Google on its AdSense blog has outlined some policies and practical tips to avoid copyright infringement of, for example, reposted content like videos and news articles.
Google's policy is not to show ads alongside copyrighted material for which the publisher has no authorization to use. "Simply put, you cannot run AdSense ads alongside copyrighted content that violates copyright laws," or even alongside links to content like it.
What is and is not copyrighted? Generally, any original and creative work appearing online is protected by copyright law. Some exceptions include purely factual material, particularly government generated. You may cut-and-paste Bureau of Labor Statistics data to your heart's content—which of course does not have the appeal of a raunchy video from CollegeHumor.com. Google (as well as Microsoft, AOL and providers like them) generally allow re-reporting of their blogs (like this entry) in the interest of spreading the word to their user communities.
Another exception is out-of-copyright material. Those tedious Twilight teenaged vampire novels are all protected by copyright, and a user cannot lift passages from it; Dracula is long out of copyright, as are for example The Three Musketeers and anything by Shakespeare. Some film content is now in the public domain as well - stuff like the 1956 classic "The Brain That Wouldn't Die." Hardly cutting-edge stuff, and hard to monetize.
But in general, advises Google, "the reach of copyright law is very broad," and you are safest assuming material is copyrighted.
What Is Proper Use?
Usually, you have no right to offer mainstream entertainment (e.g., television shows, movies, and popular music) on a website without express authorization.
If you create the content yourself, you likely hold the copyright and may attempt to monetize it; but if you created it using content from others as source material, you are likely borrowing material unauthorized.
If you have acquired permission from the copyright holder for material on your site, this is called a license.
Fair use laws in the US allow for some uses of copyrighted material, for example, citing passages from a book (with attribution) for purposes of criticism or research.
"We don't want AdSense used in ways that may support copyright violations, so we sometimes err on the side of caution if a site cannot demonstrate a clear legal basis for using or linking to copyrighted material," Google advises.
Linking to Filesharing Hosts
In general, it is against AdSense policy to show ads on a page with links to other sites that host copyright materials without authorization (e.g., forums, blogs or community websites).
Google invites content creators to tattle using the AdSense Help Center if they believe a site participating in AdSense is cadging copyrighted material without license.
Some Nerve, Google
Interestingly, go to the Google property YouTube and you will find copyright infringement on parade. Search for example for "John Lennon Imagine." It defies belief that of the 24,000+ results, all are licensed by EMI, which holds the rights to "Imagine." A few of the videos return the message that EMI has blocked the content in your country due to copyright concerns; still you will see ads for Sprint and BigCommerce.com alongside other fan-generated videos.
Google's take on YouTube has long been that it provides a platform in YouTube; it is not their fault that infringers use it to infringe. After several fractious lawsuits brought by, among others, Viacom, Google tasks the copyright holders to identify and protect that content with tools that Google provides. Not good enough for Viacom which for nearly four years policed YouTube to take down Spongebob Squarepants and South Park content. (Viacom appears to have given up that fight.)