A group of major music companies are preparing to sue Yahoo China over complaints the popular search engine violates copyrights by linking to Web sites that offer pirated music, the group's chairman said Tuesday.

"Yahoo China have been blatantly infringing our members' rights," said John Kennedy of the International Federation of Phonographic Industries. "We are taking the preliminary steps required by Chinese law for filing a lawsuit."

IFPI says Yahoo China links to outside sites with unlicensed MP3 downloads of hundreds of songs.

Yahoo China is operated by Alibaba.com Corp., which is 40 percent owned by Mountain View, Calif.-based Yahoo Inc. (YHOO) It is the No. 2 Chinese search engine, after industry leader Baidu.com (BIDU), according to the Shanghai market survey firm iResearch Co.

IFPI could file its lawsuit within a few weeks, said Kennedy, who was in Beijing for meetings with government officials. The group represents more than 1,400 recording companies in 73 countries, including major U.S., European and Asian labels.

A spokesman for Yahoo China, Porter Erisman, said the search engine is acting "within the law."

"We respect intellectual property rights," he said. "If someone sees something on our site that violates intellectual property rights, there is a process for removing it."

Erisman said the company is talking with music companies about creating a licensed music download system for China.

Kennedy wouldn't say how much money the lawsuit would ask for in damages. He said it also would request a court order to stop copyright infringement.

IFPI's lawsuit probably would be filed in a Beijing court, but the group also hasn't ruled out filing abroad, said Leong May-seey, its regional director for Asia.

China is one of the world's biggest sources of unlicensed copies of music, movies and software. But the government has been tightening enforcement under foreign pressure and to protect its own struggling music, movie and other creative industries, which say they face heavy losses from piracy.

A new Chinese law that took effect Saturday allows the government to fine online distributors of illegally copied music, movies or software.

Kennedy said the IFPI also is talking to Baidu.com Inc. about the search engine's links to outside pirate Web sites but hasn't taken legal action.

Baidu.com responded to complaints last year by adding a disclaimer to its Web site saying it "fights piracy" and promises to remove links to sites that infringe copyrights. But the site continues to link to sites that the IFPI says offer unlicensed downloads.

Baidu.com had 46.5 percent of China's search market last year, with U.S.-based Google Inc. (GOOG) in second place with 26.9 percent, according to iResearch. It said Yahoo China was the No. 2 Chinese search engine, with 15.6 percent of the market.

The complaints come at time when Yahoo China also is defending itself against criticism by human rights activists for cooperating with the communist government's efforts to censor the Internet.

The company has provided the government with information about its e-mail users that activists say was used to convict at least three political activists on subversion charges.