The TOS section quoted by simonbrown doesn't say anything about letting third parties lay claim to others' content.

If it's a DMCA claim being filed by the third party, the third party is committing perjury. If it's via an extralegal agreement set up between YouTube and the third party, then the third party is at the least defaming the legitimate uploader, and the third party taking direct action to receive royalties for a video they did not create is fraud.

Furthermore, the current copyright laws which apply the synchronization and public performance rights of music owners to home videos of dancing babies uploaded by amateurs need to be revisited. The present situation is entirely unfair and unproductive to society at large.

Like I said in the first post, Youtube has an automatic content recognition system[1], which was probably what caused this, which means that there probably was no DMCA claim, defamation or fraud. The third party probably doesn't even know the video exists.

[1]: https://www.youtube.com/t/contentid

Companies can be held responsible for their automated systems running amok. If this is the case, then either YT's ContentID system is overly sensitive, the third party uploaded something like a sample of white noise or silence that ContentID matched to the silence or jet engines in the video, or the third party uploaded the original author's video to ContentID.

If Google can be accused of defamation for automatically suggesting "sucks" as an additional search term after a company name, then they can be accused of defamation for automatically indicating that an original author's video contains another's content. If the third party deliberately uploaded ambiguous content, hoping to trigger spurious ContentID matches, that is fraud.

At the end of the original article, the author says the situation has been rectified, but this is not an isolated incident. The article links to another example of a third party uploading someone else's royalty-free audio tracks to ContentID, giving them ad revenue from any video that includes those audio tracks.

No third party should have this kind of unchecked power over others' creations, and YouTube's ContentID system has been upheld as an example of how all sites with user-generated content should operate.