Viacom has sued Google for $1 billion (£517m), for alleged piracy on YouTube, the internet group’s video-sharing site.

Viacom, whose media empire includes MTV, the television network, and Paramount, the film studio, said that YouTube had “built a lucrative business out of exploiting the devotion of fans to others’ creative works in order to enrich itself and its corporate parent Google."

A YouTube spokesperson said: "We are confident that YouTube has respected the legal rights of copyright holders and believe the courts will agree."

The suit, filed in the US District Court for the Southern District of New York, contends that nearly 160,000 of Viacom’s clips have been posted on YouTube and viewed there more than 1.5 billion times.

Google acquired YouTube, which downloads more than 100 million videos a day, for $1.65 billion in stock in October. At that time, Google set aside $200 million in escrow "for one year to secure certain indemnification obligations".

The allegation of "massive intentional copyright infringement" comes after Viacom demanded that Google take down 100,000 clips earlier this year after months of talks over a distribution deal broke down.

Google argues that it complies with the law by taking down bootlegged clips from YouTube when notified by content owners. It also pointed out last night that it has more than 1,000 partnerships with content providers including the BBC, NBC and CBS.

However, a host of media companies, several of which have deals in place with YouTube, have continued to accuse Google of not clamping down hard enough on pirates on the site. Google has also faced legal action over alleged copyright infringement on its news service and its books-scanning project.

In particular, content owners are impatient with YouTube's failure to build a system that automatically identifies pirated content.

Struan Robertson, a senior associate with Pinsent Masons, the law firm, said: I'm guessing that Google saw this coming. It had said it was working on a filtering system to counter piracy and that it would be ready soon. Viacom were not prepared to wait."

It is understood that YouTube had been in talks several months ago - before its acquisition by Google - to use a system developed by Audible Magic, the US technology group, which is designed to identify music and prevent bootlegged tracks being uploaded.

Audible Magic, which already supplies filtering technology to MySpace, the social networking site owned by News Corporation, parent company of The Times, has been in talks with Google in recent weeks, but no deal has been announced.

YouTube said: "We don't comment on proprietary or third-party technology."

Meanwhile, content owners have taken matters into their own hands. In January, Twentieth Century Fox, also owned by News Corp, demanded that YouTube reveal details of an American user who posted episodes of 24 and The Simpsons on the site.

The move underscored the increasingly fractious relationships between content owners and YouTube.

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