Music 2.0 - Exploring Chaos in Digital Music

December 22, 2007

IFPI wrongly blames Chinese Law for Baidu loss, but wins Yahoo case

Filed under: Music Industry — maths @ 3:24 am
I Fought The Law v1

The IFPI has just announced that it has finally won a ruling against Yahoo China, after it prevailed against a Yahoo appeal to the Beijing Higher People’s Court and so the original penalty of RMB 200,000 awarded in April - for music copyright infringement against 11 music labels - by the Beijing No.2 Intermediate Court stands. At the same time, the same court reaffirmed that its ruling in favor of Baidu in the case brought against it by the IFPI in 2005 also stands.

The IFPI has in the meantime been touting that its loss to Baidu is due to changes in copyright law. John Kennedy, CEO of IFPI claimed that,

“We are disappointed that the court did not find Baidu liable, but that judgment was about Baidu’s actions in the past under an old law that is no longer in force. The judgment is irrelevant since it has effectively been superseded by the Yahoo China ruling. Baidu should now prepare to have its actions judged under the new law.”

However, this claim has been debunked by a few lawyers in China as told to Music2.0. As also reported in Sina (in Chinese), a prominent lawyer Yu Guo Fu pointed out,

“Even though the Provisions of Copyright Protection regarding Transmissions through Digital Networks was introduced in July 2006, it is not the underlying reason for the different results in both the Yahoo and Baidu cases. Fundamentally, the higher level Copyright Law and also the General Principles of the Civil Law were unchanged throughout both cases and that has been the basis for both rulings”

It is also important to note that these Provisions were only introduced by the State Council to make existing laws clearer and easier to enforce. John Kennedy’s spurious claims of an “old law that is no longer in force” is ignorant or at worst, an act of misinformation. The Provisions which are promulgated by the State Council CANNOT supersede the existing higher level General Principles of the Civil Law and the Copyright Law which are made by the People’s Congress.

Under the existing Copyright Laws. copyrights with regards to online transmissions (i.e. music downloads and streaming) are already protected, and any online distribution of this music by any party without proper license clearance is considered a direct infringement. Where a party does not engage in this infringement directly, but helps or induces others to commit an infringement, they will be jointly liable for the damages suffered by the victim. This is similar to the concept of contributory infringement in the US. Before liability can be proven, it is critical that the infringer is proven to have knowledge of or made to know that their actions have contributed either directly or indirectly to the infringement act.

So what exactly happened with IFPI in the Baidu case?
It does seem that the IFPI has either been using the introduction of the superfluous (in this instance) new law as an excuse for their embarrassing Baidu loss or more worryingly, were unfamiliar with Chinese laws and did not even realize that there were existing Chinese laws in place to put forward a more viable case against Baidu in the first place. Another contributory factor is that the IFPI, in its constant war footing mode decided to go for the jugular and accused Baidu of wholesale direct infringement without undertaking the necessary burden of proof to establish a more watertight case against it.
And that was a chance gone a begging especially when it is common knowledge that Baidu has been more than just an innocent bystander in the facilitation of mass copyright infringement. And this act of failure by the IFPI to nail them has not only served to embolden Baidu but given it a court endorsed legitimacy to persevere with its dubious activities.

O’Reilly’s Nat Torkington from his vantaged position, thousands of miles away from the scene of the alleged crime volunteers a more contrarian view that the IFPI might welcome to cover up its deficiencies:

“I suspect that really it’s because Baidu is viewed as a local (Chinese) product rather than a foreign one. China’s institutions (from the courts down to rules on currency movement and company ownership) are used to tilt the playing field in the favour of local companies. Expect to see more of this as big western Internet companies want a piece of the big Chinese market.”

(Hmm, it’s also nice being a big Western financial institution reaping the rewards of its investment in Baidu via ill-gotten gains, while keeping its hands clean, ain’t it?)

Once bitten, the IFPI duly attacked Yahoo like a wounded animal with twice the venom trying to prove that Yahoo was both a direct infringer (as per their Baidu case) and also a contributory infringer. They again, however failed to prove the former as part of their suit seeking damages of RMB 5.5 million and only got a fraction of this as they only succeeded with the latter. Yahoo’s refusal to act on a prior de-link notice - so that they could profit from the offending access to unlicensed music - was the main reason that they were eventually found guilty of contributory infringement. It has to be noted that even though the IFPI did not seem to have served Yahoo the necessary take down notices listing each offending link and instead simply dished out a general notice seeking a de-linking of all related artists content without specific song links, and the fact that the first instance verdict was announced at the start of China’s Intellectual Property Week, it was indeed a fortuitous outcome in some respects.

