Liability of Chinese internet search engines enabling illegal music searches – a comparative analysis of the Baidu and Yahoo cases

17 June 2008

Ai-Leen Lim, Ricky Leung

On 20 December 2007, the Beijing Higher People’s Court (the "Court") decided against Yahoo! China ("Yahoo") in a case brought against it by 11 major record companies, in which Yahoo was held to have infringed the plaintiffs’ copyright by including a search function for locating illegal music files as part of its search engine capabilities. Yahoo was ordered to pay the plaintiffs RMB¥210,000 (US$28,600) in damages on account of its infringement. The Court upheld the ruling of the first instance court in this appeal (and final) decision.

Interestingly, on the same day the Yahoo case was decided, the Court rendered the appeal judgment of another case brought by similar plaintiffs against ("Baidu"), which held that the Chinese search engine was not liable for copyright infringement, despite the fact that Baidu provided a search function for illegal music files similar to that offered by Yahoo. In this appeal, the Court again chose to uphold the lower court’s decision in favour of Baidu.

This sounds intriguing if not surprising – how was it possible for the same Court to decide, on the very same day, two factually similar cases in such an inconsistent manner? This is the question we seek to answer in this article.

The applicable laws

Although the two appeals were decided on the same day, the Baidu dispute in fact arose more than one year before Yahoo was brought to the court by the record companies. This time difference in the accrual of the two cases’ respective causes of action is believed to be an important factor as to why the Court approached the two cases so differently.

Yahoo was sued by the plaintiffs on the basis of facts that took place after the Regulations on the Protection of the Right of Communication through Information Networks (the "Regulations") came into force on 1 July 2006. Baidu was sued on the basis of events before the Regulation’s effective date. As such, whereas the Yahoo case was governed by the Regulation (in addition to other applicable copyright laws) the Baidu case was not.

The Baidu case was decided mainly on the basis of an older law, the Interpretation by the Supreme People’s Court On Several Issues Relating to the Application of the Law in Copyright Disputes involving Computer Networks (the "Interpretation").

On the issue of copyright infringement

The plaintiffs’ ownership of copyright was not at issue in both cases.

In both cases, the main issue before the Court was the same– whether the defendants (both search engines) were liable for copyright infringement by the acts of providing deep-linking to third party infringing music contents, and providing pre-arranged listings of music by singers, genre etc in the music search interfaces which enabled their users to search for and download illegal music from third party sites with ease. The courts’ findings in the two cases on the issue of infringement are set out below*.

The Baidu case

The first instance court (whose decision was upheld by the appeal court) held that Baidu was liable for copyright infringement. The grounds furnished in support of the said decision are:

1. Although the functions of trial listening and downloading were provided in Baidu’s music search page, this did not constitute copyright infringement because any infringing contents in question would have resided in third party websites and any infringing acts of copying or dissemination would have been committed by the said third-party websites and/or the users of the search engine[1].

2. Baidu would not have been able to anticipate, identify or control the legality of the searched contents which must invariably be stored in third party websites. Therefore it lacked knowledge of any infringement by the search engine user relating to the downloading of infringing music files and/or by the third party website for making available infringing music content for downloading[2].

3. Although Baidu should have removed links to all infringing music contents upon the relevant copyright owners filing their statutory complaint notices, the notice given in this case was defective and insufficient because it failed to set out the identity of the owner of the copyright work in question and the links complained of[3].

The Yahoo case

The first instance court in the Yahoo case (which decision received affirmation by the appeal court) held that Yahoo did not directly infringe for the first reason stated above in respect of the Baidu case.

However, Yahoo was held to have been liable for infringement jointly with its users on the basis that upon receiving the notice of complaint from the plaintiffs requesting deletion of the infringing links, Yahoo failed to fulfil its statutory obligation to remove the links. It only deleted the links of a selection of the songs specified by the plaintiffs in their notice. The court held that Yahoo should have deleted the links to all the songs the copyright of which was alleged by the plaintiffs to have been infringed.

In this case, the courts had clearly imposed a more stringent obligation on search engines to respond to infringement complaint notices given by copyright owners than in the Baidu case. It appears that, it is this onerous obligation that caught Yahoo. In this regard, the courts seem to have applied Articles 14, 15 and 23 of the Regulations which provided, inter alia, that if a search engine fails to remove all infringing contents as demanded by a copyright owner pursuant to a good complaint notice filed in accordance with Article 14, it shall be held liable on the ground of joint infringement.

Concluding remarks – the impact of the new Regulations

It can be seen that the new Regulations were at work in the Yahoo case which the courts had relied on to find the defendant liable.

Whilst copyright owners such as record and film companies are pleased with the promulgation of the Regulations, it is not entirely clear how effective the new law will prove to be when it comes to affording practical protection to copyright owners. It is perceived by many industry observers that the Regulations are not a sufficient deterrent, given that the maximum fine for breach is only RMB¥100,000 (approx. US$13,000). No doubt, the larger search engines in China can certainly afford to pay the maximum fine as part of their costs of doing business and choose to flout the law. This would be so particularly in view of the fact that the Chinese internet population is exploding and local search engines are finding themselves in a highly lucrative business.

In the final analysis, instead of insisting on the strict enforcement of copyrights, the more realistic and pragmatic solution for the music and film industries in combating internet copyright infringement would lie in them exploring opportunities for revenue sharing with the content providers. This will likely yield better results for the copyright owners than if they choose to wrestle with the search engines over copyright infringement issues.

* As at the date of writing, the written judgments of the Yahoo and Baidu appeals were not available. For this reason, the analyses of the two cases set out in this article are based on the first instance decisions of the lower court in respect of the two cases (which were both upheld by the Court in the appeals).

[1]See Art. 41 of the PRC Copyright Law.

[2]See Art. 5 of the Interpretation.

[3]See Art. 5 and 8 of the Interpretation.