Music firms hope Yahoo China ruling will apply to Baidu
At the end of last year, the world's major record labels lost their lawsuits against Baidu for copyright infringement by its MP3 search services. They filed legal proceedings again on February 4 and, this time, they are expected to win.
Record companies are pinning their hopes on a new interpretation of the mainland's piracy law. Although they lost the case against Baidu, the country's dominant search engine, they were able to win their suits filed later last year on similar grounds against Yahoo China.
'We reviewed the court documents. Both cases have the same factual situations,' said Leong May-seey, the Asian regional director of the International Federation of the Phonographic Industry (IFPI).
The federation, based in London, is representing EMI, Sony BMG, Universal Music Group, Warner Music Group and their local subsidiaries in the court cases.
Baidu was able to convince the Beijing court that it was not guilty by claiming it was only an electronic platform - a search engine that picks up music files automatically over the internet.
'But how would it know which songs are movie-related, which belong to individual singers and which belong to bands? Someone must be deliberately sorting out the songs,' said Ms Leong. Songs are sorted according to different categories in Baidu's MP3 search service, which allows music downloads by providing links to the unlicensed files.
The same argument did not work for Yahoo China, partly owned by one of the world's biggest internet companies, Yahoo, through its mainland subsidiary, Alibaba Group.
By the time that case went to court, a new set of anti-piracy laws had been passed on the mainland stating it was not only illegal to be the source of pirated music files but also to be an assistant to piracy.
Baidu's case was filed in 2005, while the new laws were passed in 2006. Yahoo China's case was filed in January last year.
Yahoo China has subsequently stopped its MP3 search services.
'My understanding is that the Baidu and Yahoo China cases were brought at different periods when the laws were slightly different, which is why we believe there are two different outcomes,' said Porter Erisman, Alibaba's vice-president for corporate affairs.
'We hope and assume that, with the recent clarification of the law, the new standards will be applied uniformly so that there is a level playing field for all search engines in China.'
John Kennedy, IFPI's chairman and chief executive, said earlier that Baidu should prepare to have its actions judged under the new law.
'We are confident a court would hold Baidu liable as it has Yahoo China,' Mr Kennedy said.
On February 4, the music companies brought legal proceedings against Baidu and mainland portal Sohu and its search-engine unit Sogou for their MP3 search services.
Baidu had approached the record firms for an out-of-court settlement, an industry source said. The record labels' determination to fight Baidu in court might not be in proportion to the amount of compensation they seek. The music companies were asking for 1.67 million yuan when they sued Baidu in the summer of 2005. But the legal battle has dragged on for 2? years.
'If a major company such as Baidu can openly violate copyright, other parties and individuals will think it is all right for them to do the same,' said Ms Leong.
The IFPI estimates that more than 99 per cent of all music downloading on the mainland infringes copyright, and search engines such as Yahoo China and Baidu account for the bulk of the problem.
Baidu's actions were affecting music sales not only on the mainland but in Hong Kong, Taiwan, Singapore and other areas where Chinese songs have a market, said Ms Leong. Users worldwide can use Baidu's MP3 search.
While Baidu is reluctant to stop its popular MP3 search right away, it is trying to offer some legal music services as well.
Shen Haoyu, Baidu's vice-president of business operations, said: 'Baidu believes in copyright protection and we have already announced partnerships with companies such as EMI and Rock Music Group that provide users with high-quality, fully licensed music through an advertising-supported free music streaming model.'
Yahoo China also insists its ultimate goal is legal music services.
'Our ultimate goal remains to partner the leading record labels to develop a licensed music service for the China market,' said Mr Erisman.
But Mr Kennedy has a somewhat different viewpoint.
'The music industry in China wants a partnership with the technology companies, but you cannot build partnership on the basis of systemic theft of copyrighted music,' he said. 'And that is why we have been forced to take further action.'