PRC court rules against Yahoo in copyright case

Yahoo Inc's China unit has been ordered to pay the world's biggest music companies compensation for copyright violations two weeks after the US sued China at the WTO to stop piracy in the Asian nation.

The Web site, operated by Alibaba.com Corp (阿里巴巴), must delete links to 229 songs on non-affiliated sites and pay 210,000 yuan (US$27,176) in compensation to companies including EMI Group Plc, according a ruling by the Beijing Second Intermediate People's Court posted yesterday on the Web site of China's Supreme Court.

About 85 percent of recordings in China are illegal, with sales of pirated music worth US$410 million in 2005, said the International Federation of the Phonographic Industry (IFPI), the industry group that organized the suit. EMI, Warner Music Group Corp and nine other record companies sued Yahoo China last month on claims it violated copyrights by allowing users of its search engine to find links to pirated music.

Yahoo China plans to appeal the ruling, the company said in an e-mailed statement.

"This is a case that has far-reaching implications for all search engines," it said.

Baidu.com Inc (百度), the operator of China's most-used Internet search site, won a suit filed by record companies including EMI, Warner, Sony BMG Music Entertainment and Universal Music Group on similar claims last November.

The Beijing Intermediate People's Court ruled that the Web site didn't violate copyrights because it doesn't provide direct downloads of pirated music.

China's legal system isn't based on case law and legal precedents, Tony Chen, a partner at law firm Jones Day, said by telephone yesterday from Shanghai. Only interpretations by the nation's Supreme Court are legally binding, he said.

"The record companies have to be very happy with this ruling," Liu Bin, an Internet analyst at Beijing-based research company BDA China Ltd, said by phone.

"This ruling is going to put a lot more pressure on other search sites, especially Baidu, to really be careful about what they do," he said.

The IFPI, which also organized the lawsuit against Baidu, said in November it planned to appeal the Beijing court's decision in favor of the Chinese search company.

EMI in January said that it would not participate in the appeal after it formed an online music partnership with Baidu.

The London-based record company agreed to put streaming samples of its Chinese-language music, which can't be saved to computers, on Baidu's Web site. Baidu sells online advertising that appears next to the songs and shares the ad revenue with EMI.

Sina Corp (新浪), China's biggest Web portal, formed a similar agreement with EMI, Sony BMG, Warner, Universal, and Taiwan's Rock Records (滾石) last month. The five record companies agreed to offer free streaming versions of their music on Sina's site to win a share of ad revenue in the world's second-biggest Web market.

China was home to 137 million Internet users at the end of last year, second only to the US, government data showed.

Baidu had a 58 percent share of the Chinese search market in the fourth quarter, ahead of Google Inc's 17 percent and Yahoo China's 13 percent, researcher Analysys International said.