Google saves $200m for YouTube legal issues

Google on Tuesday indicated it was setting aside more than $200m to deal with possible lawsuits and copyright settlements over the next 12 months arising from its $1.65bn acquisition of the video-sharing site YouTube.

Google announced the completion of the deal, agreed last month, and said it had issued 3.2m shares and options and warrants convertible into another 440,000 shares worth $1.65bn, less $15m already given in funds to YouTube.

It added that 12.5 per cent of the equity issued and issuable – equivalent to $204m - would be subject to escrow for one year “to secure certain indemnification obligations.”

Critics of the YouTube deal have argued that Google would face major lawsuits from media companies whose copyrights were infringed by content being illegally uploaded onto the YouTube site.

But Eric Schmidt, chief executive, denied last week a report that surfaced on blogs suggesting it had put aside $500m for possible lawsuits.

He told the Web 2.0 Summit in San Francisco that Google had been visiting as many media companies as it could to sort out content licensing issues.

In the statement announcing the closing of the acquisition on Tuesday he said: “We look forward to working with content creators and owners large and small to harness the power of the internet to promote, distribute and monetise their content.”

Google disclosed in a regulatory filing last week that its own Google Video service was being sued for copyright infringement. With billions of dollars in cash, it represents a fatter target for those feeling their intellectual property has been abused. YouTube had received only $11.5m in venture capital.

YouTube has taken down material when copyright holders have complained and is introducing new technology to identify pirated content.

Google declined to comment on the statement on Tuesday.