Google countered that Viacom managers continued to secretly upload content to YouTube even after the media company had filed the $1 billion copyright suit in March 2007.

“YouTube was intentionally built on infringement and there are countless internal YouTube communications demonstrating that YouTube’s founders and its employees intended to profit from that infringement,” Viacom said in a statement on Thursday, as the documents were released.

Most of the court evidence revolved around email exchanges between high level YouTube executives that dated back to the summer of 2005. The opening briefs in the Viacom vs YouTube lawsuit are viewed by many as a test of the Digital Millennium Copyright Act (DMCA) which YouTube believes protects it from Viacom’s claims.

The DMCA makes technology that circumvents anti-piracy measures illegal. But the law also limits the liability of providers of online services for copyright infringement by their users. The decision by the court will have far reaching ramifications on user generated content.

Deals with Hulu normally give 50% to 70% of the advertising revenue to the content owners with the distributor pocketing the rest. Rumors circulated that due to the popularity of its Comedy Central program, Viacom wanted a cash payment upfront.

“We tried to reach a deal; we got close; we continued to talk even over the weekend. But we could not agree on a price,” an anonymous negotiator told The New York Times.

Adny Forsell, Hulu SVP of content and distribution, sounded a bit like a jilted lover in his blog post announcing the dissolution, claiming that the Comedy Central relationship was quite amicable and that Hulu had been generating strong revenue for the shows. Forsell even embedded some of his favorite recent clips from the show — I almost feel like offering the guy my shoulder to cry on.

comScore reported that Hulu had more than 44 million unique users with an average of 22.9 videos viewed in December 2009. Viacom Digital followed Hulu on comScore’s charts with close to 40 million uniques, but less than 10 videos viewed on average. Both sites pale in comparison to the Google-YouTube juggernaut with 178 million uniques and 187 vids per viewer, though the majority of those sites is user-generated content. Hulu served more than a billion videos in December according to comScore, for a 3% share of all vids and second only to Google.

Removal of the shows will sting Hulu as it kills the halo effect — viewers coming in for their daily dose of satire being intrigued by other advertised content. “Daily Show,” in particular, was ranked the third-most popular show on the site.

But both shows have highly loyal fanbases who will go to the ends of the earth to watch the program. In the ongoing shoving match on the Internet between content owners and distributors, Viacom had the higher ground in this battle.

It’s no secret that Viacom missed out on buying the social network, with Rupert Murdoch swooping in. The former pairing might have worked better for MySpace, which has laid off more than 700 people both in the US and internationally in the past month. With MTV, MySpace could leverage its solid advantage over Facebook: music.

But what will it take? According to Breaking Views, Viacom might be able to buy MySpace for about $1 billion. With the social network’s lucrative deal with Google, $300 million a year, ending next year, and experts saying that they doubt it can grow revenue substantially after the deal expires, it makes sense for Viacom to make up for its mistake.

Except that Summer Redstone is getting killed in the stock market, already having sold blocs to stave off bleeding elsewhere, and there is even talk of spinning off Paramount, and MTV just laid off 75 people.

While it makes sense, especially for MySpace, you wonder what other music-oriented partnerships are out there.

The game developer created the popular “Scene It” DVD game (its sold more than 15 million copies since its debut in 2002). Paramount snagged ScreenLife to pump up its presence in the increasingly lucrative gaming world. ScreenLife will continue to operate as a standalone company.

Paramount Pictures’ parent company, Viacom, also owns Guitar Hero and Rock Band, video games targeted at the wannabe rock stars in all of us.

Montgomery & Co. ran the bidding process (Viacom was also reportedly wrangling for the bubbly, female-focused newsletter). DailyCandy was snapped up for about $3 million in 2003 by Pilot Group Ventures.

