(This article was originally featured in Modern Practice, Findlaw’s Law and Practice Technology Magazine, in November 2006.)
Remember the days, 16 January 1996 until 4 March 2003, when many thought federal trademark dilution law required proof based on a “likelihood” of dilution, rather than “actual” dilution? Remember when Victor’s Little Secret spoiled Victoria’s Secret’s party?
Ringing in a new era of trademark dilution law, which somewhat resembles many people’s understanding of the law circa 1996, President Bush signed the Trademark Dilution Revision Act (TDRA) on 6 October 2006. As many expected, famous mark owners were invited to party and relive the glory days, while unsanctioned users of famous mark were reminded that they don’t get to have fun with the goodwill of others. So what’s to celebrate, you ask. Below is a brief overview of key aspects of the TDRA
Favoring Famous Owners (Plaintiffs)
1. “Likelihood” of Dilution in Again
The TDRA abolishes the “actual” dilution standard, replacing it with the likelihood of dilution standard on which many famous mark previously relied. Although the courts will still have to determine how to measure “likelihood” of dilution, it is sure to be modeled on the likelihood of confusion standard upon which trademark infringement actions are based. Obviously, this should make trademark dilution much easier for plaintiffs to prove.
2. Blurring & Tarnishment Spelled Out
Old federal dilution law never did specify whether both dilution by blurring and dilution by tarnishment were covered. Now, however, the TDRA makes this clear. Dilution by blurring occurs where an association impairs a mark’s distinctiveness. Dilution by tarnishment covers any association that harms a mark’s reputation. How courts will actually interpret these broad definitions is another matter, but generally they favor trademark plaintiffs.
3. Acquired Distinctiveness Is Enough
Under previous federal dilution law, courts often differed on whether dilution of the “distinctive quality of the famous mark” meant a mark must be inherently distinctive or whether acquired distinctiveness was enough. The TDRA now specifies that distinctiveness acquired through secondary meaning is sufficient to bring a dilution action, which helps trademark plaintiffs.
Favoring Unsanctioned Users (Defendants)
1. Niche Fame Is Out
Courts long struggled with whether a mark having niche fame, i.e., fame within a specific region or category, was protected under federal dilution law. The TDRA resolves this issue in favor of defendants. As the current law reads, a mark is only “famous” and entitled to dilution protection “if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner.” Marks famous only in some podunk town, the state of Maryland, or even the southern half of the United States should not be considered famous for trademark dilution purposes.
2. Unregistered Trade Dress Burden
The new dilution law somewhat clarifies a mark owner’s burden of proving dilution of unregistered trade dress. Taken as a whole, the claimed trade dress cannot be functional and must be famous. In addition, unregistered matter must be famous separate and apart from any fame of a registered mark. This means that a mark owner cannot rely on the fame of a registered mark to establish fame of unregistered trade dress, even if the famous mark is incorporated in unregistered trade dress.
3. Fair Use Expressly In the Act
The TDRA clarifies fair use defenses by providing express protection for comparative advertising, parodies, criticism and comments. Although these protections are now more apparent, they do not really afford defendants more protection than what they already had. Nevertheless, the clarifications work in favor of trademark defendants.
Although the favors dished out appear even (3 to 3), the Trademark Dilution Revision Act considerably broadened federal trademark dilution law, benefiting owners of famous marks. The original impetus behind revising federal dilution law was to change the standard from “actual” dilution to “likelihood” of dilution, which would have been a huge win for owners of famous marks without more. But, in many ways, the TDRA remade dilution law altogether. The net effect of the TDRA is to greatly expand the rights of owners of famous marks and better equip them to succeed in dilution actions, while clarifying some minor ambiguities in favor of defendants. So, for owners of a famous mark, the party is on. But for unsanctioned users of famous marks, the party is looking less and less inviting.
11.01.2006
4.02.2006
STOP Counterfeiting Act
On March 16, 2006, President Bush signed the Stop Counterfeiting In Manufactured Goods Act (“Stop Counterfeiting Act” or “SCA”), which expands current counterfeit law and is designed to target counterfeit labels and packaging, as well as equipment
used to make them.
Underpinning the SCA are the following findings by Congress: (1) counterfeiting is estimated to cost the U.S. $200 billion annually; (2) “counterfeit automobile parts, including brake pads, cost the auto industry alone billions of dollars in lost sales each year;” (3) “counterfeit products have invaded numerous industries, including those producing auto parts, electrical appliances, medicines, tools, toys, office equipment, clothing, and many other products; (4) counterfeiting is tied to terrorist activities; and (5) “counterfeiting of manufactured goods poses a widespread threat to public health and safety.”
