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 Look Who’s Suing Baidu

28 February 2008 — Forbes



HONG KONG -It's no longer just foreigners who are angry over piracy in China.

With sales of Chinese music plunging, trade groups representing domestic musicians, singers and songwriters are taking the country's dominant Internet search engine, Baidu.com to court.

The Music Copyright Society of China and China's largest digital music distributor, R2G, have filed suit against Baidu.com in Beijing, charging that the company has taken advantage of their industry's lack of technical sophistication to "stealthily provide unlicensed music streaming and downloading via its Web site, and thus earn significant advertising revenues via its massive online traffic brought about by its music download service."

The MCSC and R2G hold 80% of all digital copyrights in the Chinese music industry.

“This lawsuit is just the early beginning of our anti-piracy action,” Wu Jun, CEO of R2G, said in a phone interview with Forbes.com. “We will also start to reach out to advertisers in order to save our industry from destruction.”

Copyright protection has long been an afterthought in a country whose small manufacturers thrive on copying everything from Louis Vuitton handbags and Hollywood movies to Western luxury cars, despite China’s commitment to respect intellectual property rights under the terms of its accession to the World Trade Organization.

In a twist, Wu said Chinese artists were encouraged to stand up for their legal rights by the robust recent action in Chinese courts by foreign record companies.

In February, the world’s three biggest record companies, Sony BMG Music, Warner Music Group and Universal Music, sued Baidu to stop rampant music piracy. (See: " Baidu, Sohu Served With Suits By Music Companies")

The trio are also going after Yahoo! China, which is operated by Alibaba, through an industry trade group, the International Federation of Phonographic Industries, for its refusal to comply with a landmark ruling in December that found Yahoo! China guilty of mass copyright infringements.

The record giants were encouraged by the legal victory, but they continue to be frustrated by the difficulty of enforcing rulings in a country where the application of the law is notoriously uneven.

For the Chinese music industry, it is a matter of life and death. The MCSC's publishing revenue shrunk to only a few million yuan for the full year of 2007, down 90% from 2005, concurrent to a period of explosive growth in Internet usage in China. China is expected by Morgan Stanley to overtake the U.S. as the country with the most people online as soon as this year.

New releases by record companies have fallen by about 50% since 2005, according to Wu of R2G.

Meanwhile, Baidu’s fortunes have taken off, with its revenue more than doubling in 2007 to $239 million, a substantial part of which the music industry suspects is derived from online advertising tied to illegal music downloads.

R2G reached a two-year agreement in 2005 with Baidu to block the illegal download of ringtones based on copyrighted songs, but they failed to agree on an extension beyond 2007.

R2G is also the digital copyright holder for songs distributed in China by Warner-Chappell Music and Universal Music Publishing.

The MCSC and R2G said they turned to the courts after failing to reach a private settlement with the search engine giant. They charge Baidu with stonewalling, delaying tactics and using distorted interpretations of the law.

"Baidu hides behind the guise of a 'neutral search engine' and employs sophisticated secret music Web sites and deep links which without the requisite technology expertise makes it almost impossible for copyright holders to detect and protect their rights by exposing Baidu’s dubious activities," they said in a statement.

For starters, they are suing Baidu for infringement of copyright of 50 popular Chinese songs, including the patriotic anthem " Ai Wo Zhong Hua (Love My China)."

Wu said more lawsuits for other song titles would follow.

 



 
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