Google Wins on Thumbnails in 9th Circuit, Could Lose on Underlying Images

The 9th circuit credited the U.S. Dist. Court, L.A., with handling the case “in a thoughtful and skillful manner” but said it “erred on certain issues” -- apparently getting its judgments backward. The L.A. court said Google profited from ad revenue it split with linked pages hosting infringed images, so its thumbnail service constituted competition with a similar Perfect 10 paid-thumbnail service (WID Feb 23/06 p2). The court issued but stayed a preliminary injunction against Google on thumbnails. But the L.A. court said the infringing photos resting in Google’s cache were likely fair use. High-tech groups largely backed Google in the dispute (WID July 24 p2).

Perfect 10 has the burden of overcoming Google’s fair- use defense to get a preliminary injunction, the unanimous opinion by Judge Sandra Ikuta said, agreeing with the L.A. court. The publisher also must overcome Google’s claim that its liability is limited for “infringements that may occur in the course of their activities,” such as “system caching” or “information location tools.”

Google only faces contributory liability issues, not claims of direct infringement of “display rights,” since it only links to infringing images hosted elsewhere, the appeals court said. Though some users may believe, due to Google’s in-line linking, that Google is hosting the image, there’s no “consumer confusion” protection for copyright owners, the court said. Similarly, Perfect 10 is unlikely to show that “a cached webpage that in-line links to full-size infringing images violates” the publisher’s display and distribution rights. Perfect 10 also incorrectly applied the Napster ruling on “making available” infringed images, the court said: Google indexes the full-sized images, but doesn’t actually host them.

The appeals court relied on its Kelly v. Arriba Soft decision to find that Google’s thumbnails didn’t infringe, a reversal of the L.A. court. “Google’s use of thumbnails is highly transformative,” in that they become “a pointer directing a user to a source of information,” the court said: “A search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool.” Holding with Kelly, the court said even incorporating the entire image into the search results didn’t infringe, because it served a “different function” than the original image.

Crucial to Google’s argument, the appeals court said its “superseding and commercial uses” of thumbnail images -- splitting ad revenue with pages to which it links -- was “not significant at present.” No downloads to mobile phones -- Perfect 10’s nascent market -- came from Google thumbnails, and Google ad earnings attributable to pages with infringing content were small. Hence, the transformative value of the thumbnails outweighed Google’s profiting from them, the appeals court said, disagreeing with the L.A. court.

The Grokster decision forms the basis of the appeals court’s reversal of the L.A. court’s finding that Google doesn’t infringe contributorily. Google isn’t shielded from liability simply because its search engine is capable of substantial noninfringing use. If Google had “actual knowledge” of “specific infringing material” pulled up in search results and didn’t take “simple steps” to block such results, it could be liable, the court said. The L.A. court’s conclusion was “erroneous” that Google was safe because it didn’t make “substantial promotional or advertising efforts” to steer users to infringing websites.

“There is no dispute that Google substantially assists” websites in distributing and users in finding infringing materials, the appeals court said: “We cannot discount the effect of such a service on copyright owners,” despite Google’s nondiscriminatory assistance to all websites. The court remanded the determination of Google’s in-line linking liability to the L.A. court, which didn’t resolve factual disputes between Perfect 10’s notices and Google’s responses.

Perfect 10 hasn’t shown, however, that Google was vicariously liable for infringement, since it didn’t show that Google has “the right and ability to stop or limit” infringing websites’ activities, the appeals court said. Unlike the original Napster, Google doesn’t use site registration and can’t terminate “user accounts” -- 3rd-party websites that come up in search results. Google lacks “image-recognition technology” that could police 3rd-party sites’ infringing activities, the court said.

The appeals court also directed the L.A. court to consider the DMCA Sec. 512 arguments by Perfect 10 that Google failed its takedown requirements and therefore loses the liability shield. The higher court agreed with the district that Amazon.com, also sued by Perfect 10, wouldn’t likely be liable for any infringement of thumbnail or full- size images.