Baidu Inc (ADR) (NASDAQ:BIDU), the largest search engine company in China is facing a lawsuit related to online piracy filed by the Motion Picture Association of America (MPAA) along with a group of Chinese internet companies including Tencent Holdings Ltd (HKG:0700), Inc (NASDAQ:SOHU), Youku Tudou Inc (ADR) (NYSE:YOKU) among others.


Baidu violated copyright laws

The group of defendants in the case alleged that Baidu Inc (ADR) (NASDAQ:BIDU) and others violated copyright laws by using automated processes to obtain content licensed to other companies. In some cases, Baidu provides links to websites hosting pirated content. They are seeking 300 million yuan in damages.

In a statement, Baidu Inc (ADR) (NASDAQ:BIDU) emphasized that it is committed in protecting copyrights in the online video industry. The Chinese search engine giant said its automatic system was implemented to filter illegal content, and it has a team that works 24 hours a day to process complaint and promote legal content.

“We hope to collaborate with industry partners and, through technological innovation and close collaboration, together promote the development the legalization of the video industry,” added Baidu Inc (ADR) (NASDAQ:BIDU).

QVOD also named as a defendant

On the other hand, QVOD, a software company that was also named as one of the defendants in the case said, “We are just a video player, we don’t provide content.” The company’s mobile and desktop video player allows users to stream videos and it is linked to the web.

Meanwhile, Charles Zhang, chief executive officer of Inc (NASDAQ:SOHU) said, “We can’t continue to compete in the situation because law-abiding people can’t survive in a place where robbers and thieves rampage.” He added that their negotiations with Baidu Inc (ADR) (NASDAQ:BIDU) failed because the company refused to stop violating copyright until QVOD also agrees to stop pirating videos.

Furthermore, Zhang said, “For American companies, many millions worth of content is being stolen…if this continues they will never have a chance to make money in the China market.”

Baidu Inc (ADR) (NASDAQ:BIDU) could suffer huge damage in the online video market if the lawsuit succeeds. Advertising in the online video market in China was worth 3.25 billion yuan, and it is expected to generate 16.2 billion sales next year. Last May, the company acquired PPStream for $370 million and combined it with its video site. Baidu also launched its Smart TV products.