508 F.3d 1146 (9th Cir. 2007)
Perfect 10 v. Amazon.com is a seminal Ninth Circuit decision at the intersection of copyright law and internet functionality.
1) Does a search engine directly infringe the display or distribution rights by inline linking or framing full-size images that reside on third-party servers? 2) Does a search engine's copying and display of thumbnail images constitute direct infringement, and if so, is it protected by fair use? 3) Can the search engine or related service be secondarily liable (contributory or vicarious) for facilitating user access to infringing images hosted by others?
Direct infringement of the display right under 17 U.S.C. § 106(5) requires that the defendant show a copy of the work, and a "copy" is a material object in which the work is fixed, 17 U.S.C. § 101. Under the Ninth Circuit's "server test," a service provider directly displays a work only if it stores and serves a copy of the work from its own server. Inline linking or framing content stored on another's server is not direct display infringement and does not distribute the work under § 106(3) because the defendant does not fix or disseminate a copy. Copying and displaying thumbnail images stored on the defendant's servers can implicate the reproduction and display rights, but such use may be fair use under § 107. Fair use requires analysis of four factors: (1) purpose and character of the use (including whether the use is transformative and commercial), (2) nature of the copyrighted work, (3) amount and substantiality used, and (4) market effect. Secondary liability: Contributory infringement arises where a defendant, with knowledge of the infringing activity, materially contributes to or induces the infringement (MGM v. Grokster; A&M Records v. Napster). Vicarious infringement requires a direct financial benefit from infringement and the right and ability to supervise or control the infringing conduct.
1) Inline linking and framing of full-size images that reside on third-party servers do not constitute direct infringement of the display or distribution rights under the server test. 2) Google's creation and display of thumbnail images stored on its servers implicates the reproduction and display rights but is likely fair use. 3) Perfect 10 did not show a likelihood of success on vicarious infringement because Google and Amazon lacked the right and ability to control the infringing activities of third-party websites. 4) Contributory infringement remains possible: providing links that facilitate access to known infringing images can materially contribute to infringement; the court remanded for further proceedings on contributory liability consistent with its standards.
Perfect 10 v. Amazon.com is a cornerstone of internet copyright law. It established the server test for direct display liability, a rule widely applied to determine whether embedding or inline linking constitutes direct infringement. It confirmed that search-engine thumbnails can be protected by fair use due to their transformative, informational function, extending and reinforcing Kelly v. Arriba Soft. The decision also delineates the boundary between direct and secondary liability for online intermediaries: while mere linking does not make a service a direct infringer, knowledge-plus-material-contribution can give rise to contributory liability. For law students, the case is indispensable for understanding platform liability, fair use in functional technologies, and the doctrinal architecture that governs how the web works.