My friend says that as long as you don't monetize/gain profit from the video, it is legal to upload it, but if the owner asks you to remove - you have to remove it. My stance on this is that whether the video is monetized or not, it is illegal to upload movies on YouTube and you could be prosecuted by law.
Who is correct - me or my friend?
Everything you need to know about uploading to YouTube and copyright law is in their Terms of Service, particularly the section of Copyright: Copyright and rights management - YouTube Help and in the Frequently asked copyright questions - YouTube Help.
It is simply illegal to upload movies for which you don't have copyright or a license to distribute. Monetization doesn't have anything to do with copyright itself.
Also read I have a question about copyright. What should I read before I ask it? - Law Meta Stack Exchange
Caveat: some laws in other countries could supersede US laws.
It is likely an infringement of copyright whether or not you monetize, unless it falls under fair use. Simply responding to the DMCA notice by taking down the video will NOT protect you from a lawsuit (the DMCA limits YouTube's liability, not yours), although it might limit the damages because your video won't be up as long. (But statutory damages are still possible, and they can run up to $150,000 for willful infringement.)
But there's not just civil liability to worry about. Copyright infringement can be a crime. According to 17 U.S. Code § 506 - Criminal offenses:
Any person who willfully infringes a copyright shall be punished as provided under section 2319 of title 18, if the infringement was committed—
(A) for purposes of commercial advantage or private financial gain;
(B) by the reproduction or distribution, including by electronic means, during any 180–day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000; or
(C) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.
According to 18 U.S. Code 2319, the maximum punishment for violating the above is between 1 and 10 years, depending on various details.
So, if you consider civil copyright infringement to be "illegal", you are most likely correct. However, if you're only concerned about criminal charges, then your friend is also correct - monetizing could make it criminal.
