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Viacom is getting its hands on some of YouTube's sensitive user data as a result of the copyright infringement lawsuit the conglomerate filed a year ago.

The two companies are in the discovery part of the case and must make certain information available to each other. On Wednesday, a federal judge ruled that Google must turn over YouTube user activity--videos watched, IP addresses, and usernames.

Google responded on Thursday in a statement to the court's order.

"We are pleased the court put some limits on discovery," Google said in the statement, "including refusing to allow Viacom to access users' private videos and our search technology. We are disappointed the court granted Viacom's overreaching demand for viewing history. We are asking Viacom to respect users' privacy and allow us to anonymize the logs before producing them under the court's order."

CNET News.com reported that Viacom is under strict instructions from the court not to use the data for anything other than proving the prevalence of infringement on YouTube.

Viacom, therefore, is forbidden from targeting individual users in the manner of the Recording Industry Association of America's lawsuits against individuals found to be downloading illegal music.

The case is important to Internet users because it could help define the scope of the safe harbor provision of the Digital Millennium Copyright Act. That's the part of copyright law that Google and other Internet service providers claim protects them from being held responsible for the actions of their users.

Don't look for the case to get to court anytime soon. The discovery part of the case isn't expected to end until sometime next year.

What might prove interesting in the meantime is that among the people Google has asked to depose are Jon Stewart of The Daily Show and Stephen Colbert of the The Colbert Report.

UPDATE:To include mention of a report that Facebook valued itself at $3.75 billion.

SAN JOSE, Calif.--What is Facebook really worth?

One of the burning questions in the technology business during the past year also played a major role in the dispute between social networks ConnectU and Facebook, according to documents obtained by CNET News.com.

Some interesting details about Facebook's valuation were revealed in partially redacted court records released Wednesday by federal district judge James Ware. The documents were a transcript of a June 23 hearing in the case, which Ware had closed to the public. The judge released the redacted transcripts after CNET Networks, parent company of News.com, objected to the closing and launched an effort to have relevant documents unsealed.

Facebook founder Mark Zuckerberg

(Credit: Facebook)

ConnectU, founded by brother Cameron and Tyler Winklevoss and Divya Narendra, filed suit against Facebook founder Mark Zuckerberg in 2004 and accused him of stealing their business plan. The two sides reached a settlement, but ConnectU's side tried to pull out of the deal after alleging that Facebook fraudulently misrepresented the value of its stock. Ware disagreed and last week ordered that the settlement be enforced. That means Facebook is nearing the end of the ConnectU case.

But what the transcripts show was just how much Microsoft inadvertently influenced the proceedings.

Last fall, Microsoft paid $240 million to acquire a 1.6 percent share of Facebook. The day that news of the deal broke, headlines screamed that Facebook was worth $15 billion based on Microsoft's investment.

Analysts said all along that the money Microsoft paid was more a reflection of the company's need to strengthen ties to Facebook than what Microsoft thought the company was really worth. Judging from the transcripts, the Microsoft money may have gotten ConnectU's founders seeing dollar signs. But it shouldn't have, according to statements made during the June 23 hearing by Facebook attorney Neel Chatterjee.

The value of Facebook shares
As part of the settlement, Facebook agreed to give ConnectU's four principals--Narendra, the brothers Winklevoss, and their father, Howard Winklevoss, who had invested in ConnectU--an undisclosed amount of cash and Facebook stock. In exchange, ConnectU's principals agreed to give Facebook all the stock they held in ConnectU. The settlement was essentially an acquisition.

In a statement to the court, a small portion of which was redacted, it's obvious that Chatterjee wanted to make clear that Microsoft's investment in Facebook had little in common with ConnectU's deal. The transcript indicates that ConnectU received common stock while Microsoft received preferred stock.

"ConnectU didn't get that and they knew they weren't getting that," Chatterjee said. "What Microsoft got out of the deal...are fundamentally different than what ConnectU is getting, or the principals of ConnectU, which was subject to the fair-market valuation."

Chatterjee pointed out that Facebook provided ConnectU with fair-market valuations it obtained when it considered using stock for other partnerships. But he also noted that if ConnectU wanted to know what Facebook was worth it could have obtained its own "independent appraisal," which it did not do before agreeing the the settlement.

Getting an accurate Facebook valuation was not why ConnectU had sought to challenge the settlement, said the company's attorney, David Barrett. ConnectU argued that the settlement was unenforceable for several reasons, the first being that Facebook withheld vital information.