Bob Pittman, head of Pilot Group Ventures, sent out a congratulatory missive to the newsletter’s staff that reads in part:

“I have been associated with the start-up, turnaround or acceleration of many companies and major brands, and rarely have I seen the kind of creativity, commitment and passion I’ve seen day in and day out at DailyCandy. And the results speak for themselves: since we made our investment in 2003, subscriptions have grown from just over 200,000 to over 2.5 million.”

TiVo will offer (the roughly 20% of its 3.8 million subscribers with the right equipment) the option of streaming YouTube videos onto their TVs or through broadband-enabled TiVo boxes. This is TiVo’s first foray into streaming online content, though it does have partnerships with online sites that provide content to TiVo.

YouTube also penned a deal with Lions Gate Entertainment Inc. in which YouTube will feature ad-supported film clips on its site. The companies will share the revenue from ads, but the split has not been disclosed. YouTube is also reportedly in talks with other Hollywood studios in an attempt to form similar relationships. (And no, they’re not talking to Viacom).

In other online/TV news, Amazon has launched a beta version of its new film-and-TV store, “Amazon Video on Demand.” It offers 40,000 movies and TV shows for immediate viewing online. Amazon is also partnering with Sony to send the on-demand service to Sony TV sets.

Judge Louis Stanton had ordered Google to fork over the details of millions of YouTube users to Viacom, which would theoretically help the company prepare its $1 billion case on copyright infringement. The U.S. District Court judge for Southern New York would allow all of the information contained in its database (including login ID, IP addresses, video identifiers and the timing of the viewing) to be handed over.

But in the wake of a flurry of protests from users and privacy advocates, Viacom has backed down.

“We are pleased to report that Viacom, MTV and other litigants have backed off their original demand for all users’ viewing histories and we will not be providing that information,” YouTube said in a release.

The new deal will allow the video-sharing site to hide user IDs and IP addresses – the methodology has not been agreed on yet and YouTube has seven days to come up with a plan.

YouTube said it is “committed to protecting your privacy and we’ll continue to fight for your right to share and broadcast your work on YouTube.”

The company’s employees are not protected under the deal, however. Their identities will be revealed to Viacom – along with their viewing histories – in what is seen as an attempt to figure out if workers uploaded or knew about copyrighted works on the site.

And if, say, CEO Chad Hurley did in fact know about copyrighted works on YouTube, all best are off for its protection under the Digital Millennium Copyright Act of 1998.

This week, Manhattan District Judge Louis Stanton handed Google two partial victories in the $1 billion suit. The judge is ordering Google to turn over user data to Viacom. That includes usernames, associated IP addresses, videos watched on YouTube, every video yanked from YouTube for any reason.

The judge did deny Viacom’s request for Google to fork over YouTube source code.

The argument? Privacy concerns over user data are “speculative,” while the source code’s leak could cause Google “competitive harm.”

The Electronic Frontier Foundation is up in arms saying that Judge Stanton “erroneously ignores the protections of the federal Video Privacy Protection Act (VPPA), and threatens to expose deeply private information about what videos are watched by YouTube users. The VPPA passed after a newspaper disclosed Supreme Court nominee Robert Bork’s video rental records. As Congress recognized, your selection of videos to watch is deeply personal and deserves the strongest protection.”

The foundation goes on to say that in addition to the fact that the court’s ruling may be in violation of federal law, “the Court may not order the production of ‘personally identifiable information’” – which as we all know, most YouTube videos contain in excess.

Several industry observers are raising the specter of the infamous AOL search history debacle of ’06 in which 20 million online searches from 650,000 AOL users were released. (Along with names, addresses, social security numbers, etc.)

Dauman stated “We are seeing some signs of softness in some categories. We are in an economically uncertain environment.” Analyst for Sanford C. Bernstein, Michael Nathanson was quoted on Bloomberg.com to say “This is the first indication of national advertising slowing.”

Viacom is the latest in the sea of firms looking to dip into the mobile pool, reports Reuters. Many media firms have been looking to make their content more accessible to a wider audience to appear more attractive to various advertisers looking for creative targeting.