Silicon Hutong on the IP Beat

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As another follow-up to my posts last week on cyber-litigation and its future in China, David had an excellent post a few days ago that touched on some of the same issues. This part about Youku is particularly worth a read:

Youku is particularly happy about that the statistics suggesting that people spend more time on Youku than on its competitors’ sites. There is a good reason for that, as Senior Analyst Elias Glenn at Pacific Epoch pointed out on Twitter today. Youku acknowledged in its release the importance of "professionally produced" long-form content (i.e. movies and TV shows) to the company’s performance.

What is unclear is whether some, most, or all of that long-form content is being show without prior permission of the copyright owners.

There are two possibilities.

Is that the Union Jack or the Jolly Roger?

First, that Youku has reached agreements with all the copyright holders of the content on its site, including 20th Century Fox, the distributors of the Cameron Diaz movie "What Happens in Vegas" that I was enjoying on Youku (sponsored by 51jobs) just a few minutes ago. Or Universal, who kindly allowed Youku to show me "Leatherheads" with George Clooney, and this year’s blockbuster, "Iron Man," courtesy of the generous folks at Paramount.

If that is the case, they are to be commended, and I will happily join the line of people seeking stock when Youku goes public. Somehow, I don’t think that’s happened yet.

The second is that Youku has not reached those agreements with all of the copyright holders, that its vaunted filtering systems are failing to pick up the pirated videos (despite being able to filter politically objectionable content), and that Youku is building its spectacular user numbers based on its role as a pirate multiplex.

That is going to be a concern to both investors and advertisers.

While China may not enjoy a reputation as an ardent defender of intellectual property rights, the time where a company with Youku’s profile can openly operate as a copyright scofflaw are rapidly coming to an end. Baidu and others have learned that China’s intellectual property laws are slowly growing teeth, and Youku, laying claim to the mantle of the most popular site of its type, would be an ideal chew-toy.

As I discussed last week, we have some ways to go over here in sorting out issues related to video sites and copyrighted material. While Google and Viacom fight it out in the US over YouTube, the updated laws and aggressive activities of the intellectual property community will not disregard Chinese analogs, at least not for long.

My comments touched on site policing and take-down standards as well. As David points out, China sites that filter political content are setting themselves up for an interesting problem when they get hit with litigation. If the filters are effective for one type of content, why not use the platform for copyrighted material? Reminds me of the problem the Beijing government will have after the present campaign against unauthorized Olympic symbols/content is over — industry is going to wonder why similar efforts have not been rolled out to protect other kinds of IP.