Alibaba-Kugou dispute may signal China digital shift

This article originally appeared in Managing Intellectual Property


Early this year, Alibaba restructured its two online music platforms XiaMi and Ttpod, forming Alibaba Music. Since then, most of the online music copyrights are held by three entities – Alibaba Music, Kugou and Tencent Music.

In May, Alibaba Music sought an injunction in Hangzhou against Kugou, claiming that Kugou was broadcasting 260 songs that Alibaba had exclusive rights to. The court agreed with the plaintiff and blocked Kugou from distributing those songs.

Kugou fired back in June, demanding that Alibaba take down over 10,000 songs on its service. Alibaba ignored the demand, prompting Kugou to file a lawsuit at the Shanghai People's Court alleging that Alibaba is engaging in malicious copyright infringement.

This dispute is another fight of a long-running war over music copyright. “Years ago, there was chaos, with disputes between several record companies and online music platforms, and now the battle is still on but has shifted to online music platforms,” observes Alden (Guanbin) Xie of Lifang & Partners.

He says that Alibaba Music and Kugou's dispute demonstrates that China's digital market is still in its early stages, and how it is resolved will shape the market and how it protects copyright.

So much potential

China's copyright industry is facing many of the same challenges that rights holders have struggled with worldwide, with the internet making it easier to reach larger audiences but also making piracy an unprecedented challenge.

China's copyright industry is a story of untapped potential. According to Xinhua News, there were 478 million consumers of online music in 2014, with about 200 million downloads per day. However, the revenue generated by online music that year was only RMB 400 million ($64.6 million), meaning that the average user spent less than 16 cents per year.

The bulk of the transactions goes through China's only collective management organisation, the China Audio-Video Copyright Association (CAVCA). The problem, explains Xie, is that the organisation's scope is limited.

CAVCA is the country's only collective management organisation to manage copyright-related rights, but it only oversees lyrics and music, he explains. One issue is that there isn't an efficient system in place managing neighbouring rights, such as those related to transmission, making online distribution difficult.

Another problem he notes is that many rights holders are not aware that they even possess rights in the online space.

Changes to come

Government officials are aware of the problem. Xiaohong Yan, deputy director of the National Copyright Administration of China (NCAC), says that the legal system is still struggling to deal with these internet-related issues. The principal and concepts embodied in the current laws and regulations can't meet the demands of the digital world, according to Cyberspace Administration of China.

There is some optimism that NCAC's newly-initiated Net Sword Action will address some of these problems. No details have been announced, but it will likely be along the lines of previous 'sword' programmes aimed at IP infringement.

Also, the most recent draft revision to the Copyright Law seeks to address these internet-related issues. For, the draft calls for joint liability for internet platforms that fail to timely act on notices that it is hosting infringing matter.

The third revision is under consideration at the Legislative Affairs Office of the State Council and may be enacted as soon as 2016.


By Stephy Tang, Managing Intellectual Property