Yahoo China lost another round in a legal battle as a court in Beijing upheld a ruling that the company is infringing on copyright laws by allowing pirated music to be downloaded, according to the industry group suing Yahoo China.
"The ruling against Yahoo China is extremely significant in clarifying copyright rules for Internet music services in China," John Kennedy, chairman and CEO of the International Federation of Phonographic Industries, or IFPI, said in a statement Thursday. "By confirming that Yahoo China's service violates copyright under new Chinese laws, the Beijing court has effectively set the standard for Internet companies throughout the country."
Yahoo owns a 44 percent stake in Yahoo China, and the controlling stake is owned by Chinese Internet company Alibaba.com, which essentially runs the site. Representatives from Alibaba could not be reached Friday for comment on this story.
The International Federation of Phonographic Industries, which represents the music industry, filed the lawsuit in January 2007 on behalf of several recording studios, including Warner Music Group, Sony BMG, and Universal Vivendi.
In the suit, IFPI accused China Yahoo of violating copyrights because it allows links between its search engine and Web sites that have illegally copied songs from artists such as U2 and Destiny's Child.
In April, a lower court in Beijing had ruled that Yahoo China facilitated infringement of copyrights. Yahoo China appealed the decision, arguing that it should not be liable for content found outside its Web site. Now that appeal has been rejected by a higher court in Beijing, according to the IFPI.
Separately, the court also upheld a ruling on a similar case against Internet company Baidu. A lower court in November 2006 had found that Baidu had facilitated copyright infringement. But because this case was filed under older Chinese copyright laws in 2005, the company was not liable for copyright infringement, the IFPI said.
"We are disappointed that the court did not find Baidu liable," Kennedy said in a statement. "But that judgment was about Baidu's actions in the past, under an old law that is no longer in force. Baidu should now prepare to have its actions judged under the new law. We are confident a court would hold Baidu liable as it has Yahoo China."
China is viewed as one of the biggest sources of pirated music and movies, as well as counterfeit goods. And the IFPI, along with other companies and trade organizations, has been taking legal action to stem the flow of this content out of China. Recent reforms in Chinese law have helped, but experts say piracy still runs rampant.
The IFPI said search services from sites such as Yahoo China and Baidu, which connect users to hundreds of thousands of pirated music tracks, are "a huge drain on efforts to develop a legitimate music market in China." The group claims that more than 99 percent of all music downloading in China violates copyright. Despite the large population and potential of the Chinese market, the IFPI said that in 2006, music sales in China only amounted to $76 million, or less than 1 percent of the entire global recorded-music market.
Still, music labels see huge potential in China, and they have been willing to work with Chinese companies to ensure that music can be distributed legally and without violating copyrights.
In April, Sony BMG Music Entertainment struck a deal with content aggregator Global Music International to distribute its music videos, full-track songs and ringtones to mobile subscribers in China. The deal calls for Global Music to distribute Sony content through wireless-phone operator China Unicom.