Yahoo China infringed music copyrights by providing a music download service on its website, record labels have alleged in a suit filed in Beijing.
Most of the world's major music companies have joined the case against Yahoo's Chinese partner, Alibaba.com.
The record labels, which include Sony BMG, Universal, Warner EMI and seven others, are demanding that Yahoo China removes the service immediately.
The firms are also seeking more than $700,000 in compensation from Alibaba, and demanding that the portal operator publishes an apology for the alleged infringement.
Alibaba contends that it is not publishing or distributing the disputed tracks. The Yahoo China site merely offers its users links to music files stored on other servers which are not operated by Alibaba, the company says.
The users themselves choose whether or not to visit those third-party sites to download the files.
Alibaba operates the Yahoo China site as a joint venture with Yahoo. When the venture was established two years ago, Yahoo paid $1bn for a 40 per cent share in Alibaba.
The case is almost identical to one filed in 2005 against China's leading search engine, Baidu.com, over a service which helps users find downloadable MP3 files and other music file formats.
Baidu won the case in late 2006, although the record labels are appealing this decision.
Baidu offered a similar defence to Alibaba, pointing out that none of the infringing files has ever been stored on or transmitted through its servers.
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