Congress sought to address certain ambiguities in existing anticounterfeiting law, which helped counterfeiters avoid liability. For example, in United States v. Giles, 213 F.3d 1246 (10th Cir. 2000), the Tenth Circuit held that trafficking in counterfeit trademarks that are not actually attached to any “goods or services” was not a violation of the federal criminal infringement statute. Defendant Giles had been dealing in counterfeit “patch sets” of the Dooney & Bourke logo, which consisted of a leather patch and gold medallion bearing a logo and a leather strap used to attach the medallion to fake goods. The court noted that the statutory scheme indicated that “goods” were intended to be viewed as separate from the marks they carried. As a result, the statute prohibited trafficking in goods to which a counterfeit mark was attached, but it did not prohibit trafficking in counterfeit labels unattached to goods. Thus, under the old law counterfeiters were safe as long as they did not attach counterfeit marks to goods.
The Stop Counterfeiting Act closes the Giles loophole (and others) and expands the scope of protection and remedies available to trademark owners. The benefits to trademark owners are substantial. First, the SCA expands the definition of “counterfeit mark” to include goods and services as well as “labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature” that is either applied to or used in connection with counterfeit goods. Thus, it is now a crime to traffic in labels and various forms of packaging bearing a counterfeit mark that is likely to cause confusion.
Second, the SCA makes counterfeiting less profitable by imposing harsher, mandatory forfeiture and destruction penalties, such as the forfeiture and destruction of counterfeit goods including labels), the forfeiture of equipment and materials used to make counterfeit goods, and the forfeiture of assets derived from counterfeiting. In addition, the SCA requires convicted counterfeiters to pay restitution to the mark owner. Under the new law, counterfeiters will have a much more difficult time resuming counterfeiting operations without the equipment and money to do so.
Third, the SCA now broadly defines “traffic” and “financial gain” in a manner that prohibits distributing (including importing and exporting), or intending to distribute, counterfeit goods in exchange for the receipt or expected receipt of anything of value. Under the SCA, it is now illegal to give away counterfeit goods in exchange for some future benefit—i.e., the bartering of counterfeit goods is prohibited.
In short, the Stop Counterfeiting Act removes ambiguity used by counterfeiters to evade legal consequences and strengthens trademark law. By doing so, it serves as a valuable new weapon, protecting intellectual property owners and consumers alike, in the battle against counterfeits.
used to make them.
Underpinning the SCA are the following findings by Congress: (1) counterfeiting is estimated to cost the U.S. $200 billion annually; (2) “counterfeit automobile parts, including brake pads, cost the auto industry alone billions of dollars in lost sales each year;” (3) “counterfeit products have invaded numerous industries, including those producing auto parts, electrical appliances, medicines, tools, toys, office equipment, clothing, and many other products; (4) counterfeiting is tied to terrorist activities; and (5) “counterfeiting of manufactured goods poses a widespread threat to public health and safety.”
Congress sought to address certain ambiguities in existing anticounterfeiting law, which helped counterfeiters avoid liability. For example, in United States v. Giles, 213 F.3d 1246 (10th Cir. 2000), the Tenth Circuit held that trafficking in counterfeit trademarks that are not actually attached to any “goods or services” was not a violation of the federal criminal infringement statute. Defendant Giles had been dealing in counterfeit “patch sets” of the Dooney & Bourke logo, which consisted of a leather patch and gold medallion bearing a logo and a leather strap used to attach the medallion to fake goods. The court noted that the statutory scheme indicated that “goods” were intended to be viewed as separate from the marks they carried. As a result, the statute prohibited trafficking in goods to which a counterfeit mark was attached, but it did not prohibit trafficking in counterfeit labels unattached to goods. Thus, under the old law counterfeiters were safe as long as they did not attach counterfeit marks to goods.
The Stop Counterfeiting Act closes the Giles loophole (and others) and expands the scope of protection and remedies available to trademark owners. The benefits to trademark owners are substantial. First, the SCA expands the definition of “counterfeit mark” to include goods and services as well as “labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature” that is either applied to or used in connection with counterfeit goods. Thus, it is now a crime to traffic in labels and various forms of packaging bearing a counterfeit mark that is likely to cause confusion.
Second, the SCA makes counterfeiting less profitable by imposing harsher, mandatory forfeiture and destruction penalties, such as the forfeiture and destruction of counterfeit goods including labels), the forfeiture of equipment and materials used to make counterfeit goods, and the forfeiture of assets derived from counterfeiting. In addition, the SCA requires convicted counterfeiters to pay restitution to the mark owner. Under the new law, counterfeiters will have a much more difficult time resuming counterfeiting operations without the equipment and money to do so.
