A copyright lawsuit has finally stopped the crazy stock market streak of Beijing Baofeng Technology

Obsession
China's Transition
Obsession
China's Transition

It had to end eventually. News of a copyright dispute has broken the breathtaking post-IPO rise (paywall) in the share price of Beijing Baofeng Technology, which offers online videos, a media player, and a low-price virtual reality headset. In March, the company listed on the Shenzhen Stock Exchange. Since then, its shares rose every day until May 14. On most days, the stock gained the same amount: 10%, the maximum daily increase allowed by China’s exchanges. The improbable performance led to speculation of underlying inefficiencies and other problems in the markets.

On May 14, competitor Leshi Internet accused Baofeng (link in Chinese) of infringing on the copyrights of movies and TV shows. Apparently, Leshi bought the rights to play certain movies, and says Baofeng is offering the same content without buying the rights. By day’s end, Baofeng’s stock was down 4.1%. The stock lost another 6.5% in trading today:

Beijing_Baofeng_Technology_share_price_rate_chartbuilder

Baofeng has faced plenty of similar lawsuits in the past. According to its 2014 prospectus (pdf in Chinese), since the beginning of 2011 about 100 copyright litigations against the company were concluded through settlement or mediation, costing the company 3.3 million yuan (about $530,000). In 28 of the cases, Baofeng lost and paid about a million yuan. The prospectus noted that Baofeng faced 17 pending lawsuits at the time—14 from Leshi—that could result in damages of about 1.5 million yuan.

Over the past year, China has instituted dramatic changes to its intellectual-property laws. Tencent chairman Pony Ma Huateng has noted that 95% of all IP litigation in China is between Chinese companies and does not involve foreign multinationals, according to Corporate Counsel magazine.

Zheping Huang contributed reporting.

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