Friday, July 16, 2010

YouTube v Viacom -- Why Google's $100 Million in Legal Fees is Just the Beginning

Yesterday, Google reported in its earnings call that it has paid out $100 million in legal fees in its epic copyright battle with Viacom. And, those lawyers earned their money, right? Google did recently "win" after all, did it not? The case was dismissed. Google's long legal nightmare is all over!

Or is it?

Of course not -- in fact, the case is ripe for going on and on and on ... much to the chagrin of Google, but much to the delight of all lawyers involved.

You see, the judge overseeing the case threw it out on what is called "summary judgment" -- which means, the judge did not let the case go to trial (in essence, the judge took the case out of the hands of the jury and decided it on its own -- without the benefit of live testimony -- and on the basis only of documentation (including deposition testimony)). Let's be clear, summary judgments are granted only in a small percentage of cases -- and those rare rulings are always appealed. And, those summary judgments are frequently reversed on appeal -- particularly in a complex case like this -- precisely for the reason that the lower court judge took the case out of the hands of the jury and did not give them a chance to judge the live testimony and credibility of witnesses.

So, the case is far from over. The appeals process itself will be extremely costly -- given what Google has spent so far just to get to the summary judgment phase, it may be $10 million or more. And, then what?

If the case is, in fact, reversed on appeal, then the case will be sent back for trial. And, the fees associated with a trial may actually dwarf the $100 million number!

Even if Google wins on the inevitable appeal, that does not mean the case is over. At that point, it would not be surprising if Viacom appealed once again to the highest court in the land. And, it ain't cheap to have the privilege of doing that.

So, here we are -- Google's legal fees -- $100 million and counting. Let's not forget Viacom's own legal fees -- at the same order of magnitude. And, the scores of lawyers on this case continue to bill -- likely in 15 minute increments -- the clock keeps ticking.

Yes, this is our system of dispute resolution -- this is what we have. But does it make sense? Is value being created for this massive expenditure of legal fees (not to mention the overall distraction to business resulting from litigation)? Of course not. Wouldn't it have been better simply to resolve this matter out of court? Of course it would. Everyone would be happier, right? Of course ...

... not! The lawyers like our system of dispute resolution just fine.

(NOTE -- I am a former big firm media lawyer myself -- I don't bash lawyers or the legal system lightly -- and I understand the forces that drive cases on and on and on -- but, this case is extreme and ridiculous -- it makes absolutely no economic sense at all to any of the parties to the lawsuit.)