Earlier in the week we brought you news of a growing conflict between Megaupload and Universal Music Group. Late last week Megaupload posted a video that featured a wide array of celebrities singing the praises of the online data locker service. Over the weekend, however, UMG used YouTube’s automated system for reporting copyright infringement to have the video, which was produced and owned entirely by Megaupload, taken down. When Megaupload protested and re-posted the video, UMG again had it taken down. Megaupload responded by suing UMG.

Today, court documents have surfaced showing UMG’s defense of its actions. Early this week YouTube’s legal director, Lance Kavanaugh, apparently sent UMG a letter demanding that the company either provide evidence of its ownership of the video or forfeit its copyright claim. UMG’s response, written by Kelly M. Klaus of Munger, Tolles & Olson, claims first of all that UMG took YouTube’s “statements to be self-effectuating and decided to take no further action.” In other words, when presented with an ultimatum to either prove or forfeit its copyright claim, UMG chose to forfeit its claim by not responding. YouTube apparently sent a follow-up letter, reiterating its request, to which UMG responded with this letter. What we have here, then, is a tacit admittance of what everybody already knew: UMG does not own the Megaupload video, and has no copyright claim to the video.

Most interesting, however, is UMG’s second line of defense. Mr. Klaus’s letter takes exception to the demand for copyright proof from YouTube. The paragraph in question is too good to quote piecemeal:

Second, your letter could be read to suggest that UMG’s rights to use the YouTube “Content Management System” with respect to certain user-posted videos are limited to instances in which UMG asserts a claim that a user-posted video contains material that infringes a UMG copyright. As you know, UMG’s rights in this regard are not limited to copyright infringement, as set forth more completely in the March 31, 2009 Video License Agreement for UGC Video Service providers, including without limitation in Paragraphs 1(b) and 1(g) thereof.

So, let’s break that down a little. Wading through the legalese, it looks as though UMG is citing this Video License Agreement to claim that it has the right to take down video content that it doesn’t own. Exactly what grounds UMG thinks it does need, however, remain unclear. What does seem clear is UMG’s only possible reason to remove the Megaupload video is simply that they don’t like it. So, in effect, UMG is claiming that this nebulous agreement with YouTube allows it to remove YouTube content for any reason at all.

In preparing this story I sent requests for comment both to Mr. Klaus and to YouTube. As yet there has been no response from either. Look for updates later in the morning if they respond.