Shanghai - A legal battle is brewing between Yahoo China and its former head
of operations, who filed a lawsuit against his ex-employer on Thursday as Yahoo
China prepared to answer with its own suit.
Zhou Hongyi took his legal action in Beijing alleging defamation against
Yahoo China, said a spokeswoman for Qihoo, another China search company that
Zhou currently heads. Yahoo Inc.'s main China business consists of a 40 percent
stake in Alibaba.com that it bought last year for US$1 billion. Alibaba owns
"Because Yahoo China has used numerous methods in the media to openly express
incorrect facts about and verbally abuse Zhou Hongyi, Zhou Hongyi has taken
Yahoo China to court," Qihoo said in a statement.
As part of the landmark Yahoo-Alibaba deal, Yahoo folded its previous China
business into Alibaba.
Zhou, who sold his Internet search business to Yahoo in 2003 for US$120
million and had remained with the firm after that, left Yahoo China shortly
after the Alibaba deal was announced.
He was free to pursue any business opportunities he wanted as of the end of
last year, said the spokeswoman for Qihoo, where Zhou is now chairman and whose
investors include venture capital heavyweights Sequoia Capital and IDG.
Chinese media have reported that Alibaba has accused Zhou of unspecified
"unethical business practices."
Meantime, Alibaba said in a statement it would sue Zhou, though it declined
to elaborate on the allegations.
"Alibaba has decided that its affiliated units and business departments
starting from today will never make any investments with Zhou Hongyi and will
have no involvement whatsoever with any of his companies," Alibaba said in a
An Alibaba spokeswoman said the company would file its lawsuit in Hong Kong.
Both Zhou and Alibaba founder Jack Ma are known in China's Internet world as
highly vocal and opinionated entrepreneurs, each building his company from
scratch to become the business leader in its respective area.
Zhou's company, formerly known as 3721, was virtually synonymous with search
in China when Yahoo bought it in 2003.
He was a highly visible figure before the purchase, and continued to freely
express his views after the deal even as 3721 stumbled under competition from
the likes of Google and Baidu, China's current Internet search leader.
Alibaba's Ma also relishes the spotlight, building his company into a Chinese
Internet juggernaut whose scope includes business and consumer online
marketplaces and online search.
Ma is also known for his outspokenness, frequently taking pot shots at eBay
Inc.'s China unit.
Alibaba has waged an aggressive campaign that allowed it to overtake eBay's
market-leading position in China over the last two years, although Ma's company
offers its services for free while eBay is charging for some of its