LeTV Sues Xiaomi In Growing Copyright Wars

By newsdoug on July 1, 2014

China was traditionally known for its rampant piracy, but is now suddenly becoming a strong copyright protection advocate with the rise of a new generation of video site operators looking to protect their intellectual property. In the latest twist of this new and somewhat unexpected trend, Internet TV operator LeTV (Shenzhen: 300104) has successfully sued fast-rising smartphone maker Xiaomi for copyright violations related to Xiaomi’s problem-plagued Internet TV set-top boxes.

I’ve observed the China piracy story for quite a while now, and will admit that I’ve even purchased a pirated DVD from time to time, largely because it’s impossible to buy legal copies of discs in Shanghai. I’ve watched the periodic government campaign to tackle the problem and have even seen shops closed by the police from time to time, but none of these actions ever seems to completely stamp out the problem.

All that has begun to change over the last year, with this new generation of private companies emerging as a surprising group of new enforcers that could finally tackle this vexing and long-running problem. In the latest instance of private-sector enforcement, LeTV has successfully sued Xioami in Beijing for illegally offering its programs in violation of copyright laws. (Chinese article)

Under the judgment, Xiaomi has been ordered to stop the transmission over its Xiaomi Box product of more than 10 filmed programs which are the intellectual property of LeTV. The setback is just the latest for the troubled Xiaomi Box, which ran afoul of regulators when it first launched in late 2012. Xiaomi later solved that problem, but since then has run into similar copyright conflicts with other program owners including broadcaster Hunan Satellite TV and leading video site Youku Tudou (NYSE: YOKU).

All of these legal actions highlight problems confronting not only Xioami, but also the many other companies now rolling out Internet TV products. Nearly every major Internet company has entered the space in the last year, many through tie-ups with major TV manufacturers like TCL (Shenzhen: 000100; HKEx: 1070) and Skyworth (HKEx: 751). Having entered the space, all of these companies will now have to be careful to avoid offering material over their services that is owned by another company.

This particular lawsuit is just the latest in a growing number of similar legal actions, many targeting major industry players. One of the biggest in recent headlines saw a record 260 million yuan ($42 million) fine levied last month against Shenzhen-based QVOD, maker of a popular video player and operator of a website rampant with pirated material. (previous post) That action was reportedly taken by the Shenzhen government due to strong lobbying from locally-based Tencent (HKEx: 700), China’s largest Internet company, which operates its own video service.

Also in the last few weeks, web portal Sohu (Nasdaq: SOHU) and the Southern Chinese newspaper Guangzhou Daily have both taken legal action to stop a fast-rising new mobile app called Today’s Headlines from illegally using their printed material. (previous post) And in one of the highest profile actions last year, a group of major video site operators including Tencent and Sohu joined with Hollywood’s top studios in suing leading search site Baidu (Nasdaq: BIDU) for copyright violations. (previous post)

So the broader questions become: Where is all of this going, and what will the landscape look like when the dust finally settles in this new round of legal actions? In all likelihood, the big names like Tencent, LeTV and Sohu are likely to become potent copyright police that will successfully shut down many mid-sized and smaller sites that rely on pirated material. But all these legal actions will also lead to a fragmented landscape among the major Internet video sites, whose selection of programs will be limited due to the wide dispersal of copyright ownership among a large field of players.

Bottom line: A new group of private copyright police like Tencent and LeTV will help to shut down many websites that depend on pirated material, but will also create a fragmented Internet video landscape.