Third, the SCA now broadly defines “traffic” and “financial gain” in a manner that prohibits distributing (including importing and exporting), or intending to distribute, counterfeit goods in exchange for the receipt or expected receipt of anything of value. Under the SCA, it is now illegal to give away counterfeit goods in exchange for some future benefit—i.e., the bartering of counterfeit goods is prohibited.
In short, the Stop Counterfeiting Act removes ambiguity used by counterfeiters to evade legal consequences and strengthens trademark law. By doing so, it serves as a valuable new weapon, protecting intellectual property owners and consumers alike, in the battle against counterfeits.
4.01.2006
Rankings, Google Slight – Not Every Player Gets To Compete In This Search Engine Game
(This article was originally featured in Modern Practice, Findlaw’s Law and Practice Technology Magazine, in April 2006.)
Running parallel to the George Mason Cinderella story about its ability to move up in the ranks of the most preeminent college basketball tournament, is the lesser known story of a low ranking website that cannot get noticed on the world’s leading Internet search engine.
On March 17, 2006, to get back into the search engine game, KinderStart lodged a seven-count complaint against Google, based on its website being downgraded and virtually banished from Google since March 2005 for reasons unknown to KinderStart. The lawsuit centers on whether Google, a private company and the gateway (or gatekeeper) to vast Internet content, has the right to keep others out via its proprietary and secret search techniques. The question is whether this sad, yet compelling, story has more than a short, shaky leg to stand on under any theory of law.
Low Percentages, Rank
At one point, Google was the source of 70% of KinderStart’s Web traffic. Since March 2005, however, KinderStart has been denied a spot in the Google rankings, showing a mere 0.01% referral traffic from Google. As a result, the self-claimed “largest (and most popular) indexed directory and search engine focused on children zero to seven on the 'net” wants to force the world’s largest Internet search engine to recognize its website in private search rankings.
Harmful Blockage
In the complaint, KinderStart—along with other sadly situated plaintiffs hoping for class certification—alleges that Google violates federal and California constitutional laws, federal antitrust law, and state unfair trade, defamatory and good faith and fair dealing laws. KinderStart is really complaining about what it terms “Blockage.” In the complaint, “Blockage” is defined as Google’s unilateral and unreasonable acts of terminating KinderStart’s free speech, traffic and commerce otherwise available by virtue of “normal” search engine operation. Unlike the typical remedy sought for blockage, i.e., fiber, KinderStart seeks relief in the form of a declaration, an injunction, and money.
Kitchen Sink Offense & Pre-Game Gut Analysis
Below are brief summaries of counts alleged in the complaint, along with a pre-game gut analysis.
1. Violation of Free Speech Right Under the U.S. and California Constitutions. Google, a speech intermediary and cyber forum, denies KinderStart its right to the exercise of free speech by engaging in blockage, and it fails to exercise reasonable regulation of time, place, or manner of restriction to the exercise of KinderStart’s free speech right.
Gut Analysis: Google is not a state actor. Similar attempts to pin free speech violations on Internet companies have failed. This one also is likely to fail.
2. Sherman Act 2: Monopolization. Google abused its monopoly power in the search engine usage and search-driven Internet advertising markets by denying linking and referrals to KinderStart’s website and by artificially depressing KinderStart’s rank.
Gut Analysis: Does Google really have a monopoly on Internet searches? This claim seems specious: while Google has 36.5% of the U.S. Internet search market, Yahoo has 30.5%, MSN has 15.5%, AOL has 10%, Ask Jeeves has 6%, and InfoSpace has 1%.
3. Unfair Competition and Practices Under California Law. Google’s blockage practice is wrongful and without reasonable business justification. Google falsely and artificially calculated and presented the KinderStart website as a low rank, and it deceived, concealed, and omitted material facts as to the operation and execution of the AdSense Program. Google’s AdSense program wrongfully leads consumers to believe that they can realize adequate value and financial benefit by using AdSense. By engaging in blockage, Google also engages in price discrimination without business justification, which tends to destroy market competition.
Gut Analysis: KinderStart is likely to go farthest with its claim of “unfair competition,” but probably not all the way. Unfair competition under California law appears to provide broad-based protection against violations of public policy and acts injurious to consumers (or competitors, but then it starts to look more like an antitrust claim). If true, KinderStart’s claim that Google falsely touts objective search
methods may have some traction.
