In recent years, U.S. Internet service providers (“ISPs”) such as Google, Yahoo, and YouTube have been challenged in U.S. courts by copyright owners alleging that materials hosted on the ISPs’ websites infringe on the owners’ rights. Based on the U.S. safe harbor law and its exceptions to the U.S. copyright law, U.S. courts have held that an ISP may be shielded from monetary damages for copyright infringement where the ISP is unaware of the infringing nature of the hosted content and moves expeditiously to remove or block access to such content upon becoming aware that it infringes the copyrights of others. This scenario is being repeated in China.

In a widely publicized case, more than 40 Chinese authors posted an open letter to Baidu (arguably China’s largest and most prominent search engine) on March 15, 2011, claiming that certain digital books posted on Baidu Wenku (????) violated the authors’ copyrights and should be removed from the site. Baidu eventually removed “almost 2.8 million files, mainly from the Literary Works section of the site, which was the primary concern of the writers and publishers” after negotiations with the authors broke down. Nonetheless, Baidu took the position that, as an ISP, it was not liable to the authors for any monetary damages for any alleged copyright infringement since the foregoing activity was permitted by the PRC copyright regime safe harbor.

Baidu struck a conciliatory tone in its approach with the protesting authors, no doubt in part due to the wide media coverage of the incident and the fact that the protesting authors included some of China’s most prominent authors. However, it is arguable whether in the future Baidu would be able to rely on the copyright regime safe harbor in order to avoid liability to rights holders for the reasons discussed below. We highlight below the regulatory background and certain key aspects and developments regarding the PRC copyright regime safe harbor potentially available to ISPs and consider its effect on the Internet industry in China going forward.