Perfect 10 v. Visa International

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Perfect 10 v. Visa Int'l Service Ass'n, 494 F.3d 788 (9th Cir. July 3, 2007).

Perfect 10, a subscription-based website for adult photographs, sued the credit card company Visa for secondary copyright infringement, including contributory and vicarious infringement, as well as inducement. (The plaintiff also made other claims such as secondary trademark infringement, unfair competition, and right of publicity violations.) Perfect 10 claimed that Visa was liable because third-party websites sold infringing photographs (taken from Perfect 10's site) using Visa's credit card services. Perfect 10 had previously notified Visa of certain websites where infringing photographs were located.

The majority held that although Visa had knowledge of the infringement (as required under contributory infringement), the credit card company did not materially contribute to the violations. Essentially, the court found the chain of causation between the copyright infringement and the purchase of the works too tenuous. If Visa were found liable, the majority was concerned that secondary liability could potentially extend to every component related to any transaction where infringing material was bought or sold.

The court articulated the test as: "one contributorily infringes when he (1) has knowledge of another’s infringement and (2) either (a) materially contributes to or (b) induces that infringement." Id. at 7839.

The opinion distinguished the recent Perfect 10 v. case, where the same company sued search engines, including Google, for providing users with access to sites that infringed upon Perfect 10's photos. In the case, the court found: “Google could be held contributorily liable if it had knowledge that infringing Perfect 10 images were available using its search engine, could take simple measures to prevent further damage to Perfect 10’s copyrighted works, and failed to take such steps" (2007 WL 1428632, at *19). The Visa opinion argued that while search engines played a substantial role in distribution of copyrighted works, credit card companies merely made infringement more profitable.

As for inducement, the majority rejected the claim by failing to find any "affirmative steps," irrespective of any knowledge of infringement by Visa. The opinion stated, "Because Perfect 10 alleges no 'affirmative steps taken to foster infringement' and no facts suggesting that Defendants promoted their payment system as a means to infringe, its claim is premised on a fundamental misreading of Grokster that would render the concept of 'inducement' virtually meaningless." Id. at 7848.

The analysis of vicarious liability centered around a lack of control over the content of transactions. Although Visa could indirectly impact the infringement (by refusing to process transactions on infringing websites, for example), vicarious liability requires more direct and intimate control. The credit card companies could prevent payment to the sites, but they could not block access to the infringing material. As the opinion stated, "For vicarious liability to attach, however, the defendant must have the right and ability to supervise and control the infringement, not just affect it." Id. at 7855.

The secondary trademark infringement claims were rejected for the same reasons as the secondary copyright claims.

Judge Kozinski dissented, arguing that credit card companies represented an essential part of the infringing transaction. If consumers were unable to use Visa to buy the infringing photos, the infringement would cease. Therefore, in Kozinski's view, the credit card companies did "materially contribute" to the infringement.

Perfect 10 v. Visa Int'l Service Ass'n, 2004 WL 1773349 (N.D.Cal. Aug.5, 2004)

The court held that one must show “a relationship between the ··· services provided by the [d]efendant[ ] and the alleged infringing activity as opposed to the mere operation of the website businesses.”).