Yahoo China Loses Suit, Must Say “I’m Sorry”

That sounds like a slap on the wrist – a sort of virtual dunce cap – more than a real punishment.  There is a precedent for these terms, however, as “in early July, Qihoo was ordered to apologize to China Yahoo on its home page for 24 hours, and pay RMB 30,000 ($3,950) to China Yahoo,” according to Interfax China.

Why the back-and-forth?  There have been allegations that Qihoo’s founder embezzled from and defrauded Yahoo China.  Furthermore, as Interfax’s Rita Shen notes, Qihoo’s “Safe360 began identifying China Yahoo’s 3721 Internet surfing tool as malware, removing it from the computers of users.  Soon after, Safe360 appeared to become the victim of electronic sabotage, something the company blamed on updated versions of 3721.  Accusations and counter-accusations were exchanged . . .”

And now, at long last, both companies may be at peace.  “The ruling should signal an end to the long-running battle of attrition between Qihoo and China Yahoo,” writes Shen.

That’s not to say Yahoo’s problems in China are entirely over – it still faces some thorny issues relating to a jailed dissident.  And its market share could be better.  But at least the Qihoo lawsuit got resolved in a relatively harmless manner.  Hat tip to Barry Schwartz.

Yahoo China was naturally displeased by the actions of Qihoo.com, and pressed the issue in a legal fashion. A report on Yahoo News said Yahoo China prevailed against Qihoo’s claims.

A Beijing court decreed Qihoo had engaged in “unfair competition,” which means they will have to clarify their statements about the Yahoo toolbar. Qihoo also has to pay up to cover Yahoo’s legal expenses and damages.

However, Reuters noted Qihoo’s ownership, Beijing Sanjiwuxian Internet Technology, will appeal that verdict.

An ex-Yahoo staffer, Zhou Hongyi, runs Qihoo. The problems with Yahoo began with some Qihoo software:

Although the Yahoo Toolbar is not a threat to China’s users, some may note Yahoo still poses a concern for certain citizens. Reporters Without Borders has been a frequent critic of Yahoo and its role in the imprisonment of three journalists in the country.

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David Utter is a staff writer for WebProNews covering technology and business.

An earlier lawsuit against Qihoo is still active; at issue is a Qihoo anti-spyware program, called 360 Safe, “that prompts users to de-install Yahoo China’s toolbar,” according to Fortune’s Elen Wu.

That dispute became fairly ugly, with references to “personal vendettas” and “evil” tossed about by both sides. This new lawsuit isn’t likely to mend relations between the two companies. Matt Marshall, who broke the story, reported on the details.

“Yahoo China will claim Zhou was already using his position . . . to steal partnership and investment opportunities away from Yahoo China, preparing the groundwork for his exodus to Qihoo,” Marshall wrote.

“He also offered money to key Yahoo China staff if they left the company, the suit will allege. He even launched press releases through front PR firms, saying in one case that a Yahoo China deal with MSN had expired when in fact it hadn’t, the suit will claim.”

And as if all that wasn’t enough, Marshall’s VentureBeat article also noted that “a separate source says Yahoo’s co-founder Jerry Yang is actively seeking to dissuade investors from backing Qihoo.”

Yahoo China is owned by Alibaba, a Chinese company. The fate of the lawsuit will still reflect on its American counterpart, though. China has proven to be a “challenging” market for Yahoo, Google, and Microsoft.

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Doug is a staff writer for WebProNews. Visit WebProNews for the latest eBusiness news.