. Last week, Hasbro filed suit against Scrabulous creators Jayant and Rajat Agarwalla, claiming trademark and copyright infringement. “Hasbro has an obligation to act appropriately against infringement of our intellectual properties,” said Barry Nagler, Hasbro’s general counsel, at the time. “We view the Scrabulous application as clear and blatant infringement of our Scrabble intellectual property, and we are pursuing this legal action in accordance with the interests of our shareholders, and the integrity of the Scrabble brand.”

An understandable view. Scrabulous is, let’s face it, trading on Scrabble’s name and conceit. And, until it was pulled, it had over two million users and was generating over $25,000 per month in revenue–for someone other than Hasbro. That said, when was the last time you played Scrabble offline?

If you answered, “I can’t recall,” or “at Aunt Marge’s house when I was eleven,” you’re probably like a lot of other folks out there who only rediscovered the game because of Scrabulous. And when you think about it that way, Scrabulous could have been the perfect licensing opportunity for Hasbro (HAS), had the company decided to view it as that, instead of an affront to its intellectual property. Two-million- users-and-growing is a hell of a lot better than the 8,900 users the official Scrabble Facebook app has garnered since its launch earlier this month.