YouTube has raised another $8M from Sequoia bringing the total to $11.5M. Om Malik suggests that YouTube clean up its act to avoid the legal fate of Napster. As many of you know I was a VP at the original Napster and intimately aware of the legal issues. I wrote earlier about the similarities between YouTube and Napster.
I am not a lawyer, and I don't give legal advice. But, based on my understanding of the law, the big difference between Napster and YouTube is that YouTube has "substantial non-infringing use", which was the critical legal issue in the Sony Beta-max case. If a product or service has "substantial non-infringing use" than it can not be held liable for contributory copyright infringement. However, individual users could be sued for copyright infringement. The RIAA is still doing this today.
YouTube has thousands and thousands of videos that are not copyrighted, which are produced by independents or amateurs. Napster really didn't have any non-infringing content so the case was pretty clear.
YouTube can stay within the law by "taking down" any videos that infringe a copyright when they are notified by the copyright holder and served with a "take down" notice. They do not need to proactively search their site for infringing video. It is up to the copyright holder to notify YouTube and provide some evidence that they are the legal copyright holder. YouTube must then remove the infringing content within a reasonable time using "commercially reasonable efforts".
The other issue YouTube needs to be careful about is porn. Porn itself is not illegal..it is all over the web. However, YouTube must use "commercially reasonable efforts" to prevent minors from viewing potential pornographic material. All the major search engines have porn filters that work reasonably well. So, YouTube could solve this issue fairly easily.
If YouTube can manage these two issues they have a very bright future. Apparently Sequoia thinks so...and they have been right many times before.