"The point is that (Facebook's) duty is to disclose all material information," Barrett said, noting that Facebook is a privately held company but comes under security laws when selling shares. "If they decide to engage in a private trade of their stock, they do have to disclose material information."

Specifically, Barrett said that Facebook's board of directors obtained an evaluation of their company's worth following the Microsoft sale but before the settlement was reached. ConnectU claimed that Facebook never handed over that valuation. The transcript of the hearing didn't reveal the amount of Facebook's valuation.

But on Thursday, The New York Times' Brad Stone reported that in a transcript from a June 13 case management conference, that figure was revealed: "one-quarter of its apparent value based on Facebook's public press releases." That would put the price of Facebook at $3.75 billion.

As Stone points out that valuing private companies is not exact and we'd have to wait until someone actually plunks down real money for Facebook in an acquisition or in a public offering of the company's stock.

In any case, Chatterjee, Facebook's attorney, told the court he suspected that the reason ConnectU's founders had changed their mind about the settlement was because of a dispute with the company's former law firm, Quinn Emanuel. The reality of legal fees "was affecting the economics in some way they don't like," Chatterjee said.

Lawyers from Quinn Emanuel have filed a lien against ConnectU's settlement money, and appeared before Ware on Wednesday to request that he not release any of the company's funds until they got paid.

CNET News.com's Caroline McCarthy contributed to this report.

SAN JOSE, Calif.--The public will be allowed a peek at some of what was said last week during a settlement hearing in the long-running legal dispute between ConnectU and Facebook.

James Ware, a U.S. district court judge, barred reporters and the public from attending the June 23 hearing in San Jose, Calif. He also put many of the documents in the case under seal. CNET Networks filed an objection to Ware's decision last week.

On Wednesday, Ware said he would release a redacted copy of the transcript from the June 23 hearing and allow a magistrate judge to decide on whether some of the other sealed documents should be released. What was redacted is still unclear, according to CNET lawyers who were at Wednesday's hearing.

Facebook has agreed to pay ConnectU's founders cash and stock as part of the terms of the settlement, but the exact amounts have not been released.

The case began in 2004, when ConnectU's founders alleged in a lawsuit that the idea for Facebook was originally theirs, and accused Facebook founder Mark Zuckerberg of ripping off their business plan and their code while they all attended Harvard.

Zuckerberg denied the allegations. The case dragged on until the two sides reached a settlement earlier this year that called for Facebook to pay cash and stock to ConnectU's founders. ConnectU later tried to back out after it said it had obtained important new information.

Some of that information was unearthed by a computer forensics expert hired by ConnectU who located instant-message logs belonging to Zuckerberg.

But Ware decided there was no reason to throw out the settlement. The purpose of Wednesday's hearing was to figure out how the settlement would be paid and take care of other legal loose ends.

Prior to the judge's decision about releasing some of the sealed documents, Facebook's lawyers objected, arguing that some of the information included Facebook's source code, proprietary trade secrets, financial information, and communications between Facebook employees and their family and friends.

Roger Myers, the attorney representing CNET, told the court that before documents should be sealed in this kind of legal proceeding, the parties had to prove that they would suffer a "competitive harm."

"They have the burden of proof," Myers told the court.

Ware said he wanted to protect the privacy enjoyed by parties who are in mediation. He said he had promised ConnectU and Facebook that their discussions would not be part of the public record and he would have to go back on his word: "The integrity of the court is an issue," Ware said.

Myers, from the San Francisco law firm of Holme Roberts & Owen, wasn't altogether happy with the judge's decision to redact information from the transcript.

"It's not clear what he's going to redact," Myers said later. "Whether we think the redactions go too far, it's going to be hard to say until we see them. I think he's going to redact what was said in the mediation...In the documents that were filed with respect to the proposed judgment that includes a copy of the term sheet of the settlement, the only thing that was redacted was financial information: how much money was going to be paid and how much stock was going to be given.

"It sounds like he's (going to redact more than that) in the transcript," Myers continued. "We think that goes too far...There's hundreds of documents filed under seal. We think that most of them should not have been sealed. There's some things that (Facebook) can keep confidential, like their source code and trade secrets but they've gone way overboard here."

As for Zuckerberg's IM logs, Myers said: "Those should not have been sealed. There's been no showing made that would justify keeping that information under seal, so those should be released."

