"But it is equally important to protect the industry's prosperity by ensuring that online service providers who have carried out their obligations should be exempt from rights infringement liability," he said.

To solve disputes of online copyright breaches, China practices the rule of notice and takedown, a regulation widely used in many countries that exempts Internet service providers from infringement liabilities if they take down the disputed content after receiving a notice from the copyright owner.

Zhejiang-based Taobao.com, China's leading online retail platform, said it has deleted more than 47 million pieces of disputed information after receiving notice from copyright owners since the company was established in 2003. By this means Taobao has managed to escape hundreds of lawsuits related to copyright violation.

In a recent lawsuit against Taobao, China Friendship Publishing Company requested compensation of 224,000 yuan ($35,000) after finding that an online bookstore registered on Taobao was selling pirate versions of books published by Friendship.

The Beijing Second Intermediate court, however, only approved a 2,000-yuan penalty, saying Taobao had fulfilled its obligation to pre-censor and delete related information.

"Judicial decisions usually serve as a model in forming the code of conduct, especially in emerging industries," Sun said.