Vivendi SA, Sony Corp and Warner Music Group Corp are seeking record damages from Baidu.com Inc on claims the operator of China's most-used Internet search site infringed copyright by offering Web links to pirated music.
The lawsuit filed by the International Federation of the Phonographic Industry in February was accepted by the Beijing No 1 Intermediate People's Court earlier this month, allowing the claims to be publicized. The $9 million in damages sought from Baidu and $7.5 million from Sohu.com Inc are the most asked for by record companies in China, May-Seey Leong, the federation's Asia regional director, says in a telephone interview.
Baidu, which controls 60 percent of the Chinese search market, is the "biggest roadblock" to creating a market for legal digital music in China, says Lachie Rutherford, the industry group's Asia Pacific chairman. More than 99 percent of online music in China is pirated, according to the federation.
"Winning this case against Baidu would be the biggest step forward yet in creating a legal digital music market in China," Rutherford, Warner Music's Asia president, says in a phone interview. China is home to more Web users than the combined populations of the UK and Japan.
Linda Sun, a Beijing-based spokeswoman for Baidu, says she couldn't immediately comment. Erin Sheng, a Beijing-based spokeswoman for Sohu.com, wasn't immediately available for comment. Vivendi's Universal Music Group is the world's biggest recorded-music company, while Sony BMG Music Entertainment, a venture between Sony and Bertelsmann AG, is the second largest. Warner Music and EMI Group Ltd rank third and fourth, respectively.
Baidu's Internet search service allows users to find links to pirated music files on non-affiliated Web sites. Universal, Sony BMG, Warner Music and EMI previously sued Baidu in 2005 for copyright violations and lost. EMI, which signed an agreement to offer legal music on Baidu's Website in January 2007, isn't involved in this latest suit.
London-based EMI is suing Sohu along with Universal, Sony BMG and Warner Music for providing links to pirated music.
The lawsuits against Baidu and Sohu may make Chinese Internet companies liable for more damages. Compensation in the cases was calculated on the basis of $71,000 in damages per track, the record-industry federation says in an e-mailed statement. The $9 million being sought from Baidu is based on copyright violations for 127 songs, while the IFPI says the Web site offers links to more than 250,000 pirated tracks.
Baidu had a 60 percent share of the Chinese search market in the fourth quarter, more than double the 26 percent held by its closest rival, Google Inc, according to research company Analysys International. Yahoo! Inc's China unit had 9.6 percent and Sohu had 1.2 percent, the researcher says.
In December, a Chinese court ruled that Yahoo China had violated copyright by providing links to pirated music. The record companies won the case against Yahoo China, which is owned by Alibaba.com Corp, because of regulations issued after the 2005 suit against Baidu had been filed, says Leong of the record industry federation.
That ruling signaled the courts are following the June 2006 regulatory change in China that clarified liability for distributing pirated content over the Internet, she says. "The new regulations make our case much stronger," Leong says.
The industry group in February began legal proceedings to enforce the December ruling after finding Yahoo China's site still offered links to pirated music Web sites, Leong says. As of today, the links were still active.
Porter Erisman, a Beijing-based spokesman for Alibaba, declines to comment. Sunnyvale, California-based Yahoo swapped $1 billion and its China unit in 2005 to become Alibaba's biggest single shareholder.
"The record industry wants partnership with China's Internet companies, but one that is based on respect of copyright and the law," John Kennedy, chairman and CEO of the International Federation of the Phonographic Industry, says in the emailed statement.