Viral Videos: Money to Be Made, But First a Trip to the Courthouse

Two companies that bring viral videos to broadcasters are now involved in a high-stakes lawsuit that rips the lid off of the behind-the-scenes arms race happening.
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A video reenacting "Carrie" in a cafe went viral in 2013

Maybe you've seen that viral video of the drone walking the dog. Or the one where a man gets kicked in the head while taking a selfie. No? How about the police officers dancing to Taylor Swift's "Shake It Off" or the children who twerk during a school musical? These videos have been shown on morning news shows, late night television and variety programs throughout the world. They mean big business to a company like Jukin Media.

Jukin is one of the upstarts in the user-generated content industry. Founded in 2009, with financial backing from Disney's Maker Studios, Bertelsmann Digital Media and others, the company has grown to more than 90 employees including eleven who work full time scouring the Internet for pre-trending videos. After discovering the next hit — say, "Hair Tutorial Gone Wrong" — Jukin swoops in and makes a deal with the owner, and after acquiring it or coming to a revenue-sharing agreement, Jukin then licenses the viral video elsewhere. According to the company's website, Jukin's media partners include NBC, Fox, CNN, TBS, BBC, the Weather Channel and on and on. A company spokesperson also says that Jukin will act as a clearing house for television producers who discover on their own a viral video they'd like to use, but need rights.

But Jukin isn't alone in the space, and the resulting arms race for viral video lucre has triggered a high-stakes lawsuit that could mean uncertainty for broadcasters, and for everyone else, a new perception of drone walking the dog.

One of Jukin's competitors is Defy Media, which owns the top online humor site Break.com, and has gathered millions in investment from Lionsgate. The company breeds viral videos too and touts partners including Freemantle, MTV, Fuse, BBC, New Regency and 20th Century Fox.

A lawsuit filed by Jukin in June, though, accuses its competitor of being less the scrupulous when discovering viral videos. Specifically, the complaint says that Break.com "tracks Jukin’s video posting behaviors... and copies Jukin’s videos shortly after Jukin publishes them."

Jukin says that it has been sending takedown requests pursuant to the Digital Millennium Copyright Act, but "the volume of Defendant’s infringing videos needing to be reported via the DMCA process became overwhelming, and DMCA notices did not appear to hamper Defendant’s infringing activities."

The lawsuit specifically mentions more than 300 videos being infringed "presently" and describes the harm of a competitor doing this at the height of a video's "virality."

If the dispute ended there, it'd be interesting but perhaps not quite potentially groundbreaking. Other content industries experience the same problems. In the early days of YouTube, Viacom and other content owners accused the video-sharing site of systematically violating copyrights and refusing to go beyond DMCA obligations to adopt filtering technology. Even in journalism, one outlet's "exclusive" quickly becomes fodder for aggregation or re-reporting that essentially adds nothing.

That cat videos and news articles share something in common is somewhat surprising, but the lawsuit provides other eye-openers about what's happening in the viral video space.

Jukin also accuses the defendant of creating "false user identities that routinely post infringing content on the Break.com site" and "intentionally spreading false and misleading information about Jukin to Jukin’s potential licensors, in an attempt to persuade these video creators to license their content to Defendant instead of with Jukin."

Maybe this can be explained by slightly different business models.

Break.com seems to encourage people to upload content, but there's ramifications. According to Break.com's terms with its users, those who post content to the site grant to Defy "an irrevocable, perpetual, non-exclusive, transferable, fully paid, royalty-free worldwide license (with the right to sublicense) to use, copy, publicly perform, publicly display, reformat, translate, excerpt (in whole or in part) and distribute such User Content for any purpose."

The italics in the above paragraph are ours. If it's true that Break.com is creating false user identities to upload infringing content, then perhaps it is purporting to gain the right to sublicense these videos as well. That could be problematic to any television producer who thinks a viral video is being properly cleared.

A Jukin spokesperson points out that it doesn't work this way. People can submit videos, but they go through a screening process, and no rights are transmitted until a contract is worked out between the owner and the licensor. Jukin says its payments to original video owners "totaled firmly in the seven figure range" in 2014.

We've reached out to Defy for a response, but so far, the defendant has not returned messages.

The lawsuit accuses the company of copyright infringement, unfair competition and tortious interference. The latter claim derives from an assertion that the defendant "has intentionally attempted to persuade individual video creators not to license their videos to Jukin, by falsely informing such potential licensors that Jukin is a much smaller company than Defendant, and that Jukin’s ability to earn licensing revenue for the licensor is limited because Jukin will only use licensed videos for its own show, instead of further licensing them to a variety of television and video outlets."

The full complaint filed on behalf of Jukin by attorneys at Venable is here.

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