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US court spanks porn company over credit card copyright suit

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Perfect10 is at it again.

The litigious porn purveyors have drawn yet another copyright decision out of the 9th Circuit Court of Appeals, this time concerning the liability of payment processors who provide services to infringing websites.

After two recent, high-profile decisions that had mixed results for the dedicated guardians of nudie picture copyrights, Perfect10 last week was resoundingly defeated in this case. The 9th Circuit panel, albeit with one judge dissenting, agreed with the lower court that Perfect10 had failed to make its case against major credit card companies. And that's a decision that should benefit many e-commerce sites, as we shall see.

Perfect10, which touts its products as featuring "tasteful copyrighted images of the world's most beautiful natural models," sued Visa, MasterCard and others after sending repeated notices that some of the websites receiving credit card processing services from the financial institutions contained stolen Perfect10 images.

In addition to federal copyright and trademark infringement claims, Perfect10 filed a mess of state law claims against the defendants - also to no avail.

The court dismissed Perfect10's contributory copyright claim after determining that the credit card companies had neither materially contributed to nor induced the infringing behavior. Since, the court argued, Visa and MasterCard did not use their payment processing systems to locate, transmit, alter or display copyrighted works, they did not contribute to the infringement.

The dissenting judge vigorously disagreed with the majority on this point, claiming that the credit card companies facilitated the infringement by allowing the infringing sites to make a profit off of the activity.

The majority responded by pointing out that the infringement could occur - say, via an ad supported model - regardless of whether Visa and MasterCard made it easier for the sites to collect money for it. At issue, according to the majority, was the unlicensed use of Perfect10's images, not the system of payment.

In addition, contrary to Perfect10's legal arguments, the defendants never took any affirmative steps to steer cardholders towards infringement, such as distributing ads promoting their cards as an effective way to infringe copyright. (One copy of Playboy? $6. A girl-on-girl DVD? $20. Cheap, stolen porn? Priceless.)

Now, a legal development that swings in favor of credit card companies will not usually warm the hearts of many consumers, pornographers or journalists. But, as the majority points out in its decision, this ruling has broader implications for general e-commerce that most people who conduct any sort of business online will probably celebrate.

After all, if the case had gone against the credit card companies, how long would it have been before rival websites began sending infringement notices to Visa and MasterCard in order to drive their competition out of business? Or would the payment processors have simply pulled back from enabling online transactions for fear of somehow incurring copyright liability? Either way, a decision for Perfect10 would probably have had an extensive chilling effect on e-commerce.

The court didn't feel that putting electronic payment processors - the economic lifeblood of the Internet - in the cross hairs would fit the US Congress' stated purpose of encouraging e-commerce, a sentiment which pervades the opinion and makes it fairly apparent that Perfect10 never had a shred of a chance on this one.

Don't feel too bad for Perfect10, though. The company received better results from its two earlier 9th Circuit rulings, and it still might force Google to change the way it indexes information and delivers search results.

The company may leave its mark on the Internet, yet. ®

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