Perfect 10, Inc. v. Amazon.com, Inc.

Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007) was a case in the United States Court of Appeals for the Ninth Circuit involving Perfect 10, Inc., Amazon.com, Inc. and Google, Inc. The court held that Google's framing and hyperlinking as part of an image search engine constituted a fair use of Perfect 10's images because the use was highly transformative, overturning most of the district court's decision.
Background.
Perfect 10 was an adult entertainment magazine that featured sexually provocative images of women. It also operated a subscription-only website featuring such images and leased some of these images to other businesses. A number of independent, third-party web site publishers placed images obtained from Perfect 10's subscription-only area on their own websites, violating Perfect 10's terms of service and copyright. Google crawls, indexes, and caches websites on its internal servers so they can be accessed quickly. The sites crawled included many of these third-party sites containing infringing images. As part of their image search service, Google also provides thumbnail copies of the images that are being searched for so the user may see them before accessing the website. Furthermore, when a user selects an image from a Google search, a new page is accessed that includes the original website as well as a frame that contains information about the image and the thumbnail version of the image. Google did not store or physically transmit the full images, only their thumbnails.
Perfect 10 believed the linking constituted instances of secondary copyright infringement, and the caching and thumbnails constituted direct infringement. Acting on this, beginning in May 2001, Perfect 10 began sending notices to Google informing it of specific links to infringers in its general Web search and requesting their removal. In May 2004, it began sending similar notices for Google's comparatively new image search (first offered in 2003). Google states that it complied with the notices where it could find the infringement and determine that it was in fact an infringement, removing them from Google Search. However, it noted that it was unable to do this in many cases due to deficiencies in the requests. Perfect 10 sent Google infringement notifications for nearly 4 years, eventually filing suit against both Google and Amazon for similar activities. Perfect 10 requested injunctions against Google and Amazon from linking to websites displaying Perfect 10's images and, in the case of Google, displaying the thumbnail images.
District Court opinion.
On November 19, 2004, Perfect 10 filed suit against Google, asserting various copyright and trademark infringement claims, including direct, contributory, and vicarious copyright infringement. After settlement discussions lasting several months, Perfect 10 filed for a preliminary injunction that would require Google to cease linking to and distributing its images. The district court granted partial injunctive relief in favor of Perfect 10. Specifically, it ruled that Google's thumbnail images were likely to be found to be infringing while the hyperlinks to infringing sites were not likely to be found infringing in and of themselves. Google appealed the injunction against them, and Perfect 10 appealed the decision on the hyperlinks.
On February 2006, District Judge A. Howard Matz ruled that "P10 is likely to succeed in proving that Google directly infringes by creating and displaying thumbnail copies of its photographs. P10 is unlikely to succeed in proving that Google can be held secondarily liable", and consequently ordered that P10 and Google jointly propose a wording for a preliminary injunction to halt Google's distribution of thumbnails of P10's works.
Following the district court's decision, both sides cross-appealed to the United States Court of Appeals for the Ninth Circuit. The Appeals court reversed.
Direct infringement.
Perfect 10 made two claims of direct infringement. First, it argued that Google's framing of infringing websites constituted direct infringement, and it requested that Google be enjoined from so framing websites infringing its content. Second, it argued that Google's creation and distribution of thumbnails was direct infringement, and it requested that Google be enjoined from creating and distributing thumbnails of its images.
Framing.
After an eight-page discussion of the framing issue, the district court found that Google would infringe the distribution and display rights by framing others' content only if it hosted and physically transmitted the content itself (the "server test"). The court rejected Perfect 10's argument that the relevant question should be whether the content is visually incorporated into the site (the "incorporation test"). Since Google only provided an instruction for the user's computer to fetch the infringing pages from servers not under its control, rather than hosting or transmitting the content itself, the court found that Perfect 10 was unlikely to succeed on this point, and so denied its request for injunction.
Thumbnails.
Google did not dispute that it displayed and distributed protected derivative works of the plaintiff's images. However, it argued that the use of the works in such thumbnails was protected under the copyright doctrine of fair use. There are four statutory fair use factors in U.S. law: the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used, and the effect of the use upon the potential market for or value of the copyrighted work.
The district court found that the purpose and character of the use was commercial and partially transformative (intended to serve a fundamentally different purpose than the originals). The court found Google's use highly commercial, more so than in "Kelly v. Arriba Soft Corporation" (which was prevailing precedent), due mainly to its AdSense program, which a number of the infringing sites used. Also distinguishing the case from "Kelly", the court noted that in 2005 Perfect 10 leased the right to distribute reduced-size versions of its images for use on cell phones to Fonestarz Media Limited, putting it in direct competition with Google's thumbnails. Therefore, the court ruled that this factor "weigh[ed] slightly in favor of P10".
