A copyright lawsuit for China's largest e-book reader manufacturer is highlighting problems that are holding back development of the country's e-book market.

The company, Hanvon, is being sued by the Zhonghua Book Company for alleged copyright infringement of its Twenty-Four Histories and Draft History of the Qing Dynasty. The works are considered authoritative in the field of the nation's pre-communist history. Hanvon said it obtained the legitimate copyright through a deal with the China Written Works Copyright Society, but Zhonghua has nonetheless requested $136,000 in damages.

Though a relatively small amount, the situation highlights a big and growing problem for e-book reader manufacturers in China. It's getting increasingly difficult to obtain legitimate copyrights in what could potentially be the largest e-book market in the world. In some cases, agents purport to represent a collection of content providers, but often overstate the true size of their library, leaving the licensee open to additional claims.

Content providers complain that e-books bring little benefit to them at this stage and thus many are reluctant to issue digitized versions, disrupting the supply chain. Top publishers say the environment means that most of the copyrights released to e-book manufacturers are for content that is at least two years old.

To try to correct the problem, Hanvon is investing around $4.4 million this year to obtain content for its e-book mall. It is also offering a 20-to-80 profit share between Hanvon and copyright holders.

Some industry insiders are also calling for greater government intervention to try to break the bottleneck.

But that seems unlikely in the near term. Beijing is still trying to feel its way through new copyright disputes for online media as it tries to cleanse the industry of a raft of pirate online video sites. Few think it will tackle the e-book issue until it has more experience in regulating the medium.

Though many e-books are pirated in China, e-reader makers like Hanvon are slowly trying to entice people to pay for content, hoping that over time it can transition to a hardware-and-services model made viable by Apple with its iTunes store.

InformationWeek has published an in-depth report on the expanding profile of data deduplication. Download the report here (registration required).