The snafus of these cases should not be allowed to detract us from a few home truths:

  • Music Search engines in China are not your typical search engines but offer grey area deep links and some also clandestinely host music files on their servers and actively promote the accessible content to their users as they seek to actively profit from unlicensed music. Other than Yahoo, Baidu, Sogou, Sogua and a few other local search engines, even the venerable Microsoft is not above slugging it out in the dirt in China. And they cry out about Windows piracy?
  • Yahoo’s conduct is totally disgraceful and Chief Yahoo Jerry Yang, Alibaba CEO Jack Ma, and head of music, Ian Rogers, who has been held in high esteem in the music industry, should be totally ashamed at yet another blight to the Yahoo name in China. What the hell are they thinking?
  • Baidu could probably have been found guilty of contributory infringement. But that’s nothing compared to the direct infringement liability that it (and CSFB, DFJ, Goldman Sachs and its other American investor cohorts) should be slapped with, as rumor has it that Baidu itself hosts large quantities of music files on its server farms to conveniently serve up illegal music files as part of its mp3 search service. Now all we need is someone more competent to turn hearsay into a foolproof case.
  • John Kennedy would instead have us believe,

    “We are confident a court would hold Baidu liable as it has Yahoo China”

    I fought the law and I won
    I fought the law and I won
    The law don’t mean shit if you’ve got the right friends
    That’s how this country’s run
    Twinkies are the best friend I’ve ever had
    I fought the law and I won
    I fought the law and I won

    - Dead Kennedys

    Music2.0 would like to state that we have yet to have access to the second instance judgements for both these cases, but with our ground-level proximity, this should serve as a close reflection of events.

    Update (7 Jan 2008):

    Music2.0 managed to find out more details of the case and has come to the following conclusions:

    1. We have observed through our various contacts with the related judicial fraternity that it does seem that the Appeals judges probably deemed it necessary to allow the first instance verdicts to stand as over-ruling it would have been too major a disruption to the system and also untenable for reasons best known to themselves.
    2. Even though philosophically there seems to be an incongruence between the final verdicts of both cases, the different approaches that the IFPI took for each case, with the Yahoo action being stronger helped in maintaining the favorable result for IFPI in that instance, whilst upholding the IFPI loss against Baidu was easier due to the weaker initial attempt against Baidu
    3. Also, in order for #1 to be achieved, it was conveniently cited that the “Provisions of Copyright Protection regarding Transmissions through Digital Networks” which was introduced in July 2006 helped IFPI get a favorable result against Yahoo. However, it has been pointed out by various lawyers in China that the existing “higher level Copyright Law and also the General Principles of the Civil Law were unchanged throughout both cases, and these already provide the foundations of the legal application” while it has to be noted that the Provisions were only introduced by the State Council to make existing laws clearer and easier to enforce. Even under the existing laws before the introduction of the Provisions, Baidu had been found guilty of music copyright infringement by the courts. On Sep 19, 2005, a Beijing court ordered Baidu to stop providing downloading services related to songs copyrighted by Shanghai Busheng Music Cultural Media Company and to pay the company RMB68,000 yuan.
    4. A detailed examination of the Yahoo second instance judgment does throw a monkey wrench into the customary and universally understood safe harbor provisions as it stated in effect that Yahoo should have known that it was infringing on copyrighted material and it should have taken it upon itself to divest all links to the offending copyrighted material on its own. Failure to have done so is the reason cited for Yahoo losing its case.

    Music2.0 concludes that the incongruence presented by these cases are made all the more difficult to comprehend by some of the obfuscation at play here by the parties concerned, and as such, it is not advised to use this as a basis to draw a definitive out-of-bounds marker for search engines in China. Also it is important to note that China does not adhere to the Common Law system and rulings are not necessarily bound by precedent.

    Dead Kennedy’s ‘Give Me Convenience Or Give Me Death’ album cover: courtesy of Amazon
    Twinkie the Kid image: courtesy of Twinkies


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