After the discussion about unsealing documents ended, Ware turned to address a third-party claim on some of ConnectU's settlement money. Before ConnectU co-founders Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra can pocket the money and stock Facebook agreed to pay to settle the case, they have to pay off their former lawyers.

Lawyers representing Quinn Emanuel, the law firm that once represented ConnectU, made every attempt to persuade the judge not to disperse the settlement money and stock before they've been paid.

With advertisers and marketers polluting the Web with scads of pseudo "viral videos" it's nice to see a legitimate one crop up.

In a lampoon of CNN and mainstream media, alternative news source The Onion informs us of an approaching disaster: "Entertainment Scientists Warn Miley Cyrus Will Be Depleted by 2013."

The Onion News Network reports that we're burning through the entertainment value of the teen-pop sensation "at far more aggressive rates" than we did of Lindsay Lohan or the Olsen twins. The latter women were "bountiful entertainment resources that our overconsumption reduced to smoldering remnants."

Tip: Pay attention to the graphs and to the ticker running across the bottom of the screen.

The expert from the Institute of Miley Research soberly tells viewers that within two years, society will be reduced to "roving tribes of barbarians constantly searching and fighting and scouring the landscape for the last remaining Miley Cyrus fashion doll."

Leave it to the folks at The Onion to remind us what viral videos are supposed to do: entertain.

Entertainment Scientists Warn Miley Cyrus Will Be Depleted by 2013

The legal spat is winding down between Mark Zuckerberg and the former college classmates who accused him of stealing Facebook's business plan from them.

The two sides will be in U.S. District Court in San Jose, Calif., on Wednesday to iron out the details of a settlement between Facebook and ConnectU, founded by Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra.

The three ConnectU founders claimed in a lawsuit filed in 2004 that Zuckerberg, Facebook's founder, stole ConnectU's code and business plan while all four were students at Harvard University.

ConnectU tried to back out of the settlement after a computer-forensics expert it hired discovered some of Zuckerberg's instant-messaging logs that the company claims is relevant to the case.

Once it obtained the logs, ConnectU accused Facebook of fraud and asked the judge to throw out the settlement. One of the reasons ConnectU gave was that Facebook never disclosed that it had altered the value of its common stock not long before February's settlement was reached.

Facebook, which is not publicly traded, did not deny that it had altered its valuation, and the judge in the case found nothing in Facebook's actions to be fraudulent.

As for what was revealed in Zuckerberg's IM logs, we don't know because the court has prevented the public from gaining access to much of the information in the case.

Indeed, the only fireworks left in the dispute might come from a third party: CNET Networks, parent company of News.com. CNET objected to U.S. District Judge James Ware's decision to close the courtroom for a June 23 hearing between Facebook and ConnectU and is pursuing a request to have the court unseal documents related to the proceedings. (CNET Networks has since been acquired by CBS in a deal that closed Monday.)

The reason for barring the public appears clear. Facebook doesn't want to reveal financial information, the content of Zuckerberg's IM logs, and the terms of the settlement. case. As my colleague Declan McCullagh wrote in a recent blog, the term "under seal" appears at least 234 times in the official court docket.

McCullagh wrote: "Not only should the courtroom not have been closed, but any audio recording or transcript of the proceedings should be released."

Warner Music Group, the third largest music label, will license music to Nokia's Comes With Music service, a Warner Music spokeswoman confirmed Monday.

Nokia now only lacks EMI's participation in the service, which offers unlimited free access to music for a full year.

During that time, users will be able to transfer their Comes With Music library to a PC as well as to a new Nokia handheld, but they won't be able to transfer it to iPods or other non-compatible devices.

At the end of the year, Nokia users won't lose their music. It will live on their computer or Nokia device for as long as they own them. To acquire new music after the year is over, Nokia phone owners can either purchase downloads from the Nokia Music store or join the company's subscription service.

The story was first reported by .

The Comes With Music service won't be ready until later this year.

In contrast, Verizon's V Cast service announced Monday that it has begun selling downloads from all four major labels. Not only that, but the music sold is free of copy protection software and will play on iPods and other digital music players.

To this point, selling DRM-free music hasn't proven to be much help for Apple competitors but it's probably better than a service that ties consumers to one device, regardless of how much free music they are given.

Harvey Levin, TMZ's managing editor, was among those at the company who recognized that the Web and digital technology could give it an advantage over rivals.

(Credit: Craig Mathews/Warner Bros.)

Alec Baldwin, Lindsay Lohan, and Kramer from Seinfeld may despise TMZ.com, but that hasn't stopped the celebrity news site from bagging more blockbuster scoops the past two years than any competitor.

