Viacom owns a number of well-known brands

Viacom, which owns MTV and Nickelodeon, says YouTube uses its shows illegally.

Viacom alleges that about 160,000 unauthorised clips of its programmes have been loaded onto YouTube's site and viewed more than 1.5 billion times.

Google says it is "confident" that YouTube has respected the legal rights of copyright holders.

However the internet search giant saw its shares fall $11.72, or 2.6%.

'Clearly illegal'

As well as more than $1bn in damages, the legal action seeks an injunction to prevent what Viacom calls "massive intentional copyright infringement".

"YouTube's strategy has been to avoid taking proactive steps to curtail the infringement on its site," said Viacom in a statement.

There is no question that YouTube and Google are continuing to take the fruit of our efforts without permission Viacom Google's copyright nightmare

"Their business model, which is based on building traffic and selling advertising off of unlicensed content, is clearly illegal and is in obvious conflict with copyright laws."

Last month, Viacom, which also owns cable networks VH1 and Comedy Central, told YouTube to remove 100,000 "unauthorised" clips.

Viacom said its demand came after YouTube and Google failed to install tools to "filter" the unauthorised video clips following negotiations.

"There is no question that YouTube and Google are continuing to take the fruit of our efforts without permission and destroying enormous value in the process," it said.

We will certainly not let this suit become a distraction Google Check Google's share price Check Viacom's share price

"This is value that rightfully belongs to the writers, directors and talent who create it and companies like Viacom that have invested to make possible this innovation and creativity."

Doing deals

A Google spokesperson said: "We have not received the lawsuit but are confident that YouTube has respected the legal rights of copyright holders and believe the courts will agree.

"YouTube is great for users and offers real opportunities to rights holders: the opportunity to interact with users; to promote their content to a young and growing audience; and to tap into the online advertising market.

"We will certainly not let this suit become a distraction to the continuing growth and strong performance of YouTube and its ability to attract more users, more traffic and build a stronger community."

The soaring popularity of YouTube has led traditional media to worry that the displaying of clips from their programmes - without compensation - will lure away viewers, and, as a result, advertising revenue.

Google, which paid $1.65bn for YouTube last year, has been trying to win permission from media companies to broadcast output legally on YouTube in exchange for payment, avoiding the threat of legal action.

Separately, the BBC has struck a content deal with YouTube to showcase short clips of BBC content.

The BBC hopes that the deal will help it reach YouTube's monthly audience of more than 70 million users and drive extra traffic to its own website.

The corporation will also get a share of the advertising revenue generated by traffic to the new YouTube channels.