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

Brief Fact Summary.

Google, Inc. (Defendant) claimed that even if its transmission of thumbnail images of Perfect 10, Inc.’s (Plaintiff) copyrighted nude images, or its in-line linking to or framing of full-size images that infringed Plaintiff’s copyright in the images constituted infringement of Plaintiff’s display or distribution rights, its use still constituted a fair use.

Synopsis of Rule of Law.

(1) A computer owner that stores an image as electronic information and provides that electronic information directly to a user violates the copyright holder’s exclusive right to display the image. (2) A computer owner that in-line links to or frames a full-size image does not infringe the distribution right of the image’s copyright owner when the image is displayed on the computer screen of a user. (3) A search engine’s owner’s appropriation of a copyrighted image for use as an indexed thumbnail picture is a protected “fair use†under the copyright law where the balance of the statutory fair use factors favors the owner of the search engine.

Facts.

Perfect 10, Inc. (Plaintiff) markets and sells copyrighted images of nude models, and operates a subscription website on the Internet accessible to subscribers who pay a monthly fee. Members may view images of Perfect 10 (Plaintiff) in a “member’s only†area of the site by using a personal password required to log-in. Plaintiff has also licensed copyrighted images in a reduced size for download and use on cell phones. Google, Inc. (Defendant) operates a search engine, a software program that automatically accesses thousands of websites (collections of web pages) on the Internet and indexes them within a database stored on Defendant’s computers. When a Google (Defendant) user accesses Defendant’s website and types in a search query, Defendant’s software searches its database for websites that respond to the particular search query. Defendant then sends relevant information from its index of websites to the user’s computer. Defendant’s search engines can provide results in the form of text, images, or videos. The Google (Defendant) search engine that provides responses in the form of images is called “Google Image Search.†Google Image Search identifies text in its database responsive to the query and then communicates to users the images associated with the relevant text. Defendant’s software cannot identify and index the images themselves. Google Image Search provides search results as a web page of small images called “thumbails,†which are stored in Google’s (Defendant) servers. The thumbnail images are reduced, lower-resolution versions of full-sized images stored on third-party computers. When a user clicks on a thumbnail image, Defendant’s software directs the user’s browser to create on the user’s computer screen a small rectangular box that contains the Google (Defendant) thumbnail and a larger box that contains the full-size image, which the user’s computer has been instructed to access from the third-party site that houses that image. Defendant does not store the images that fill this larger box and does not communicate the images to the user. The two boxes together appear to be coming from the same source, since they are in the same frame, but they actually come from two sources—Google (Defendant) and the third-party website. The process the web pages use to direct a user’s browser to incorporate content from different computers into a single window is referred to as “in-line linking.†The term “framing†refers to the process by which information from one computer appears to frame and annotate the in-line linked content from another computer. Defendant also stores web page content in its cache, which ultimately means that Defendant’s cache copy can provide a user’s browser with valid directions to an infringing image even though the updated web page no longer includes that infringing image. Google (Defendant) also generates revenue through a business program called “AdSense.†Under this program, a website owner can register with Google (Defendant) to become an AdSense “partner.†The owner then places HTML instructions on its web pages that signal Google’s (Defendant) server to place advertising on the web pages that is relevant to the web pages’ content Google’s (Defendant) computer program picks the advertising automatically by using an algorithm, and the AdSense participants share the revenues that result from such advertising with D. Some website publishers pirated Plaintiff’s images and Defendant’s search engine automatically indexed the web pages containing the pirated images and provided thumbnail versions of the images in response to user inquiries. Perfect 10 (Plaintiff) repeatedly informed Google (Defendant) that its thumbnail images and in-line linking to the full-size images infringed Plaintiff’s copyright and when Defendant continued its search engine practices, Plaintiff filed a copyright infringement action against Defendant, and sought a preliminary injunction to prevent Google (Defendant) from infringing Plaintiff’s copyright in its images and linking to websites that provide full-size infringing versions of Plaintiff’s photographs. The district court granted the preliminary injunction, finding harm to the derivative market for Plaintiff’s reduced-size images. The court also ruled that Defendant’s search engine likely infringed Plaintiff’s display right with regards to the infringing thumbnails, but that Plaintiff was not likely to succeed on its claim that Google (Defendant) violated Perfect 10’s (Plaintiff) display or distribution right regarding its full-size infringing images. The district court used a “server test†in reaching these conclusions, reasoning that a computer owner that stores an image as electronic information and serves that electronic information directly to the user is displaying the electronic information in violation of a copyright holder’s exclusive display right. Also, however, the court reasoned that the owner of a computer that does not store and serve the electronic information to a user is not displaying that information, even if such owner in-line links to or frames the electronic information. The district court also reasoned that distribution requires an “actual dissemination†of a copy, and since Google (Defendant) did not communicate the full0size images to the ser’s computer, Defendant did not distribute these images. Defendant raised the affirmative defense that its use was a fair use, but the district court rejected this defense. The court of appeals granted review.

