Veoh and Universal Music Group’s (UMG) ongoing legal battle over copyright infringement took another step towards siding with Veoh this week. The U.S. Central District Court of California dismissed the charge that the people funding the Veoh, an online video sharing website, are responsible for the copyright infringement happening on the website. This is the second time in as many months that the ruling went in favour of the defendants.

UMG filed a complaint that named Veoh’s investors as defendants. UMG planned to go after the shareholders and financiers of the website for vicarious copyright infringement and inducement of copyright infringement. UMG claimed that Veoh’s investors are responsible for the copyright infringement on the website by financing the website and therefore promoting the infringement.

UMG cited the Napster case as a precedent. The difference, as pointed out by the judge, is that Napster’s trouble began when it was ruled that Napster was running an infringement service. Napster was a company with a primary focus of making copyrighted material available. It chose to keep running the website without monitoring the site in a way that would restrict the infringement.

In this case, the financiers were not liable for the content that users posted on their website. The ruling found that in no way did Veoh promote the use of copyrighted material, and in fact, did everything it could to remove the questionable content from its website.

The court minutes say that UMG is allowed to file a second complaint, but this must be done by February 23, 2009.