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Google: 'Yeah, We Might Get Sued'

In a document filed Wednesday with the Securities and Exchange Commission (SEC) , Google (Nasdaq: GOOG) warns investors that its purchase of YouTube might paint a target on its back for lawyers representing video and music copyright holders.

YouTube and sites like it have become notorious for wittingly or unwittingly hosting pirated video and music content. (See Will Content Deals Save YouTube?)

"Our planned acquisition of YouTube may also subject us to additional copyright claims upon the closing of the transaction," the filing reads.

"Adverse results in these lawsuits may include awards of substantial monetary damages, costly royalty or licensing agreements, or orders preventing us from offering certain functionalities, and may also result in, or even compel, a change in our business practices, which could result in a loss of revenue for us or otherwise harm our business," the 10-Q reads. (See YouTube: Who's Next?)

Google CEO Eric Schmidt has downplayed the risk since his company bought YouTube for $1.65 billion in October. Most recently, Schmidt denied rumors his company has set up a legal defense fund in case the lawsuits start pouring in when the YouTube deal closes in the fourth quarter.

The filing also makes clear that Google's own video service has been the target of at least one copyright infringement lawsuit. The suit was filed by two independent French filmmakers asking for damages of €150,000 (US$193,000). (See Google TV.)

"This is a small lawsuit over a single video that appeared briefly," says Google spokesman Ricardo Reyes. "We have procedures in place that allow copyright owners to tell us if their content is placed on Google Video without authorization. When we receive appropriate notice, we quickly remove the content."

Reyes says he isn't aware of similar lawsuits filed against YouTube. YouTube representatives did not respond to requests for comment.

The Google SEC filing also contains an interesting nugget about Sequoia Capital partner Michael Moritz, a member of Google's board of directors who likely helped bring YouTube and Google together.

Moritz's firm is the sole venture capital investor in YouTube; it's invested $11.5 million in two rounds since last November. Sequoia was also an early investor in Google. Moritz sits on the boards of both companies.

After making the introductions, Moritz recused himself by waiting outside while his fellow Google board members decided to buy YouTube. (See Google on YouTube: It'll Ad Up .)

"Michael Moritz, a member of our board of directors, is a general partner of Sequoia Capital, whose affiliates are stockholders of YouTube," the filing reads. "Mr. Moritz recused himself from board decisions regarding this planned acquisition." (See Google Gone Gaga.)

Analysts say Sequoia's stake in YouTube grew to as much as $660 million in value after the sale of the startup to Google for $1.65 billion.

— Mark Sullivan, Reporter, Light Reading

COMMENTS Add Comment
Mark Sullivan 12/5/2012 | 3:35:11 AM
re: Google: 'Yeah, We Might Get Sued' The legal department of a major studio is on the phone to YouTube saying "take our video down!" The same studio's marketing department is calling in on the other line saying "keep our video up!"
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