Appeals Court Decision a Mixed Bag for Perfect 10

Q Boyer
PASADENA, Calif. — In the latest developments for Perfect 10’s long-running lawsuit against Google Inc. and Amazon.com, the 9th U.S. Circuit Court of Appeals has dealt the company another setback in its case against the Internet giants but left the door open on some of the lawsuit’s claims.

Finding that a lower court had erred in determining that Perfect 10 was likely to succeed in its claim that Google’s use of thumbnail versions of Perfect 10 images in its image search constituted direct copyright infringement, the court lifted the preliminary injunction regarding Google’s use of those thumbnails and remanded the case to the district court for trial.

Perfect 10’s owner Norm Zada told XBIZ that he was disappointed with the court’s ruling, but remained confident that he will prevail on at least one of the lawsuit’s surviving claims.

“There are aspects that trouble us, but the good news is that the court’s latest ruling won’t hurt us that much at trial,” Zada said.

One of the specific areas in which Zada did not agree with the court’s reasoning was in relation to the full-size versions of Perfect 10 images that are in-line linked and displayed via a frame in Google’s image search results.

“In this decision, the 9th Circuit basically says that you can’t ‘display’ something without first making a copy of it,” Zada said. “Why would Congress go to the trouble of establishing a right to a separate right of display if displaying the work was the same thing as copying it?”

In the decision, written by Judge Sandra Ikuna, the court asserted that Google does not “display a copy of full-size infringing photographic images for purposes of the Copyright Act when Google frames in-line linked images that appear on a user’s computer screen.”

“Because Google’s computers do not store the photographic images, Google does not have a copy of the images for purposes of the Copyright Act,” Ikuna wrote. “In other words, Google does not have any ‘material objects … in which a work is fixed … and from which the work can be perceived, reproduced or otherwise communicated’ and thus cannot communicate a copy.”

The court also found Google’s use of Perfect 10 images to be “highly transformative,” and argued that the search engine used the images “in a new context to serve a different purpose.”

“The fact that Google incorporates the entire Perfect 10 image into the search engine results does not diminish the transformative nature of Google’s use,” Ikuna wrote. “As the district court correctly noted … even making an exact copy of a work may be transformative so long as the copy serves a different function than the original work.”

The court then balanced the value of Google’s transformative use against the extent to which that use was commercial in nature, and concluded that “the significantly transformative nature of Google’s search engine, particularly in light of its public benefit, outweighs Google’s superseding and commercial uses of the thumbnails in this case.”

Zada told XBIZ that he wasn’t satisfied with the court’s explanation as to why it considered Google’s use of his company’s images to be “highly transformative.”

“They say Google’s use is ‘highly transformative’ without explaining how and why it is transformative,” Zada said. “They don’t explain how what Google does — which is basically use the thumbnails as a preview for full-size images — is any different from what we do with thumbnails.”

One aspect of the court’s ruling that cut in favor of Perfect 10 was the court’s analysis of possible contributory copyright infringement on the part of Google, where the appellate court once again disagreed with the lower court.

“[T]he district court held that even assuming Google had actual knowledge of infringing material available on its system, Google did not materially contribute to infringing conduct because it did not undertake any substantial promotional or advertising efforts to encourage visits to infringing websites, nor provide a significant revenue stream to the infringing websites,” Ikuna wrote.

“This analysis is erroneous. There is no dispute that Google substantially assists websites to distribute their infringing copies to a worldwide market and assists a worldwide audience of users to access infringing materials. We cannot discount the effect of such a service on copyright owners, even though Google’s assistance is available to all websites, not just infringing ones.”

Ultimately, the court decided to send the case back down to the district court to determine at trial whether Perfect 10’s action against Google and Amazon can succeed on secondary liability claims, and whether the two companies can limit that liability pursuant to title II of the Digital Millennium Copyright Act (DMCA).

Zada said that despite all the setbacks in the case, he is still reasonably confident that Perfect 10 will prevail at trial, at least with respect to the thumbnail issue. Even so, Zada said that the entire experience has been draining and frustrating, and that rather than appeal every aspect of the decision that he does not agree with, he would take a limited victory at trial and be content with that.

Given that he sent his first copyright infringement notices to Google in 2001, and filed the lawsuit in 2004, Zada said he is painfully aware of the painfully slow pace of complex litigation.

“To fully litigate this thing — to appeal all the things we believe we’re right about — would mean that it goes on for years,” Zada said. “I’m not sure I have the energy for that.”

In another setback for Perfect 10, the U.S. Supreme Court yesterday declined to hear the company’s case against payment processor CCBill and its affiliated hosting company CWIE.

By declining to hear the case, the nation’s highest court effectively upheld the 9th Circuit’s ruling issued in March, in which the court found that CCBill and CWIE were immune from liability under section 230 of the Communications Decency Act.