TMZ's growing reputation as Hollywood's in-the-know and in-your-face news agency was built by working the phones, developing sources and basically out hustling rivals, say executives. What isn't well-known, however, is that the company may also possess a technology edge.

TMZ, which launched as a Web site in 2005 and moved into TV last September, is among the first to build a tapeless, high-definition TV newsroom from the ground up, according to managers.

Other newsrooms have migrated from videotape to digital, but TMZ, perhaps best-known for its reporting on Seinfeld star Michael Richards' racist tirade, was designed for the Digital Age. Not only does this enable TMZ cameramen to shoot using lighter, less expensive cameras, but editors don't have to rip up entire TV shows each time they make changes, says Jim Paratore, TMZ's executive producer.

For these reasons, TMZ often has stories up before rivals and operates more efficiently, executives say. As chilling as this may sound to some, TMZ could be the prototype of a 21st century news agency.

"The business has changed, and the business model of these shows has to change," Paratore said. "You have to figure out how to do these shows more efficiently...We had the opportunity to marry technology with the way we produced the show and create a model that fit the revenue available today."

Technology, in a way, gave birth to TMZ.

The founders recognized distributing news over the Web meant they could post stories, photos, and videos of drunken starlets or brawling actors almost as soon as they obtained them.

TV shows like Entertainment Tonight and Access Hollywood, on the other hand, had to wait until their shows aired. People magazine had to wait until the next issue hit newsstands.

TMZ sees about 10 million monthly unique visitors to its Web site.

(Credit: TMZ.com)

Sure, TMZ's clips weren't as slick looking as those broadcast by some of its rivals. But managers discovered that the audience liked it better that way, Paratore said. For example, the now-famous clip of Paris Hilton and friend Brandon Davis disparaging part of Lindsay Lohan's anatomy while leaving a nightclub, isn't great photography. The footage is grainy and dark.

Yet, the clip of a catty Hilton was viewed more than 2.5 million times and marked TMZ as a player in the Hollywood-gossip industry. Producing video for the Web taught TMZ managers an important lesson: People want unfiltered information about celebrities. Pretty images and clever editing are less important.

"What has changed because of the Web is the whole expectation of what TV is," Paratore said. "People just want to see raw video. They don't want it all beautified and packaged, particularly entertainment news because they think it's all B.S."

After learning that, Paratore and Harvey Levin, TMZ's managing editor, made plans for their tapeless newsroom.

For help, they went to Warner Bros. and its emerging-technology unit. The group focused on designing a low-cost system geared for speed and simplicity.

Engineers opted for off-the-shelf hardware--such as a 32-terabyte storage area network (SAN) from Hewlett-Packard and a bunch of 8-core Mac Pros for editing--rather than spending money on expensive production tools designed for the broadcast industry, said Spencer Stephens, vice president of product technology for the Warner Bros. group.

"It's the same sort of hardware that a financial institution or anybody else using a large 32-terabyte SAN might use," Stephens said. "More traditionally, we would have gone out and chosen something specifically designed for this marketplace, but because this is a relatively small market it would have cost more to get it up and running."

Translation: TMZ had less money to spend and that forced it to be more resourceful.

Sony HVR-Z1U

(Credit: CNET Networks)

Perfect. The company regularly competes against deeper-pocketed network shows, and loves to see itself as a giant killer, Paratore said. If less money meant TMZ had to squeeze more traffic and TV ratings out of fewer resources, so be it. Instead of buying the bulky $30,000 shoulder-held cameras favored by many broadcasters, TMZ settled on the $5,000 Sony Z1U, an HD handheld cam.

The Z1U is a half step from being a consumer product, but managers found that the camera fit with their guerrilla-journalism style.

We've all seen those scenes of reporters, photographers and cameramen swarming around stars outside courtrooms or nightclubs. The Z1U is much easier to handle in these situations than a larger camera.

Another benefit of a smaller camera is it allows TMZ's shooters to be less intimidating when approaching celebrities.

"You can't go around with big cameras, a sound guy, and a multiple-person crew," Paratore said. "You need a smaller footprint. It's all about being a fly on the wall."

Going digital also streamlined editing and content management, which is vital for breaking-news stories.

The system Warner Bros. came up with enables producers to see raw footage, make rough cuts from their desktop, and then assemble timelines for the show as they write their scripts. The system gives producers precious extra minutes to complete work on a story segment.