Under the second fair use factor, the court considers the nature of the copyrighted work. Creative works are given more protection against fair use than factual works, and unpublished works more than published works. The court rejected Google's argument that the images were uncreative; however, since the works in question were all published, it ruled that this factor too weighed only slightly in favor of P10.
Addressing the third fair use factor, the amount and substantiality of the portion used, the court cited "Kelly", stating that "'If the secondary user only copies as much as is necessary for his or her intended use, then this factor will not weigh against him or her.'" The court ruled that since Google could not have served its purpose of allowing identification if it cropped the images, this factor weighed in favor of neither party.
The fourth fair use factor requires considering the effect upon the potential market for or value of the copyrighted work if the actions were widespread, not solely the effect of the particular user. A transformative work is less likely to have an adverse effect than one which merely supersedes the original. However, as noted above, the plaintiff had begun marketing images for cell phones of comparable quality to Google's images. Consequently, the court ruled that Google's infringement meant "[c]ommonsense dictates that [cell phone] users will be less likely to purchase the downloadable P10 content licensed to Fonestarz", and that this factor weighed against Google.
On the fair use issue, the court concluded:
Therefore, the court ruled that Perfect 10 was entitled to injunctive relief for Google's use of thumbnails.
Secondary infringement.
P10 alleged two distinct forms of secondary liability for infringement: first, that Google committed "contributory infringement" by encouraging users to visit infringing sites; and second, that it committed "vicarious infringement" by profiting from infringement. As summarized by "MGM v. Grokster", "One infringes contributorily by intentionally inducing or encouraging direct infringement . . . and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. . . ."
According to the Betamax case, secondary liability could not be found "based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement" (as paraphrased by "MGM v. Grokster"). The court ruled that Google did not, in any case, facilitate infringement, essentially because "[infringing] websites existed long before Google Image Search was developed and would continue to exist were Google Image Search shut down". Therefore, the court found that P10 did not demonstrate its likelihood to succeed in a contributory infringement claim, and consequently denied injunctive relief.
With respect to vicarious infringement, the court held that Google derived direct financial benefit from infringement of P10's copyright (in the form of AdWords and AdSense profits), but that it had no power to stop the infringements even if it knew of them. Therefore, the court found P10 unlikely to succeed in a vicarious infringement claim, and consequently denied injunctive relief.
Ninth Circuit opinion.
On appeal, the Ninth Circuit upheld the district court's decision that the hyperlinks were not infringing on Perfect 10's copyright. It agreed with the district court's assessment that infringing websites existed before Google and would continue to exist without Google, thus it was not a contributory infringer. Furthermore, Google had no control over infringing sites and could not shut them down, so any profits it may or may not extract from users visiting those sites did not constitute vicarious infringement.
The court also agreed that including an inline link is not the same as hosting the material itself. So in the case of framing, while it may "appear" that Google was hosting infringing material, it was only hosting a link to the material which the browser interpreted should appear in a certain way.
The Ninth Circuit did, however, overturn the district court's decision that Google's thumbnails were infringing. Google's argument, which was upheld by the court, was a fair use defense. The appellate court ruled that Google's use of thumbnails was fair use, mainly because they were "highly transformative." The court did not define what size a thumbnail is but the examples the court cited was only 3% of the original. Most other major sites use a size not longer than 150 pixels on the long size. Specifically, the court ruled that Google transformed the images from a use of entertainment and artistic expression to one of retrieving information, citing the similar case, "Kelly v. Arriba Soft Corporation". The court reached this conclusion despite the fact that Perfect 10 was attempting to market thumbnail images for cell phones, with the court quipping that the "potential harm to Perfect 10's market remains hypothetical."
The court pointed out that Google made available to the public the new and highly beneficial function of "improving access to [pictorial] information on the Internet." This had the effect of recognizing that, "search engine technology provides an astoundingly valuable public benefit, which should not be jeopardized just because it might be used in a way that could affect somebody's sales."
Google also raised a Digital Millennium Copyright Act (DMCA) safe harbor defense in respect to the issue of hyperlinks, which Perfect 10 contested. However, the court did not reach an opinion on the matter as it found that Perfect 10 was unlikely to succeed on the matters of contributory and vicarious liability because of the other arguments.