Qihoo 360 was accused by Baidu of unfair competition. The company's lawsuits have made it difficult to launch on the stock market in the foreseeable future. (Photo/CFP)
The Beijing Second Intermediate People's Court has ordered security software provider Qihoo 360 to pay compensation of 385,000 yuan (US$58,000) to Baidu in a suit of unfair competition brought by China's largest search engine. The court also ruled that Qihoo should immediately infringing the rights of Baidu and make a public apology. The defeat in the legal battle is expected to further delay Qihoo's plan to list on the stock exchange.
The legal dispute between Qihoo and Baidu erupted after Qihoo unveiled its antivirus 360Safe 7.0 security software in early March. The company classified both Baidu Toolbar and Baidu Address Bar as "malware" with malicious applications and issued public warnings that the malware could threaten computers, according to the Beijing Morning Post.
Qihoo took a further step when launching the 360Safe 7.3 version to identify the above Baidu software programs as imbedded with viruses.
Baidu subsequently filed a lawsuit against Qihoo, alleging the company has engaged in unfair competition practices to use security testing as a pretext to tamper with Baidu search results, illegally intercept traffic flow on the internet and disparage Baidu's software programs in order to wrest away its customers.
Baidu also demanded compensation of 10 million yuan (US$1.5 million) and a public apology from Qihoo.
The two software firms under Qihoo said in their defense that they are not in competition with Baidu and denied that they have taken improper activities.
The court ruled that Qihoo had adopted unfair and illegal practices to maliciously attack Baidu software and persuaded customers to delete the software programs.
This was just one of a string of lawsuits for unfair competition brought against Qihoo. Since its inception in 2005, the company has faced successive lawsuits from companies, including Alibaba, Beijing Rising Information Technology Co, Ltd (offering antivirus solutions), Kingsoftware, and Tencent.
Sources in Hong Kong said Qihoo chairman Zhou Hongwei visited Hong Kong in late October to call on finance and securities executives for a plan to launch an initial public offering. But he was unable to meet many of them due to his company's high risks considering the lawsuits faced by the company.
Zhou, who has earned a controversial reputation in China's internet community, was dismissed as president of Yahoo China in 2005 for alleged stealing online search technology.
After establishing Qihoo 360, Zhou launched attacks on Yahoo China and Alibaba, prompting the latter to form a collective boycott against the "ruffian and bandit" in cyberspace. Yahoo founder Jerry Yang also advised potential investors in the US not to trust his "old acquaintance" from China, causing a deep cut in Qihoo's estimated market value and curtailing the company's pursuit for financing.
Qihoo's position marks a sharp contrast with Alibaba, Baidu, and Tencent that have not only ranked among the top listed firms but also won strong financial backing from investors in the US and Hong Kong.
Industry analysts believe it will take a long time for Qihoo to become traded on any stock exchange.
Qihoo 360 奇虎360