Google will likely argue that any blocking (by algorithm or human) is not unfair, is not prohibited by law, and is justified for business reasons given websites’ attempts to optimize search results. In addition, Google may argue that KinderStart is free to rely on one of the other search engines to drive traffic to its site. Although none of these defenses would directly refute inaccurate claims of objectivity, a court is likely to balance the benefits versus harm to consumers as a result of Google’s blocking practices. Of course, if Google’s stated policy that the order and content of its search results are completely automated is true, then KinderStart’s claim would likely fall apart.
The “unfair practices” claim concerns price discrimination and does not seem like it will make the cut. Of the three basic types of price discrimination prohibited in California, KinderStart relies on the “secret payments and discounts” type of price discrimination. Two predicates to this type of claim work against KinderStart. For one, KinderStart must prove that the discount or rebate is a “secret.” This is especially difficult were there is no misrepresentation to one purchaser that is getting the same pricing as favored purchasers. Second, KinderStart will have to prove intent. Specifically, it will have to prove that Google offered secret payments and discounts with the intention of injuring competitors or destroying competition.
4. Breach of Implied Covenant of Good Faith and Fair Dealing. Google has an affirmative duty not to deprive KinderStart benefit of the AdSense Program, which provides opportunity to increase the appeal of and traffic to websites. Blockage of KinderStart redirects web searchers to other websites, which may generate advertising revenues that may have gone to KinderStart were there no blockage.
Gut Analysis: This claim misses the mark. If KinderStart is a member of the AdSense Program, Google benefits by directing traffic to KinderStart’s website. Since Google is a source of generating potential customers for AdSense partners, which in turn may produce prospective customers for Google, it would not be in Google’s interest to deny itself this advertising opportunity. In addition, the fact that Google’s algorithm has somehow removed KinderStart’s website from search results would tend to support the idea that the algorithm operates objectively—i.e., Google’s AdSense Program managers would be unlikely to purposefully remove AdSense partners from the program.
5. Defamation and Libel. Google improperly lists (to the public) the KinderStart website as having a PageRank of “0,” which is
artificially depressed and mathematically impossible within the normal operation of Google’s search algorithm.
Gut Analysis: This claim scores “0.” At the most basic level, a defamation claim requires proof of a false statement. But Google defines the meaning of a zero rank—i.e., Google’s PageRank relies on its private and publicly unknown algorithm for determining how to rank pages. The public does not know what a zero rank means other than as Google defines it. For instance, if I say I assign KinderStart’s defamation claim a rank of zero, I have not defamed KinderStart. I have merely expressed an opinion, based on my own definition of zero, of how I rank KinderStart’s claim. Google has not made a false statement.
6. Negligent Interference with Prospective Economic Advantage. By participating in Google’s AdSense program, Google owed KinderStart a duty of care to permit search referrals, and corollary advertising revenues, to flow to KinderStart. Google’s blockage wrongfully interfered with this flow.
Gut Analysis: This claim seems baseless for the same reasons stated above regarding the breach of covenant of good faith and fair dealing claim.
A Non-Cinderella Ending
If CBS college basketball analyst Billy Packer were commenting on this case, he might say that KinderStart—like Search King and others before it—doesn’t have a chance in this contest. Despite the understandable desire of website owners to be ranked higher in Google’s system, they must remember that it is “Google’s” system. Until Google takes over as a form of government or controls the entire Internet search industry, it is not likely to violate any rights to free speech or antitrust laws, respectively. Likewise, to the extent that Google accurately describes its advertising and ranking policies (should it describe them at all), it is unlikely that it will be liable for denying certain websites a place in the Internet search results game.
Running parallel to the George Mason Cinderella story about its ability to move up in the ranks of the most preeminent college basketball tournament, is the lesser known story of a low ranking website that cannot get noticed on the world’s leading Internet search engine.
On March 17, 2006, to get back into the search engine game, KinderStart lodged a seven-count complaint against Google, based on its website being downgraded and virtually banished from Google since March 2005 for reasons unknown to KinderStart. The lawsuit centers on whether Google, a private company and the gateway (or gatekeeper) to vast Internet content, has the right to keep others out via its proprietary and secret search techniques. The question is whether this sad, yet compelling, story has more than a short, shaky leg to stand on under any theory of law.
Low Percentages, Rank
At one point, Google was the source of 70% of KinderStart’s Web traffic. Since March 2005, however, KinderStart has been denied a spot in the Google rankings, showing a mere 0.01% referral traffic from Google. As a result, the self-claimed “largest (and most popular) indexed directory and search engine focused on children zero to seven on the 'net” wants to force the world’s largest Internet search engine to recognize its website in private search rankings.
