Chinese Court Upholds Ruling Yahoo Music Site Breaches Copyright; Ditto For Baidu

Yahoo (NSDQ: YHOO) lost its appeal against a court ruling that its Chinese music website promotes copyright abuse. The site, which offers deep links directly to hundreds of illegal MP3 and other files on third-party web servers, was declared illegal and fined 200,000 yuan ($27,140) in April under new laws introduced in 2006 ; Yahoo appealed, arguing both that search engines should not be held liable for content they index and that it has relevant copyright protections in place. But a court in Beijing threw out the appeal Thursday. Yahoo Inc. owns 40 percent of Yahoo China, a JV with China’s Alibaba.

The International Federation of the Phonographic Industry (IFPI) — the umbrella group that brought the original case on behalf of majors SonyBMG, Universal, EMI and Warner plus their local affiliates — leaped on the ruling, claiming deep-link access services “are a huge drain on efforts to develop a legitimate music market in China,” where 99 percent of all downloaded music is illegal and where 2006 music sales were just $76 million (less than one percent of the world market).

— The appeal court also upheld a ruling that Baidu (NSDQ: BIDU) had aided third parties in breaking music copyright law. The site is not itself liable because the case was brought under the pre-2006 laws, but the IFPI said the Yahoo ruling should convince Baidu to play by the new rules. Release.