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Baidu gets out of jail free

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Google may as well pack its multicoloured luggage and head for the airport - Baidu scored an important legal victory this week which all but assures it of the number one spot in the Chinese market.

An appeals court ruled this week that deep-linking to unlicensed music doesn't constitute copyright infringement, in a case brought by international trade body IFPI. In 2008 two major labels won compensation from Baidu in just such a case.

Yet Baidu's protestations of innocence might sound hollow, as regular readers will know. Baidu offers a much more complex operation than might be the case if its spiders innocuously picked up a few MP3 files on their crawls.

In 2008 we revealed how Baidu benefits from a complex network of interrelated sites that host unlicensed MP3 files, sites that are only available through Baidu. These domains are rotated in response to takedown requests, but ensure that a song is available illegally from a variety of sources. So visitors to Baidu can be assured of a nonstop flow of free music.

Last year Google and the recording industry responded by teaming up for a free, licensed MP3 service.

Yet Baidu is a homegrown hero and enjoys close ties with the authorities in China. Despite an advisory from the Ministry of Culture ordering search engines and other sites to stop deep-linking, the practice continues unabated. Chinese courts have now ensured that a legitimate market cannot flourish.

There will be sighs of relief on Wall Street too. Baidu Inc (BIDU) began trading on the NASDAQ stock exchange in 2005, and is backed by blue chip investors including Morgan Stanley. ®

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