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In a filing with the US District Court in Los Angeles on Tuesday, Grouper denied the copyright-infringement allegations and said Universal was using the lawsuit to boost a rival video-sharing site in which it has a stake.

According to sources, Universal Music and other record companies - including Warner Music Group - negotiated small stakes in YouTube before it was bought by Google for $1.65 billion last month.

Universal, owned by French media group Vivendi and the world's largest music company, has been leading an aggressive drive to get paid for all uses of its works on new digital services over the Internet.

In its legal filing, Grouper denied it was engaged in mass copyright infringement and said that - like other such sites - it cannot prevent third parties from violating the company's terms of service that prohibit copyright infringement.

Grouper also said it was fully compliant with the Digital Millennium Copyright Act and was carrying out the requests of copyright owners to remove materials that users may have improperly uploaded to the site.

Sony Pictures Entertainment paid $65 million for Grouper in August.

In October, Universal sued Grouper and privately held Bolt.com, claiming the sites allowed users to swap pirated versions of its musicians' videos.

Last Friday Universal also sued News Corp-owned social networking site MySpace for copyright infringement of its music and videos.