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Michael Jordan, former CEO of CBS, has been tapped by Redlasso as an advisor, presumably to glad-hand the TV companies which sent the company a cease and desist letter last week. The startup has cobbled together a fair-use defense; the Electronic Frontier Foundation told Valleywag they're watching the case but declined to weigh in. But if Redlasso were going to fight the networks in court, it would have hired lawyers, not a dealmaker like Jordan. The company has been in talks with the networks for years. So what went wrong? Hulu.

"Redlasso is an online media center for bloggers that records video and audio at the request of the participants of Redlasso's private beta from publicly available signals, such as cable, broadcast and satellite television," rep Saskia Sidenfaden explained. In other words, Redlasso servers watch the closed captioning signals for search terms set up by invited users to notify them of "newsworthy" clips and items. The company then distributes those clips from its own servers to embedded players on third-party sites.

Unlike other sites which rely on the DMCA's takedown provisions — under which users can post copyrighted content, but the site must take it down if copyright owners complain — Redlasso is relying on a "fair use" defense, a provision of copyright law which carves out exceptions for some kinds of reporting and commentary. Fair use rules are often unclear, though, and one question that comes up is whether the use unfairly exploits an existing market for the work. Until recently, it wasn't. But then News Corp. and NBC Universal started up Hulu — which also allows for users to search for clips which they can then embed on third-party sites.

A Redlasso investor explained on background that the startup had been talking to the networks for at least two years, and promised them the ability to track and control usage of their clips as they spread across the Internet — something Google's YouTube couldn't, or didn't want to do. Presumably, the company could have sold their technology to the networks, or formed content partnership agreements.

Hulu offers the same control, but it's run by the networks and offers many of the same features as Redlasso to users, though with significantly more limited content. CBS would have been a great target for possible sale, but CBS recently started working with Hulu, too.

Hence, the company's best hope is to strike a deal before too many more lawyers get involved, especially since it's still planning to close another $15 million in venture investment on top of the $9.4 million already raised. (Photo by AP/Richard Drew)