Yahoo China executive spat heads for court

A former Yahoo China executive is seeking almost $500,000 for 'defamatory' statements

A war of words between former and current Yahoo China executives has escalated into a court battle.

Zhou Hongyi, the web portal's former general manager, announced today that he is suing Yahoo China for defamation, seeking almost $500,000, according to his own statements and local media reports. 

Zhou became general manager of Yahoo China in 2003, when Yahoo bought his company, 3721.com, for $120m.

He left Yahoo last year to set up a new firm, Qihoo.com. Both 3721 and Qihoo make software with functions including virus and spyware detection.

"Yahoo China, which is now part of Alibaba, unexpectedly established a column on the homepage of its website accusing its former general manager of 'intimidating and pressuring' staff into leaving Yahoo China," Qihoo announced in a statement today. 

"Yahoo China's remarks had a defamatory nature which shocked insiders."

Zhou alleged that staff have left Yahoo because of "eight strategic errors", including termination of various business lines.

Yahoo's current general manager has also accused Zhou of allegedly favouring companies he controlled in business deals when he was Yahoo head, according to the China Daily. 

Qihoo was "founded by Zhou jointly with Sequoia Capital, Matrix Partners and CDH", according to the company's statement.

Zhou's former product, 3721 Assistant, which is now provided by Yahoo, recently began to classify as spyware the 360 Safeguard Anti-Spyware application developed by Zhou's new firm, Qihoo, according to Pacific Epoch. 

"Probably it is because the 360 anti-spyware tool safeguard affects Yahoo China's interests that they have launched this personal attack on me," said Zhou.

Yahoo and Alibaba have said they will make a counterclaim rebutting Zhou's accusations, according to the China Daily.

Alibaba formed a strategic alliance with Yahoo in an equity for $1bn cash swap in August 2005 shortly before Zhou left to form Qihoo.