Google denies rumor of YouTube legal reserve

Google CEO Eric Schmidt denied a widely circulated rumor that his company had set aside $500 million to settle copyright claims by media companies as part of its deal to acquire video-sharing site YouTube.

Speaking to more than 500 Internet industry insiders at the Web 2.0 Summit, Schmidt said Tuesday that an anonymous blog post asserting that YouTube has reserved $500 million for legal claims, out of the $1.65 billion takeover price, was "not true."

Web and sports entrepreneur Mark Cuban, an outspoken critic of the Google-YouTube deal, late last month posted a claim from an anonymous blogger that he had inside information on the secret reserve plan.

The blogger claimed to be a digital media industry veteran with inside knowledge of the deal. Cuban introduced the rumor on his Blog Maverick site, saying he had not verified the details, but that the rumor "rings true" and he trusted the source.

Schmidt was interviewed on stage by conference organizer John Battelle during the three-day Web 2.0 event in San Francisco.

In a two-part question, Battelle asked whether Google's deal included a secret reserve for legal claims and, secondly, what progress Google was making in striking licensing deals with media companies to avoid threats of legal action.

"The former is not true," Schmidt said in response to the question of whether a "very large sum of money was set aside to buy peace" between YouTube and big media companies.

"The latter is," the Google CEO continued. "We have visited as many media companies as we can" to reach copyright licensing deals that can insulate both YouTube and Google, he said.

Television and video producers, along with music labels, are angry that pirated versions of their copyright programming are frequently posted by people to YouTube's site and have become a prime attraction of the video site.