Since its Nasdaq IPO in early August Baidu (ticker: BIDU) has been mired in controversy over its MP3 search function. Baidu's MP3 search allows Internet users the ability to locate copies of music stored on the Internet. The problem? A number of major US music companies claim Baidu's MP3 search gives users free access to copyrighted material. Rather than simply shutting down its MP3 search (according to its IPO filing approximately 22% of Baidu’s traffic goes to its MP3 search platform) Baidu is fighting the music companies in court. Baidu CFO Shawn Wang and CEO Robin Li discussed the latest developments during management's Q3 2005 earnings results conference call:
Well, as you're probably aware, that Baidu was a defendant in a number of MP3 related lawsuits. And they were brought against either by the major record labels or by the affiliates in China.
The one that was entered in the lower court, there was a lower court ruling, which the ruling was against Baidu and the actual result was, approximately one-tenth of the damage claimed by the plaintiff was awarded to them. And that's a total of approximately less than $70,000 US in the amount of damage. The-- Baidu believes that ruling was not with any merit and we have already appealed in higher court. We continue to believe that the, Baidu's business practice and conduct complies with most regulations of China.
We are a search engine company. We do not upload or store or edit or download any MP3 services. I think the lower court ruling was based on a misunderstanding of the facts. The--actually, the higher court proceedings is still ongoing. We cannot at this moment comment on any specific-- there's not any progress yet. We're still in the legal proceeding.
(Quotes are from the CCBN StreetEvents transcript.)