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Businesses don’t just compete through price and advertising anymore: In today’s world, it’s all about intellectual property.

It’s a relatively new development that can be both good and bad for business: While one shouldn’t be able to make profits on property that doesn’t belong to him or her, it’s hard to overlook the fact that the “sue to win” approach is one that totally disregards consumer demand. Not only that, it can be used to gain competitive advantage. Just ask media giant Viacom, which, having done little of note since chairman Sumner Redstone fired CEO Tom Freston last fall, decided to file a billion-dollar lawsuit last week.

The lawsuit, which seeks $1 billion in damages from YouTube owner Google, centers around YouTube’s “brazen disregard of intellectual property laws” shown by “more than 160,000 clips from The Daily Show with Jon Stewart, South Park, The Colbert Report and other Viacom-owned programs,” according to Wired magazine. Viacom further argues that Google hasn’t done enough to stop such infringement. But the problem doesn’t have anything to do with intellectual property, oddly enough.

Google, of course, has created content distribution deals with a number of other companies, but not with Viacom. The reason for this is simple: Not long before Viacom announced the lawsuit against Google, it signed a deal with YouTube competitor Joost to host videos from Viacom-owned networks. The lawsuit, therefore, is not a matter of Viacom losing revenue – it’s a matter of helping Joost compete.

Something similar happened when Wendy Seltzer, a professor at the Brooklyn Law School, posted a YouTube clip of the National Football League’s copyright message aired during the Super Bowl. Despite the fact that the video clearly fell into “fair use” exceptions of intellectual property and copyright laws, the NFL complained. YouTube, which has a reputation of being weak-willed about such matters, took down the video, thereby putting the NFL in a stronger position to sell its broadcasts – maybe even to YouTube itself.

This approach is unacceptable. It makes the consumer the ultimate loser. When companies compete not by offering more, but by making “the other guy” offer less, there’s a serious problem. The solution won’t be simple, and will involve both the revision of intellectual property law as well as the reformation of competitive practices. But for the sake of capitalism, which succeeds as an economic model by producing a greater number of goods and services over time – not fewer – those corrections should be made sooner rather than later.