Harmful Blockage
In the complaint, KinderStart—along with other sadly situated plaintiffs hoping for class certification—alleges that Google violates federal and California constitutional laws, federal antitrust law, and state unfair trade, defamatory and good faith and fair dealing laws. KinderStart is really complaining about what it terms “Blockage.” In the complaint, “Blockage” is defined as Google’s unilateral and unreasonable acts of terminating KinderStart’s free speech, traffic and commerce otherwise available by virtue of “normal” search engine operation. Unlike the typical remedy sought for blockage, i.e., fiber, KinderStart seeks relief in the form of a declaration, an injunction, and money.
Kitchen Sink Offense & Pre-Game Gut Analysis
Below are brief summaries of counts alleged in the complaint, along with a pre-game gut analysis.
1. Violation of Free Speech Right Under the U.S. and California Constitutions. Google, a speech intermediary and cyber forum, denies KinderStart its right to the exercise of free speech by engaging in blockage, and it fails to exercise reasonable regulation of time, place, or manner of restriction to the exercise of KinderStart’s free speech right.
Gut Analysis: Google is not a state actor. Similar attempts to pin free speech violations on Internet companies have failed. This one also is likely to fail.
2. Sherman Act 2: Monopolization. Google abused its monopoly power in the search engine usage and search-driven Internet advertising markets by denying linking and referrals to KinderStart’s website and by artificially depressing KinderStart’s rank.
Gut Analysis: Does Google really have a monopoly on Internet searches? This claim seems specious: while Google has 36.5% of the U.S. Internet search market, Yahoo has 30.5%, MSN has 15.5%, AOL has 10%, Ask Jeeves has 6%, and InfoSpace has 1%.
3. Unfair Competition and Practices Under California Law. Google’s blockage practice is wrongful and without reasonable business justification. Google falsely and artificially calculated and presented the KinderStart website as a low rank, and it deceived, concealed, and omitted material facts as to the operation and execution of the AdSense Program. Google’s AdSense program wrongfully leads consumers to believe that they can realize adequate value and financial benefit by using AdSense. By engaging in blockage, Google also engages in price discrimination without business justification, which tends to destroy market competition.
Gut Analysis: KinderStart is likely to go farthest with its claim of “unfair competition,” but probably not all the way. Unfair competition under California law appears to provide broad-based protection against violations of public policy and acts injurious to consumers (or competitors, but then it starts to look more like an antitrust claim). If true, KinderStart’s claim that Google falsely touts objective search
methods may have some traction.
Google will likely argue that any blocking (by algorithm or human) is not unfair, is not prohibited by law, and is justified for business reasons given websites’ attempts to optimize search results. In addition, Google may argue that KinderStart is free to rely on one of the other search engines to drive traffic to its site. Although none of these defenses would directly refute inaccurate claims of objectivity, a court is likely to balance the benefits versus harm to consumers as a result of Google’s blocking practices. Of course, if Google’s stated policy that the order and content of its search results are completely automated is true, then KinderStart’s claim would likely fall apart.
The “unfair practices” claim concerns price discrimination and does not seem like it will make the cut. Of the three basic types of price discrimination prohibited in California, KinderStart relies on the “secret payments and discounts” type of price discrimination. Two predicates to this type of claim work against KinderStart. For one, KinderStart must prove that the discount or rebate is a “secret.” This is especially difficult were there is no misrepresentation to one purchaser that is getting the same pricing as favored purchasers. Second, KinderStart will have to prove intent. Specifically, it will have to prove that Google offered secret payments and discounts with the intention of injuring competitors or destroying competition.
4. Breach of Implied Covenant of Good Faith and Fair Dealing. Google has an affirmative duty not to deprive KinderStart benefit of the AdSense Program, which provides opportunity to increase the appeal of and traffic to websites. Blockage of KinderStart redirects web searchers to other websites, which may generate advertising revenues that may have gone to KinderStart were there no blockage.
Gut Analysis: This claim misses the mark. If KinderStart is a member of the AdSense Program, Google benefits by directing traffic to KinderStart’s website. Since Google is a source of generating potential customers for AdSense partners, which in turn may produce prospective customers for Google, it would not be in Google’s interest to deny itself this advertising opportunity. In addition, the fact that Google’s algorithm has somehow removed KinderStart’s website from search results would tend to support the idea that the algorithm operates objectively—i.e., Google’s AdSense Program managers would be unlikely to purposefully remove AdSense partners from the program.
5. Defamation and Libel. Google improperly lists (to the public) the KinderStart website as having a PageRank of “0,” which is
artificially depressed and mathematically impossible within the normal operation of Google’s search algorithm.
