Western companies hope China's domestic disputes will help Beijing get serious about intellectual property theft
Victor Koo was looking for a way to make his video-sharing Web site stand out from China's legions of similar outfits. So the founder of Beijing's Youku.com arranged a pay-per-view special with Guo Degang, a comedian known for dialogues vaguely akin to the "Who's on First" routine by Abbott & Costello. For $7.30, subscribers could watch eight nights of Guo's fast-paced schtick, only on Youku.
Or at least that's what Koo thought. Soon after the Guo shows aired in August, Koo says, unauthorized copies started appearing on rival Sohu.com. That touched off a running battle among the kingpins of China's Internet. In September, Sohu and several other Net companies sued Youku and a handful of similar sites for airing videos without permission. Youku responded with lawsuits of its own, alleging defamation as well as illegal use of the Guo videos. "They make these announcements about us infringing their content, and the next day we still find evidence they violated our copyrights," fumes Koo, who once served as president of Sohu. Koo's lawsuit, counters Sohu chief Charles Zhang, is "pathetic."
Angry words aside, it seems the Chinese are beginning to get serious about piracy. While multinationals have battled intellectual property theft in China for years, Chinese companies have largely stayed on the sidelines. But as domestic players start to take umbrage at rivals stealing their wares, they're jumping into the fray—which may soon lead to better protection. If only foreigners complain, "it's an uphill struggle," says Michael C. Ellis, president of Asia-Pacific for the Motion Picture Assn., a trade group. But now "local industry is starting to realize the losses they are suffering."
China's video sites say they're doing their best to battle pirated content. They have introduced new technology to keep unauthorized videos offline and are quicker to take down those that make it through. "We always remove links" to pirated clips, says Gary Wang, chief executive of Tudou.com, another video-sharing site targeted by Sohu and its allies. For his part, Sohu boss Zhang argues that his company and its allies have spurred more Chinese sites to follow the rules. "Last year you could steal things in broad daylight," Zhang says. "Now, because of our efforts, you do it very discreetly."
Dan Brown, author of The Da Vinci Code, has already gained from the changing attitude. A Web site that had recruited more than 1,000 volunteers to collaborate on an unauthorized translation of Brown's latest novel, The Lost Symbol, pulled the plug on the initiative in September after a warning from the publisher that held the local rights to the book. To avoid "serious copyright consequences," the moderator wrote on the site, "I suggest that everyone suspend translating."
But plenty of demand remains. Prices for legitimate content have skyrocketed; site operators now pay $5,000 per episode, vs. $500 a year ago. And Beijing permits just a few dozen foreign films annually in Chinese cinemas—an invitation to piracy. "Unless you open the door to [foreign content], people will always find illegal ways to get it here," says Thierry Raymaekers, business development chief at Irdeto, a company that sells anti-piracy technology to cable TV operators.
That means copyright holders have a long road ahead. Lawsuits by foreign record companies against Chinese search engines for allegedly providing easy access to pirated songs have languished for more than a year, says Leong May-Seey, regional director for the International Federation of the Phonographic Industry. "It's just taking forever."