The first question that arises from the escalating situation is whether YouTube has a right to perform these songs until proven otherwise. GMR thinks the burden of proving a valid license is on YouTube.
According to the Azoff camp, YouTube has come forward with word that it has a multi-year license for the public performance of works represented by GMR. The licensors aren't identified, but it's possible that YouTube thinks itself covered by prior deals made with ASCAP, BMI, SESAC or some foreign PRO. (YouTube hasn't publicly commented about the situation, although it did give us a statement. It's below.)
King writes: "Obviously, if YouTube contends that it has properly licensed any of the songs for public broadcast, a contention we believe to be untrue, demand is hereby made that we be furnished with documentation of such licenses."
The next issue to be debated will be whose responsibility it is for alerting YouTube about infringing works on the network. Azoff tells The Hollywood Reporter that GMR has sent takedown notices, but from what we understand, these appear to fall under the category of a general notice of 20,000 unlicensed works. Azoff says that YouTube is making GMR track down each instance of an infringing work in the YouTube ecosystem. "They hide behind safe harbor," he says. "But that doesn't protect a knowing and willful infringer."
Interestingly, the responsibilities of ISPs under the Digital Millennium Copyright Act began to be shaped by Viacom's lawsuit against YouTube. That litigation was settled earlier this year, leaving it to other cases like the record companies' dispute with Vimeo to further inform the discussion about precisely what kind of knowledge and awareness is necessary before an ISP like YouTube is disqualified from having safe harbor from copyright liability. (The Vimeo case will be argued before the 2nd Circuit Court of Appeals very soon.)
Although Azoff says he's not contemplating a lawsuit quite yet, the letter from King (a notable litigator) does raise the prospect of "willful copyright infringement." Statutory damages for willful copyright infringement run up to $150,000 per work, meaning that if a lawsuit does come, it could theoretically be a $3 billion case. Statutory damages more typically run between $10,000 to $50,000 per work, though. That still amounts to a lawsuit potentially worth somewhere between $200 million and $1 billion.
Of course, it's possible YouTube does have a prior license or can mitigate its liability another way. (For example, the company now uses content fingerprinting technology that could be a middle ground in the takedown process.) If not, this is Azoff's way of ratcheting up the pressure and making his formal invitation to YouTube to get to the negotiating table right away.
A spokesperson from YouTube gave us this statement: "We've done deals with labels, publishers, collection societies and more to bring artists' music into YouTube Music Key. To achieve our goal of enabling this service's features on all the music on YouTube, we'll keep working with both the music community and with the music fans invited to our beta phase."