Gut Analysis: This claim scores “0.” At the most basic level, a defamation claim requires proof of a false statement. But Google defines the meaning of a zero rank—i.e., Google’s PageRank relies on its private and publicly unknown algorithm for determining how to rank pages. The public does not know what a zero rank means other than as Google defines it. For instance, if I say I assign KinderStart’s defamation claim a rank of zero, I have not defamed KinderStart. I have merely expressed an opinion, based on my own definition of zero, of how I rank KinderStart’s claim. Google has not made a false statement.
6. Negligent Interference with Prospective Economic Advantage. By participating in Google’s AdSense program, Google owed KinderStart a duty of care to permit search referrals, and corollary advertising revenues, to flow to KinderStart. Google’s blockage wrongfully interfered with this flow.
Gut Analysis: This claim seems baseless for the same reasons stated above regarding the breach of covenant of good faith and fair dealing claim.
A Non-Cinderella Ending
If CBS college basketball analyst Billy Packer were commenting on this case, he might say that KinderStart—like Search King and others before it—doesn’t have a chance in this contest. Despite the understandable desire of website owners to be ranked higher in Google’s system, they must remember that it is “Google’s” system. Until Google takes over as a form of government or controls the entire Internet search industry, it is not likely to violate any rights to free speech or antitrust laws, respectively. Likewise, to the extent that Google accurately describes its advertising and ranking policies (should it describe them at all), it is unlikely that it will be liable for denying certain websites a place in the Internet search results game.
2.01.2006
Copyright Clash Over Image Searches: An Imperfect Means to a Pornographic End?
(This article was originally featured in Modern Practice, Findlaw’s Law and Practice Technology Magazine, in February 2006.)
Everyone knows that “Pornography” (content) and “Google” (a means to online content) have played major roles in driving the development of the Web and Internet law. It may come as little surprise, then, that these two forces were recently at odds in pleadings, briefs, and a district court decision involving a search engine’s right to display copyright protected images (1) as thumbnails, and (2) through in-line linking to third party websites.
Perfect 10 publishes adult content and owns thousands of copyright protected adult images available online. Google, the largest Internet search engine, provides an “image search” function, which displays thumbnail versions of images cached on Google’s servers and inline links to images stored and served by third party websites. Google’s image search makes it easy to find Perfect 10’s images online.
In a 12-count complaint, Perfect 10 claimed, inter alia, that Google directly, vicariously, and contributorily infringes Perfect 10’s copyrighted images by displaying and distributing them via Google’s image search function. Google argued that its use of Perfect 10’s images is protected under the fair use doctrine. On Perfect 10’s motion for a preliminary injunction, the U.S. District Court for the Central District of California held that the issues would likely be decided as follows: (1) Google’s in-line links to infringing copies do not constitute direct infringement; (2) Google’s display of thumbnails of Perfect 10’s copyrighted images does constitute direct infringement (not a fair use); and (3) Google is not secondarily liable for its in-line links or thumbnails.
Direct Liability
To determine whether Google’s in-line links and thumbnails directly infringed Perfect 10’s copyrights, the court first had to determine whether Google’s activities constituted a public display or distribution of Perfect 10’s images. To do so, the court applied the “server test.” Under the server test, “the website on which content is stored and by which it is served directly to a user, not the website that inline links to it, is the website that ‘displays’ the content.”
Since third party websites, not Google, stored and served the Perfect 10 images to which Google provided in-line links, Google did not display such images. By creating and storing thumbnails of Perfect 10’s images on Google’s servers, however, Google did display such images. Thus, the court held that Perfect 10’s claim of direct infringement based on Google’s in-line links would likely fail, whereas its claim based on Google’s thumbnails would likely prevail.
The court also found that Google did not publicly distribute copies of Perfect 10’s images by in-line linking since Google was not involved in the transfer of any files—again, the third party websites were doing all the work. Although Google may distribute the thumbnails, the court found that Google’s distribution would likely be a fair use and that the issue was moot anyway since it already found that direct infringement was likely based on a violation of Perfect 10’s display right.
The most interesting aspects of this case, however, are found in the fair use analysis; not because the analysis is groundbreaking, but because of how the court distinguishes Kelley v. Aribasoft, 336 F.3d 811 (9th Cir. 2003) (finding fair use of thumbnail images). Analyzing fair use of a copyrighted work involves examining the following factors:
1. the purpose and character of the use;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion of the work used; and
4. the effect of the use upon the potential market for the copyrighted work.
