Veoh Networks, a start-up company that had been developing video-sharing technology for the Web, has filed for bankruptcy protection, following a lengthy court fight over copy right infringement and the sluggish U.S. economy.

In an open letter dated Feb. 11, Veoh CEO and founder Dmitry Shapiro wrote that the company has now filed for Chapter 7 bankruptcy protection and that it planned to close its doors immediately. From the letter, it’s not clear what will happen to the company’s intellectual property and patents.

When it closed, Shapiro wrote that Veoh had 28 million users a month and a run rate of $12 million. Veoh started in 2005 and had been developing technology to allow users to share high-quality video on the Web. By helping users broadcast video, Veoh was competing against the likes of YouTube, which is owned by Google.

“Veoh launched in September of 2005 with a bold goal: To make it possible for anyone with a video camera and a computer to broadcast video to the world,” according to Veoh letter, which has been posted on the company’s Website. “While others were working on helping people share short video clips, Veoh created technologies that made it possible to cost effectively transport full-length, long-form, high resolution content.”

In the last five years, Shapiro wrote that investors had supported the company with about $70 million in financing. Under Chapter 7 rules, companies are usually liquidated but businesses can continue under the guidance of a court trustee until the matter is resolved.

In the letter, Shapiro writes that the company was the victim of the sour economy in the United States and a drawn out legal fight with Universal Music Group. The lawsuit involved copyright infringement, but Shapiro said his company won after a two-year fight.

However, the cost of the court fight drained Veoh’s finances, wrote Shapiro.

“I would like to thank all of my fellow team members and their families, our courageous, dedicated investors, our suppliers and attorneys, and all of the passionate people that have made it possible for us to be a part of this great revolution of social media,” wrote Shapiro. “This is a critically important time in the evolution of the Internet as an open communications medium, and all of us at Veoh wish those companies that continue to innovate in the space, great success.”