BEIJING, Nov. 19 (AP) -- A group of major music companies lost a lawsuit against China's largest Internet search engine, Baidu.com, over alleged copyright violations, state media reported.

The seven companies, including EMI, Sony BMG, Warner Music and Universal Music, have accused Baidu of facilitating the illegal download of 137 pieces of music owned by the companies, Xinhua News Agency said late Saturday.

The companies demanded Baidu suspend its popular MP3 search service on its Web site and compensate them with 1.73 million yuan (US$216,250; €169,289).

But the First Intermediate Court in Beijing ruled that Baidu had not infringed the copyright of the record companies because the music files were being downloaded from the Web servers of external parties.

"If the music companies had won, the whole search engine sector would have ground to a halt," Xinhua quoted an unnamed Baidu spokesman as saying.

John Kennedy, chairman of the International Federation of the Phonographic Industry, which represents several companies in the music industry, said the group will support the record companies if they appeal the ruling, Xinhua said.

The group represents more than 1,400 recording companies in 73 countries, including major U.S., European and Asian labels.

It has also reportedly commenced legal proceedings against China's No. 2 search engine, Yahoo China, which the group says provides 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.

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.