An American mother has filed a court case against Universal after a video of her child dancing to a song by Prince was removed from YouTube.

Stephanie Lenz posted a 30-second clip on YouTube of her 13 month-old son dancing to the tune of Prince's Let's go crazy.

Universal issued a takedown notice under the 1998 Digital Millennium Copyright Act, but Lenz is fighting the order in what could be an important test case for the fair use of music.

"I was really surprised and angry when I learned that my video had been removed," she said.

"Universal should not be using legal threats to try to prevent people from sharing home videos of their kids with family and friends."

YouTube took down the video after a complaint from Universal, but Lenz insisted that the site continue to carry the video.

She and the Electronic Frontier Foundation (EFF) are now suing Universal over the issue of fair use of music and for the time it took to get the video back online.

"Universal's takedown notice doesn't even pass the laugh test," said EFF staff attorney Corynne McSherry.

"Copyright holders should be held accountable when they undermine non-infringing fair uses like this video."

The case is being heard in the San Jose Federal Court.