Baidu.com, China's largest search engine, has lost the suit against Shanghai Busheng Music Culture Media Company over its free music downloads service. Other music companies such as Cinepoly, Go East and Gold Label have filed similar lawsuits against it for alleged infringement of copyrights.
 
Shanghai Busheng Music Culture Media Company, an affiliate of the EMI record label also known as Shanghai Push, filed a copyright infringement suit against Baidu alleging that it allowed users to download 53 of its songs. A court in Beijing's Haidian district ruled on September 16 in favor of Shanghai Busheng and ordered Baidu to pay 68,000 yuan in damages.
 
"We will never compromise." Robin Yanhong Li, the CEO of Baidu, said of the free downloads issue in an interview with National Business Daily after the verdict.
 
Baidu has appealed the decision, saying that the court didn't understand the MP3 service process and working pattern of search engines.

Cinepoly, Go East and Gold Label are also suing Baidu in a move that could force it to shut down its MP3 search service, a key to the company's popularity among young Chinese Internet users.

"We confirm that Baidu is being sued for alleged infringement of music copyright," said Baidu's vice president of marketing, Liang Dong, who did not give further details.
 
Liang said Baidu only provides a music search service rather than downloads and added that the firm was communicating with the plaintiffs.
 
The music companies allege that Baidu has made it easy for users to download free copies of their songs via its MP3 search engine, the Hong Kong-based Standard newspaper reported.
 
Beijing New Picture Distribution is also suing Baidu for alleged piracy of the martial arts drama, "The House of Flying Daggers".
 
Although the plaintiffs are seeking compensation, what they most want is the suspension of services that allow Internet users to gain free access to copyrighted material.

After having received complaints about illegal download links, Baidu had actually deleted links last July, among which 3,000 outrageous links to a particular hit song were removed while investigations into another 5,000 links were launched.
 
"As a matter of fact, we're just a search engine that tells users where things are – this has been our business model since we started. If the copyright owners can prove their ownership of songs or other items, and pinpoint the pirates, we will definitely delete the links once for all."
 
About 28 percent of Baidu's traffic is derived from sites that allow users to download copyright-protected songs and movies for a small fee or for free in some cases. The legal status of Baidu's search function that helps Internet users access pirated music and videos has raised eyebrows.
 
Zhang Chaoyang, CEO of Sohu.com, wasn't so worried about the copyright issue. He said the traffic from MP3 search services is not that valuable for search engines, but "its contribution is the greatest." He added that this is not a new problem and might be resolved by sharing profits with record companies. Another Chinese portal, NetEase, had to shut down its MP3 search service on August 15 because most of the songs on the Internet were copyright protected. 
 
Last Wednesday, Baidu's Liang was reported to have met with several music company executives to discuss the copyright issue. A source said the goal was to "cooperate and make a platform for legal music downloads." Liang said the discussions were "positive."
 
"From the copyright point of view, we think differently from the music companies. Baidu is just a platform for music search," Liang said.
  
Baidu's options

There are currently only two models for Internet music that are profitable. One is the value-added services (VAS) model, providing SMS/MMS and ring tone services; the other is "Apple Mode" accessed via iTunes and iPod.
 
Baidu might decide to adopt the VAS model first. Baidu won't necessarily offer the ring tone downloads but could be a kind of "distributor" for service providers. While negotiations with ring tone companies continue, Baidu is scheduled to redirect all ring tone download links to official ones, and gradually get rid of the illegal ones. This way, Baidu can share profits with the service providers.
 
Baidu also hopes to be a direct distributor for record companies. Song Ke, CEO of Taihe Rye Music, suggested that just as music broadcasting rotations on TV and radio don't infringe copyrights, record companies could also avoid the issue and discuss how to sell music by putting them on Internet platforms like Baidu.    
 
One way of doing this, Liang Dong told the National Business Daily, would be to set up special features in its MP3 section and provide direct links to record companies' websites. This would be a good way to channel Baidu's user traffic to the record company websites.

(China.org.cn/Agencies by Zhang Rui, September 20, 2005)