The court found that two things set this case apart from the Kelly decision. First, Google’s use of thumbnails was far more commercial than the search engine’s use of thumbnails in Kelly. The fact that Google may increase user traffic and advertising revenue from its image search was not so significant since Google does not directly profit from use of Perfect 10’s images.
The court was persuaded, however, by Perfect 10’s evidence showing third-party websites that serve infringing content and receive and display AdSense ads from Google. Google’s AdSense program allows third party websites to carry Google-sponsored advertising and share revenue that flows from the advertising displays and click-throughs. Thus, the court believed that the connection between Google’s use of Perfect 10’s images and Google’s bottom line was much stronger here.
Second, Google’s use of thumbnails harms Perfect 10’s potential market for smaller images. After filing suit, Perfect 10 entered into a licensing agreement with another company for the sale and distribution of Perfect 10 reduced-size images for download to and use on cell phones. The court reasoned that since users of Google’s image search can download thumbnails of Perfect 10’s copyrighted images for free, they will be less likely to buy them from Perfect 10’s licensee. On these bases, the court found that Google’s thumbnail use was much more commercial and harmful than the use in Kelly. Thus, Google’s fair use defense failed.
Secondary Liability
Perfect 10 failed to introduce evidence showing that Google users directly infringe its copyright protected images. So the court only addressed Google’s secondary liability vis-a-vis direct infringement by the third party websites. In analyzing whether Google was contributorily liable, the court assumed (without deciding) that Google had actual knowledge of direct infringement (the first element) since it ultimately determined that Google did not materially contribute to direct infringement (the second element). In short, the court found that Google did not materially contribute to direct infringement because the infringing third-party websites existed before Google’s image search and would continue to exist were it shut down.
Perfect 10’s claim of vicarious liability also failed. Although Google, through its AdSense program, benefits financially (the first element) from the third party display of Perfect 10’s images, it does not have the right and ability to control infringing activity taking place on third party websites. As a result, Perfect 10 would be unlikely to succeed in proving that Google can be held secondarily liable.
Conclusion
The upshot is that Google’s “loss” at the preliminary injunction stage may not be all that significant to Web based activities for a few reasons. First, using thumbnails is not per se copyright infringement—The Ninth Circuit’s decision in Kelly still holds true. The nuance that the district court focused on here was whether the search engine enjoyed a direct financial benefit as a result of displaying thumbnails that infringe another’s work. The district court found that Google did benefit a little too directly, but the Ninth Circuit may view things differently if (when) this decision is appealed.
Second, in-line linking is still okay. A website that merely points to other information, stored and served on another party’s website, should be able to avoid direct infringement liability. Had the district court taken a different approach, every in-line link would be subject to potential liability. Third, search engines are not going to be held vicariously liable simply for facilitating the discovery of information —even if that information turns out to be infringing. There has to be an additional element such as the right and ability to control the infringing environment. Obviously, search engines cannot remove all infringing content from the Web.
In sum, the vitality of Web does not appear in jeopardy as a result of the district court’s decision, even if it holds on appeal. In addition, the development of Internet law does not appear stunted. Perhaps a new branch is growing from traditional fair use analysis, but on that branch each case will really bend on the relatedness of commercial benefit from the specific use in question.
Everyone knows that “Pornography” (content) and “Google” (a means to online content) have played major roles in driving the development of the Web and Internet law. It may come as little surprise, then, that these two forces were recently at odds in pleadings, briefs, and a district court decision involving a search engine’s right to display copyright protected images (1) as thumbnails, and (2) through in-line linking to third party websites.
Perfect 10 publishes adult content and owns thousands of copyright protected adult images available online. Google, the largest Internet search engine, provides an “image search” function, which displays thumbnail versions of images cached on Google’s servers and inline links to images stored and served by third party websites. Google’s image search makes it easy to find Perfect 10’s images online.
In a 12-count complaint, Perfect 10 claimed, inter alia, that Google directly, vicariously, and contributorily infringes Perfect 10’s copyrighted images by displaying and distributing them via Google’s image search function. Google argued that its use of Perfect 10’s images is protected under the fair use doctrine. On Perfect 10’s motion for a preliminary injunction, the U.S. District Court for the Central District of California held that the issues would likely be decided as follows: (1) Google’s in-line links to infringing copies do not constitute direct infringement; (2) Google’s display of thumbnails of Perfect 10’s copyrighted images does constitute direct infringement (not a fair use); and (3) Google is not secondarily liable for its in-line links or thumbnails.
