Music industry group the IFPI has said it's going to sue Yahoo! China for making pirated music available for download.
The IFPI said in a statement: "In April 2006 IFPI wrote to Yahoo! China on behalf of its member record companies, asking it to take the necessary steps to stop the infringement of IFPI members' rights. To date IFPI has received no acceptable response. IFPI is taking the preliminary steps required by Chinese law for filing a lawsuit."
The legal action should come within a few weeks if the two parties cannot come to an agreement before then, according to an IFPI spokesperson.
The suit would test a brand new Chinese law, which went into effect on 1 July, which fines those distributing illegal copies of digital content such as movies and music over the Internet--or those knowingly linking to pirated materials. Fines can reach 100,000 yuan (US$12,500).
Nearly 90 per cent of all recordings are illegal in China and pirate music sales in the country total about $400m annually, according to the IFPI.
Yahoo! China is operated by Alibaba.com, a Chinese web portal of which Yahoo! owns 40 percent.
Last year the IFPI sued Baidu.com - China's most popular search site - and the dispute has not yet been resolved. The IFPI represents more than a thousand members including record labels such as EMI, Sony BMG, Universal Music and Warner Music.
IFPI chairman and CEO John Kennedy said in a statement: "Yahoo! China has been blatantly infringing our members' rights. We have started the process and as far as we're concerned we're on the track to litigation. If negotiation can prevent that, so be it."
In an interview with Bloomberg, Kennedy would not say how much the IFPI would seek in damages but said damages for similar cases in the US "would certainly run into tens of millions and perhaps even more than that".
Alibaba.com has not responded to requests for comment.
Sylvia Carr of Silicon.com reported from London.
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