Fri Feb 12, 2010 @ 10:52AM PST
By Eriq Gardner
We were as shocked as everyone to hear Veoh is laying off employees and heading towards bankruptcy. Just a few years ago, the company seemed poised to challenge Google's YouTube as the go-to video-sharing website, having attracted major funding, including tens of millions of dollars from Time Warner, Goldman Sachs and former Disney chairman Michael Eisner, who sat on the company's board.
Perhaps more importantly, Veoh emerged as an underground hero among many copyfighters after beating Universal Music Group in court in the biggest signal yet
that the DMCA provides a copyright infringement "safe harbor" to tech companies so long as strong take-down measures are in place. (YouTube is still battling on this front
Word of Veoh's demise came just weeks before papers were due from UMG on whether it would pursue an appeal to the 9th Circuit. According to our sources, UMG was prepared to push its case forward to try to erase the bad precedent for copyright owners.
So what happens now?
If Veoh declares Chapter 7, a bankruptcy judge would issue an automatic stay in the case. UMG would likely file a motion with the bankruptcy court seeking relief from the stay to perfect its appeal. The trustee would engage legal counsel and make financial arrangements to cover the costs of defending the case before the 9th Circuit.
We're betting that all of this happens. The requiem on Veoh is now being written, but the company could continue to play a significant role in helping shape copyright liability for tech companies. (We wouldn't even be surprised to see Google acquire Veoh just so it could share in the fun of the action.)
We're also watching Veoh's ongoing attempts to collect nearly $3 million in legal fees
from UMG. In the aftermath of the bankruptcy announcement, many wondered, "Who killed Veoh?
" A member of the company's board was quick to tweet
that UMG was the culprit. Our sources aren't so quick to pin blame, but no doubt Veoh has creditors to pay and will continue to pursue the recovery of money tied to the UMG lawsuit.
The end result could be a message from the grave to content owners.