Direct Liability
To determine whether Google’s in-line links and thumbnails directly infringed Perfect 10’s copyrights, the court first had to determine whether Google’s activities constituted a public display or distribution of Perfect 10’s images. To do so, the court applied the “server test.” Under the server test, “the website on which content is stored and by which it is served directly to a user, not the website that inline links to it, is the website that ‘displays’ the content.”
Since third party websites, not Google, stored and served the Perfect 10 images to which Google provided in-line links, Google did not display such images. By creating and storing thumbnails of Perfect 10’s images on Google’s servers, however, Google did display such images. Thus, the court held that Perfect 10’s claim of direct infringement based on Google’s in-line links would likely fail, whereas its claim based on Google’s thumbnails would likely prevail.
The court also found that Google did not publicly distribute copies of Perfect 10’s images by in-line linking since Google was not involved in the transfer of any files—again, the third party websites were doing all the work. Although Google may distribute the thumbnails, the court found that Google’s distribution would likely be a fair use and that the issue was moot anyway since it already found that direct infringement was likely based on a violation of Perfect 10’s display right.
The most interesting aspects of this case, however, are found in the fair use analysis; not because the analysis is groundbreaking, but because of how the court distinguishes Kelley v. Aribasoft, 336 F.3d 811 (9th Cir. 2003) (finding fair use of thumbnail images). Analyzing fair use of a copyrighted work involves examining the following factors:
1. the purpose and character of the use;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion of the work used; and
4. the effect of the use upon the potential market for the copyrighted work.
The court found that two things set this case apart from the Kelly decision. First, Google’s use of thumbnails was far more commercial than the search engine’s use of thumbnails in Kelly. The fact that Google may increase user traffic and advertising revenue from its image search was not so significant since Google does not directly profit from use of Perfect 10’s images.
The court was persuaded, however, by Perfect 10’s evidence showing third-party websites that serve infringing content and receive and display AdSense ads from Google. Google’s AdSense program allows third party websites to carry Google-sponsored advertising and share revenue that flows from the advertising displays and click-throughs. Thus, the court believed that the connection between Google’s use of Perfect 10’s images and Google’s bottom line was much stronger here.
Second, Google’s use of thumbnails harms Perfect 10’s potential market for smaller images. After filing suit, Perfect 10 entered into a licensing agreement with another company for the sale and distribution of Perfect 10 reduced-size images for download to and use on cell phones. The court reasoned that since users of Google’s image search can download thumbnails of Perfect 10’s copyrighted images for free, they will be less likely to buy them from Perfect 10’s licensee. On these bases, the court found that Google’s thumbnail use was much more commercial and harmful than the use in Kelly. Thus, Google’s fair use defense failed.
Secondary Liability
Perfect 10 failed to introduce evidence showing that Google users directly infringe its copyright protected images. So the court only addressed Google’s secondary liability vis-a-vis direct infringement by the third party websites. In analyzing whether Google was contributorily liable, the court assumed (without deciding) that Google had actual knowledge of direct infringement (the first element) since it ultimately determined that Google did not materially contribute to direct infringement (the second element). In short, the court found that Google did not materially contribute to direct infringement because the infringing third-party websites existed before Google’s image search and would continue to exist were it shut down.
Perfect 10’s claim of vicarious liability also failed. Although Google, through its AdSense program, benefits financially (the first element) from the third party display of Perfect 10’s images, it does not have the right and ability to control infringing activity taking place on third party websites. As a result, Perfect 10 would be unlikely to succeed in proving that Google can be held secondarily liable.
Conclusion
The upshot is that Google’s “loss” at the preliminary injunction stage may not be all that significant to Web based activities for a few reasons. First, using thumbnails is not per se copyright infringement—The Ninth Circuit’s decision in Kelly still holds true. The nuance that the district court focused on here was whether the search engine enjoyed a direct financial benefit as a result of displaying thumbnails that infringe another’s work. The district court found that Google did benefit a little too directly, but the Ninth Circuit may view things differently if (when) this decision is appealed.
Second, in-line linking is still okay. A website that merely points to other information, stored and served on another party’s website, should be able to avoid direct infringement liability. Had the district court taken a different approach, every in-line link would be subject to potential liability. Third, search engines are not going to be held vicariously liable simply for facilitating the discovery of information —even if that information turns out to be infringing. There has to be an additional element such as the right and ability to control the infringing environment. Obviously, search engines cannot remove all infringing content from the Web.
In sum, the vitality of Web does not appear in jeopardy as a result of the district court’s decision, even if it holds on appeal. In addition, the development of Internet law does not appear stunted. Perhaps a new branch is growing from traditional fair use analysis, but on that branch each case will really bend on the relatedness of commercial benefit from the specific use in question.
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