Issue.

(1) Does a computer owner that stores an image as electronic information and provides that electronic information directly to a user violates the copyright holder’s exclusive right to display the image? (2) Does a computer owner that in-line links to or frames a full-size image does not infringe the distribution right of the image’s copyright owner when the image is displayed on the computer screen of a user? (3) Is a search engine’s owner’s appropriation of a copyrighted image for use as an indexed thumbnail picture is a protected “fair use†under the copyright law where the balance of the statutory fair use factors favors the owner of the search engine?

Held.

(Ikuta, J.) (1) Yes. A computer owner that stores an image as electronic information and provides that electronic information directly to a user violates the copyright holder’s exclusive right to display the image. The district court’s reasoning and “server test†comport with the language in the Copyright Act, and, therefore, its ruling is correct as far as Perfect 10’s (Plaintiff) display rights. Based on the plain language of the statute, a person displays a photographic image by using a computer to fill a computer screen with a copy of the photographic image fixed in the memory of the computer. Google’s (Defendant) computers store thumbnail versions of Plaintiff’s copyrighted images and communicate copies of those thumbnails to Defendant’s users. Therefore, Plaintiff has made a prima facie case that Defendant’s communication of its stored thumbnail images directly infringes Plaintiff’s display right. Conversely, Defendant’s computers do not store the full0siuze photographic images, but merely in-line links to, and frames, those images. Therefore, Google (Defendant) does not have a copy of the images for purposes of the Copyright Act, i.e., it 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 therefore Google (Defendant) cannot communicate a copy as defined under 17 U.S.C. § 101. While Google (Defendant) may facilitate access to infringing copies, such assistance only implicates contributory liability for copyright infringement, not direct liability. Even if such in-line linking and framing may cause some computer users to believe they are viewing a single Google (Defendant) web page, the Copyright Act, unlike the Trademark Act, does not protect a copyright holder against acts that cause consumer confusion. Finally, the same analysis is applicable to Defendant’s cache.

(2) No. A computer owner that in-line links to or frames a full-size image does not infringe the distribution right of the image’s copyright owner when the image is displayed on the computer screen of a user. Again, the district court’s ruling is consistent with the language of the Copyright Act. Under § 106(3), a copyright owner has the exclusive right “to distribute copies. . . .†“Copies†means “material objects . . . in which a work is fixed,†and the Supreme Court has indicated that in the electronic context, copies may be distributed electronically. Because the full-size images are not on Defendant’s computers, it cannot “distribute†them. It is the third-party website publisher’s computer that distributes copies of the images by transmitting the photographic image electronically to the user’s computer. Plus, Plaintiff’s argument that merely making the images “available†constitutes distribution is not supported. A “deemed distribution†rule that is applicable in other contexts is inapplicable to Defendant because Defendant does not own a collection of Plaintiff’s full-size images and does not communicate these images to the computers of people using Defendant’s search engine; it only indexes the images Google (Defendant) therefore cannot be deemed to distribute copies of these images.