Traditionally, the segments of a TV news show were combined and assembled onto a tape, Stephens said. The show had to be completely finished by the time it started broadcasting. It wasn't possible to change anything once the show started being aired, he said.

"Now, we're editing individual stories and plugging segments into a video server," Stephens said. "It's very similar if you got an iTunes playlist. You can start the music, but you can also push new pieces into the playlist on the fly. Rather than having to have my story finished a half hour before the whole show airs, now I actually need to finish a couple of minutes before my particular segment of the show airs."

This kind of flexibility is handy when your top news subjects can get busted for a DUI day or night.

To unseat iTunes as lord of digital music, challengers are falling over themselves to strip copy protections off music.

Apple's iTunes still wraps most of its music in digital rights management software, and the latest to try to exploit this perceived vulnerability is RealNetwork's Rhapsody. The music service, which has up to now focused on renting music through subscriptions, is expected to announce Monday that it will start selling DRM-free songs.

This means that Rhapsody's music will play on iPods and many other digital players. In addition, Rhapsody has teamed with Verizon Wireless and will offer customers with specific V Cast phones the ability to download unprotected music.

By selling downloads, Rhapsody opens its service up to two important groups: those who don't like subscription services, and owners of devices that were once incompatible with Rhapsody.

But increasingly, one can't help but catch a whiff of staleness surrounding open-MP3 offers. Besides Amazon.com, others offering at least some DRM-free music are Wal-Mart and Napster. MySpace also has plans to offer MP3s.

Amazon began offering open MP3s last September and there hasn't been much movement of the needle. Amazon's digital music store is growing but not at the expense of Apple, NPD Group said in April.

The issue of DRM only counts when iPod owners can't play iTunes music on other devices they care about. Which ones are those, you ask?

That's the point. There aren't any.

I'd be really steamed at Apple CEO Steve Jobs if my iTunes music were incompatible with some must-have cell phone, home-entertainment system, or car stereo. If there were something that his DRM-scheme locked me out of, then I might look for an iTunes alternative.

I don't have this problem because there isn't anything that compelling out there. The big digital home-entertainment system that will enable me to throw video, music, and photos around my house, still hasn't arrived.

When I'm at home and don't want to listen with headphones on, I plug my iPhone into speakers. As for cell phones, U.S. consumers just don't listen to music on them. The sticking points, such as memory, battery power, and poor user interface, haven't been worked out.

Remember, Apple didn't become an all-powerful music company just because of iTunes. Jobs was successful because of the total package: the player as well as a great music store. He made it easier to find, buy, and listen to music. And now, many of us are accustomed and comfortable with iTunes.

To pull us away, somebody has to offer a great new device and service that can do all these things and more. Or else why jump?

All this is no easy task, of course. (See Zune).

Another prestigious school is embracing Amazon's Kindle e-reader.

Princeton University has announced that it will start printing Kindle-edition textbooks this fall, according to a story in The Christian Science Monitor.

Princeton follows Yale, Oxford, and UC Berkeley in creating textbooks for the Kindle. In the United States, there are about 2,500 four-year universities, so Amazon still has a long way to go.

But the Kindle should appeal to university students better than other demographics.

I wrote this week that I was putting off buying a Kindle until I learn whether I can read digital books on the iPhone 3G, which goes on sale July 11. If the handheld enables me to read e-books well enough, I'll probably pass on the Kindle. The reason is simple: the iPhone gives me much more for my money.

Students, on the other hand, do so much reading that they may be thankful for a device that can help save their backs. Instead of schlepping 10 pounds of textbooks, the Kindle can hold about 200 titles and it weighs only 10 ounces.

Instead of having to thumb through pages, students can find text instantly with Kindle's search feature. It also allows a user to highlight text and make notes.

It's been a long time since I was in school, but I remember those long lines to buy books in September and January. Contrast that with Kindle's wireless service and the ability to download books off the Web from almost anyplace.

Back then, I would have been glad to buy a Kindle.

Tip: At Amazon, Kindles are advertised now for $359, but it might pay to check out eBay. Ina Fried, my colleague here at CNET News.com, paid $329 at the auction site this week and used Microsoft's Live Search cashback offer to get an additional 20 percent off. Total cost: $264.

Update 12:45 p.m.: I've learned that there's a strong bond between Princeton and Amazon. The company's founder, Jeff Bezos, is an alumnus of the university, class of 1986. I obtained the information from co-worker and former Tiger Caroline McCarthy (2006).