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Well before media conglomerate Viacom sued Google for $1 billion in damages over copyright infringement in 2007, the media conglomerate thought that video-sharing site YouTube would have made a “transformative acquisition” for the company, according to court briefs released today. (The briefs are here and here.)

Only once YouTube fell into the hands of Google for close to $1.8 billion in 2006 did Viacom turn around and take serious action. But the relationship remained complicated. Even during the acquisition, Viacom initially allowed its content to stay on the site. And even later, YouTube’s legal team says, Viacom’s marketing department regularly uploaded videos that its legal department simultaneously attacked the video-sharing site for hosting.

Zahavah Levine, YouTube Chief Counsel, writes:

“For years, Viacom continuously and secretly uploaded its content to YouTube, even while publicly complaining about its presence there. It hired no fewer than 18 different marketing agencies to upload its content to the site. It deliberately “roughed up” the videos to make them look stolen or leaked. It opened YouTube accounts using phony email addresses. It even sent employees to Kinko’s to upload clips from computers that couldn’t be traced to Viacom. And in an effort to promote its own shows, as a matter of company policy Viacom routinely left up clips from shows that had been uploaded to YouTube by ordinary users. Executives as high up as the president of Comedy Central and the head of MTV Networks felt “very strongly” that clips from shows like The Daily Show and The Colbert Report should remain on YouTube.

Viacom’s efforts to disguise its promotional use of YouTube worked so well that even its own employees could not keep track of everything it was posting or leaving up on the site. As a result, on countless occasions Viacom demanded the removal of clips that it had uploaded to YouTube, only to return later to sheepishly ask for their reinstatement. In fact, some of the very clips that Viacom is suing us over were actually uploaded by Viacom itself.

Viacom, for its part, excerpted quotes from dozens of e-mails from YouTube co-founders Chad Hurley, Steve Chen and Jawed Karim as evidence that the trio was aware that pirated content was responsible for as much as 80 percent of the site’s traffic.

Their brief quoted Chen as saying: “If you remove the potential copvright infringements . . . site traffic and virality will drop to maybe 20 percent of what it is.”

Viacom says that YouTube eventually introduced a community flagging feature, so that users could tag potentially copyrighted content. But it took it down about two weeks later as part of a strategy of “willful blindness” to possible copyright infringement.

“Basically if we don’t remove them we could be held liable for being served a notice. It’s actually better if we don’t have the link there at all because then the copyright holder is responsible for serving us notice of the material and not the users,” Viacom quoted Chen as saying. The brief went on to argue that Google continued YouTube’s strategy of “willful blindness” in order to prioritize strong growth on the site.

Who scored big out of the YouTube acquisition:

A few other interesting tidbits that came out of the filings were the amount of money that Hurley, Chen and other investors made out of YouTube’s sale. (Peter Kafka over at AllThingsD first found them.)

Chad Hurley: $334 million
Steve Chen: $301 million
Jawed Karim: $66 million
Sequoia Capital: $516 million on a $9 million investment
Artis Capital: $85 million on a $3 million investment

Viacom Statement of Undisputed Facts

Viacom Summary Judgment Motion

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