(3) Yes. A search engine’s owner’s appropriation of a copyrighted image for use as an indexed thumbnail picture is a protected “fair use†under the copyright law where the balance of the statutory fair use factors favors the owner of the search engine. Although Perfect 10 (Plaintiff) would likely prevail in its prima facie case that Google’s (Defendant) thumbnail images infringe its display rights, Plaintiff has the burden to show a likelihood that it will prevail against an affirmative fair use defense by Defendant. The first fair use factor, 17 U.S.C. § 107(1), requires a court to consider “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.†A “transformative work†is one that alters the original work “with new expression, meaning, or message.†In this case, Defendant’s use of thumbnails is highly transformative. Defendant’s search engine provides social benefit by incorporating an original work into a new work that serves as an electronic reference tool, thereby providing an entirely new use for the original work. The district court concluded that since Defendant’s use of the thumbnails could supersede Plaintiff’s cellphone download use and because the use was commercial as Google’s (Defendant) thumbnails “lead users to sites that directly benefit Google’s bottom line†through the AdSense program, this fair use factor weighed “slightly†in favor of Perfect 10 (Plaintiff). The district court’s conclusion on this factor is erroneous because the superseding use was nonexistent insofar as the district court did not find that any downloads for mobile phone use had taken place, and because there was no evidence that AdSense websites containing infringing images significantly contributed to Defendant’s bottom line. Accordingly, the significantly transformative nature of Defendant’s search engine, particularly in light of its public benefit, outweighs Defendant’s superseding and commercial uses of the thumbnails in this case. A weighing of these considerations must promote flexibility and account for the rule that “the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.†The second fair use factor is “the nature of the copyrighted work,†17 U.S.C. § 107(2). Perfect 10’s (Plaintiff) images are “creative in nature†and therefore “closer to the core of intended copyright protection than are more fact-based works.†However, because the photos appeared on the Internet before Google (Defendant) used thumbnail versions in its search engine results, this factor weighs only slightly in favor of Plaintiff. The third fair use factor, 17 U.S.C. § 107(3), asks whether the amount and substantiality of the portion used in relation to the copyrighted work as a whole are reasonable in relation to the purpose of the copying. Here, this factor is neutral and does not weigh in favor of either party because Google’s (Defendant) use of the entire photographic image was reasonable in light of the purpose of a search engine and since using less than the entire image would be less helpful to a computer user. The fourth fair use factor is “the effect of the use upon the potential market for or value of the copyrighted work.†The district court in this case correctly held that Defendant’s use of thumbnails did not damage Plaintiff’s market for full-size images. Plaintiff argues that the district court erred because the likelihood of market harm may be presumed if an image’s intended use is for commercial gain. However, this presumption does not arise when a work is transformative because “market substitution is at least less certain, and market harm may not be so readily inferred.†As already discussed, Defendant’s thumbnail images were highly transformative, and there was no evidence that Plaintiff’s market for full-size images was harmed. Therefore, the district court did not err as far as this ruling. However, the district court did err in determining that Google’s (Defendant) thumbnails would harm the market for reduced-size images, since Perfect 10 (Plaintiff) adduced no evidence that actual sales of such images had been made for cell phone use. Any potential harm to Plaintiff’s market remains hypothetical, and, therefore, this factor does not favor either party. Weighing the fair use factors leads to the conclusion that Defendant’s use was a fair use, especially with the public utility served by its search engine and the transformative nature of its use. Plaintiff is unlikely to be able to overcome Defendant’s fair use defense. And so, the preliminary injunction regarding Google’s (Defendant) use of thumbnail images is vacated. Reversed as to this issue.

Discussion.

Although finding that Google (Defendant) was not liable for its copyright infringement since its use was a fair use, the court in this case nevertheless ruled that Defendant could be contributorily liable for copyright infringement since an actor may be contributorily liable for intentionally encouraging direct infringement if the actor knowingly takes steps that are substantially certain to result in such direct infringement. In this case, the court found that Defendant substantially helped websites to distribute their infringing copies to a worldwide market and helped a worldwide audience of users access infringing materials. The court said it could not disregard the effect of such a service on copyright owners, even though Defendant’s assistance is available to all websites, not just infringing ones. The court concluded that Google (Defendant) could be held contributorily liable if it had knowledge that infringing Perfect 10 (Plaintiff)) images were available using its search engine, could take easy steps to prevent further damage to Plaintiff’s copyrighted works, and failed to do so. The court remanded so the district court could make factual findings necessary to resolve this issue.