In a copyright infringement case at the heart of media company battles to win Internet viewers, an appeals court grappled on Tuesday over whether to revive Viacom Inc's landmark $1 billion lawsuit against Google Inc's YouTube.

Media conglomerate Viacom , appealing its June 2010 defeat in the litigation, said online video service YouTube willfully violated copyrights in allowing users to post television shows and movies.

The purported violations over popular programs such as South Park and SpongeBob SquarePants took place between 2005 and 2008, the 2nd U.S. Circuit Court of Appeals heard. In early 2008, Viacom began using a filtering system provided by Google, so that if anyone tried to play one of Viacom's programs on YouTube, it was blocked.

The three judges on the panel made no immediate ruling.

Judge Jose Cabranes, in his questioning of lawyers for Viacom and YouTube, referred to a series of statements of facts that need to be established if last year's ruling were to be reversed and returned to the trial court.

In that ruling, U.S. District Judge Louis Stanton said it would be improper to hold Google and YouTube liable under federal copyright law merely for having a general awareness that videos might be posted illegally.

At Monday's hearing, Cabranes and the other judges raised issues including whether having general knowledge was material to the case and whether YouTube knew what copyright video users were infringing. Another matter of dispute was Viacom's assertion that YouTube had a no-action policy until it received notices to cease and desist postings.

YouTube lawyer Andrew Schapiro repeatedly told the court that there was no evidence of a single clip that infringed copyright that YouTube did not take down out of 63,000 clips at issue.

For the past decade, media companies have sought to win Internet viewers without ceding control of TV shows, movies and music. The issue is more pressing with new devices on the market such as Apple Inc's Apple TV and services like Netflix trying to bring TV and movies from the Internet to TV sets.

In what was seen as a test of the 1998 Digital Millennium Copyright Act, Viacom sued YouTube four years ago. Stanton ruled that YouTube was protected under the statute because it took down videos posted by users when it received notices of violations.

Viacom lawyer Paul Smith told the appeals court that the company believed the judge didn't understand the law and that the ruling was both practically and legally indefensible.

Viacom owns cable networks such as MTV and Comedy Central. The comedy channel programs The Daily Show with Jon Stewart and The Colbert Report were also cited in the case.

In a related case against YouTube, a lawyer for The Football Association Premier League -- English soccer's globally popular top professional league -- told the appeals panel that clips were made available deliberately to get eyeballs.

They knew what they were doing, said the lawyer, Charles Sims. They assessed the value of it and decided not to take a license out for it.

The cases are Viacom International Inc, et al v YouTube Inc, Google Inc, No. 10-3270 and The Football Association Premier League Limited et al v YouTube Inc, et al, No. 10-3342 both in U.S. Court of Appeals for the Second Circuit.

(Reporting by Grant McCool; Editing by Tim Dobbyn)

(This story was corrected in third paragraph's second sentence to show Viacom began using filtering system in 2008)

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