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Baidu Sued for Piracy Ahead of IPO
2005-8-3 21:24:28 Inc., China's biggest Internet search engine which is partly-owned by Google Inc., is being sued by two local companies over alleged copyright infringement, ahead of its planned first-time share sale in the United States.
Beijing New Picture Film Co., copyright owner of "House of Flying Daggers," filed a suit in June against Baidu for allowing users to download the movie for a fee, the plaintiff's lawyer, Ye Zhijian, said Monday by phone in the eastern city of Hangzhou. The Chinese-language film was released overseas by Sony Corp.

Shanghai Busheng Music Culture Media Co. also sued Baidu in June for allowing unauthorized downloads of 53 songs, according to share sale documents released by Beijing-based Baidu ahead of its planned offer of stock on the NASDAQ market in the United States Baidu spokeswoman Zhang Ling in Beijing declined to discuss either case.

"The copyright issue has cast great uncertainty over Baidu's future business models and revenue," said Gu Feng, a technology analyst at Shenyin Wanguo Securities Co. in Shanghai. "This is something investors should take into account."

The government, under pressure from the United States and Europe, is stiffening punishments for intellectual property theft. China on Dec. 21 made such piracy punishable by as much as seven years in prison.

Baidu sold 749,625 shares, or a 2.6 percent stake, to Google for US$5 million in June, 2004. It has hired Credit Suisse First Boston and Goldman Sachs Group Inc. to help raise as much as US$88.5 million in a U.S. initial public offering as early as this month.

"We face a higher risk of being the subject of intellectual property infringement claims in China,"Baidu said in its share sale documents. "Any litigation can result in substantial costs and diversion of management resources and attention."

Beijing New Picture Film was demanding US$20,056 in compensation and damages from Baidu, lawyer Ye said. The Hangzhou Intermediary Court would rule on the case in about two weeks, Ye said. Shanghai Busheng is seeking US$67,661 in damages, Baidu's documents show.

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