updated 4/23/2007 4:47:40 PM ET 2007-04-23T20:47:40

Activist groups dropped a federal lawsuit against Viacom Inc. on Monday after the parent of Comedy Central acknowledged it made a mistake by asking YouTube to yank a parody of the cable network’s “The Colbert Report.”

Although the video in question contained clips taken from the television show, the groups argued that their use was protected under “fair use” provisions of copyright law, and thus Viacom shouldn’t have asked YouTube to remove the item.

Viacom initially denied requesting the removal but later acknowledged it and said it was in error.

The Electronic Frontier Foundation declared victory in announcing that Viacom agreed to add information on its Web site about its stance on such parodies and to set up an e-mail address to receive complaints about possible errors in the future.

Viacom, however, sought to play down its concessions, saying the lawsuit’s dismissal was a recognition of “the effective processes we have consistently applied.” In a statement, Viacom said the lawsuit “could have been avoided” had the groups contacted the company ahead of time.

The EFF and Stanford Law School’s Fair Use Project had filed the lawsuit in U.S. District Court in San Francisco on behalf of MoveOn.org Civic Action and Brave New Films LLC, which had jointly produced the parody.

The lawsuit came about a week after Viacom filed its own, $1 billion suit against YouTube, claiming that the sharing site is rife with copyrighted video from Viacom shows, including “The Colbert Report.”

Neither YouTube nor its parent, Google Inc., was named in the dismissed lawsuit. Under the Digital Millennium Copyright Act, YouTube and other service providers are generally immune from copyright lawsuits as long as they promptly respond to copyright complaints, known as takedown notices. Service providers are not required to investigate claims under the DMCA and in fact could lose their immunity if they take too long to respond.

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