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

Rule:

The United States Supreme Court has announced that the standard for inducement liability is providing a service with the object of promoting its use to infringe copyright. Mere knowledge of infringing potential or actual infringing uses would not be enough here to subject a defendant to liability. Instead, inducement premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise. Moreover, to establish inducement liability, it is crucial to establish that the distributors communicated an inducing message to their users, the classic example of which is an advertisement or solicitation that broadcasts a message designed to stimulate others to commit violations.

Facts:

Perfect 10, Inc. (Perfect 10), operator of the subscription website www.perfect10.com, which featured copyright images of the “world’s most beautiful natural models,” alleged that numerous websites based in several countries have stolen its proprietary images, altered them, and illegally offered them for sale online. Perfect 10 then sued Visa International Service Association, MasterCard International Inc., and several affiliated banks and data processing services (collectively, the Defendants), alleging secondary liability under federal copyright and trademark law and liability under California statutory and common law. According to Perfect 10, defendants continued to process credit card payments to websites that infringe Perfect 10's intellectual property rights after being notified by Perfect 10 of infringement by those websites. The district court dismissed all causes of action under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Perfect 10 appealed.

Issue:

Were defendant financial institutions liable for continuously processing credit card payments to websites that allegedly infringed Perfect 10’s intellectual property rights?

Answer:

No.

Conclusion:

The appellate court found that defendants did not induce or materially contribute to the infringing activity. The infringement stemmed from the failure to obtain a license to distribute, not from processing payments. Defendants were not vicariously liable because they had no right or ability to control the infringing activity. There were no affirmative acts by defendants that suggested that third parties should infringe the publisher's trademarks. Even if defendants allowed the infringing merchants to use their logos, trade name or trademarks, they would not be liable for false advertising because they had no duty to investigate the truth of the statements made by others. Defendants did not facilitate the improper conduct at issue, they merely processed credit card payments. The publisher's libel and intentional interference with prospective economic advantage claims were time barred.

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