Perfect 10: The Imperfect Plaintiff Asserting an Effective Solution to Curb Copyright Infringement
Perfect 10 has the exclusive right to distribute copies of their work under 17 U.S.C. § 106(3). Third parties referred to as “Stolen Content Websites” have unlawfully copied their work and sell them to the public. Perfect 10 spent great amounts of time, money and effort to produce these images, while the infringer merely has to copy and resell. Perfect 10 is unable to enforce their rights against the direct infringer, because the infringing websites maintain no physical presence in the United States and are therefore able to evade any civil or criminal liability. The only viable solution is to pursue the credit card companies under a theory of secondary liability.
Perfect 10 operates a subscription website and publishes a magazine that pays homage to the all-natural woman in a society that has become obsessed with breast augmentation. The founder, Norm Zada wanted to create an all-natural magazine and website that does not feature women with implants. (Interview with Norm Zada, http://news.zdnet.co.uk/internet/0, 1000000097,39255863-1,00.htm) According to Perfect 10, their magazine and website “feature[s] tasteful copyrighted images of the world’s most beautiful natural models.” Perfect 10’s Opening Brief at 1.
The fundamental test for contributory infringement has also been applied in Perfect 10 v. Visa Int’l Service Assn. In order to be held liable for contributory infringement, a party must (1) have knowledge of a third party’s infringement and (2) either (a) materially contributes to or (b) induces that infringement. Id. The court never had to decide on whether Visa had knowledge of infringement because they held that there were not facts stated sufficient for a claim of material contribution.
The majority tries to differentiate Amazon from Visa because there is an extra step in the causal chain ultimately resulting in no material contribution. The majority states that the credit card companies do not provide a service, but they make infringement more profitable, and people are more likely inclined to engage in an activity when it is more profitable. The difference between search engines and payment systems is that payment systems make it easier for infringement to be profitable.
The majority does not sufficiently delineate Amazon from Visa because they both ultimately result in aiding the direct infringers. It is incredulous that the court finds that the addition of “making it easier for infringement to be profitable” is drastically different from Amazon. Google simply makes it easy to locate infringing images and Visa makes it easy to pay for infringing images. There is little difference between the two. The end result in both cases is the distribution of the image.
It appears the majority in Visa has added a new criterion in determining material contribution. The dissent points out that if there are “other viable … mechanisms” that would allow infringement to continue on a large scale, without the aid of the alleged contributory infringer, then there is no material contribution. The majority in Visa has acknowledged that the payment systems make it easier to infringe, which thereby have the effect of increasing infringement, but they hypothesize that there might be other viable funding mechanisms.
The court has erred in the application and the assertion of this test. First, there is no basis or support for stating that if there were other viable mechanisms that would allow infringement to continue on a large scale then there would be no material contribution. This is directly counter to the holding in Amazon that held Google could be liable for contributory liable if it “substantially assists” in the process of distributing the infringing material. Had this been the standard in Amazon, then there would have been no need for Google to assert the defense of fair use. The dissent in Visa pointed out a multitude of alternatives by which a third party could locate and distribute infringing images, including other search engines, search engines not under the jurisdiction of the United States, and P2P networks just to name a few. This criterion would have also changed the outcome of Grokster. Despite the shut-down of Grokster, infringement is still runs rampant and continues on a large scale.
Second, the court also erred in saying that infringement would continue on a large scale without the aid of credit card payment systems. The importance of credit cards are underestimated and too readily dismissed by the majority in Visa. In Amazon, Google simply made it fast and easy to locate and distribute infringing images. Similarly, making a credit card payment to purchase a pirated image makes the transaction quick and easy. Otherwise, the alternative is check, money order, electronic-fund-transfer services, cash-transfer agents, and electronic-check-processing services. Who wants to give a check, money order or bank account number to a business based in another country with no guarantee of receiving the product you have purchased? Otherwise, payment can be made to websites through electronic-wallet companies, such as Click2Pay, Neteller PLC and ePassporte. This would likely deter all but the most ardent of infringers.
In Amazon, we learned that a party infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit the infringing activity. The majority in Visa asserted that the fear of losing credit card privileges does not give them the ability to control the infringer. They state that even if users were unable to pay, they cannot stop websites from reproducing, altering or distributing images. Again, the majority places to little importance on credit card payment systems. The majority in Visa tries to distinguish Napster from the defendant. They asserted that Visa did not have the same tools as Napster did to take away the ability to reproduce, alter and distribute infringing content. It is blatantly false to say that payment does not prevent the distribution of the infringing content. Only after payment is made, is the content available for distribution.
Obviously, Perfect 10 is not the most attractive plaintiff. The court may have been reluctant to hear the case because Perfect 10 is simply a peddler of pornography, even if they display “tasteful” images by their own admission. Arguably, the court did choose to hear Perfect 10’s suit in Amazon and even found infringement (but it was held to be fair use despite the commercial nature).
The more plausible reason is that if the court were to hear the case, they would be afraid that it would open the floodgates for an onslaught of litigation to entities that are remotely involved in offering services to infringers. If payment systems are going to be implicated, why stop there? Banks are the entities ultimately responsible for financing the transaction. Without the aid of an Internet Service Provider, the end-user wouldn’t be able to access the website. Hardware and software give you the ability to get online. There are a myriad of ways that an entity could conceivably be secondarily liable, but the court should be able to distinguish when the relationship becomes too tenuous or remote.
Changes in technological innovation have made it easier to infringe copyright and evade liability. Therefore, the way in which liability is determined must change as well. Credit card payment systems could possibly be an effective way to enforce copyright laws, given there are only four major payment systems (Visa, Mastercard, Discover, and American Express). Why should they have the ability to profit to the detriment of the copyright holder, when they have the ability to withhold service resulting in either compliance or becoming unprofitable. I am not proposing that Visa should have been found secondarily liable, but the case should have at least made it too trial. Isn’t the standard for a 12(b)(6) motion that the complaint must be viewed in a light most favorable to the plaintiff and that the factual allegations taken as true? In this case, it does not appear to be so.
The court should have at least heard the case and then made the determination of whether the consequences of making credit card payment systems secondarily liable are outweighed by the policy goals of the United States to foster the development of the Internet and preserve the existence of a free market on the Internet.
*This post is in no way an endorsement of Perfect 10 or it’s subsidiaries.