Credit Card Processors Not Liable for Infringement by Web Sites That Use Credit Cards for Payment

Case: Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, (9th Cir. No. 05-15170, July 3, 2007)

The One Sentence Summary: The court affirmed dismissal of claims brought against Visa and other credit card processing companies that alleged that the companies were secondarily liable for copyright and trademark infringement by web sites that provided infringing copies of Perfect 10's photographs after receiving credit card payment.


Ninth Circuit Holdings:

• The Ninth Circuit summarized the test for contributory infringement as: "one contributorily infringes when he (1) has knowledge of another’s infringement and (2) either (a) materially contributes to or (b) induces that infringement."
  
• Processing payments for web sites that provided infringing materials was not material contribution to infringement for purposes of contributory infringement analysis. The panel majority disagreed with the dissent's argument that credit card companies should be subject to contributory infringement as were search engines were in the case of Perfect 10, Inc. v. Amazon.com, Inc. et.al., ___ F.3d ___, 2007 WL 1428632, (9th Cir. May 16, 2007).
  
• The panel distinguished the swap meet providers of Fonovisa (Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 264 (9th Cir. 1996)); and the file sharing of Napster (A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1019 (9th Cir. 2001)) as instances in which a central site or facility for infringement was provided. Here, the credit card companies did not provide a site or facility for infringement, and the infringing works did not pass over their networks.
  
• Defendants were not liable for contributory infringement under the inducement test of Grokster (Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005)) because there were no affirmative acts such as advertising by defendants to promote and encourage infringement.
• "To state a claim for vicarious copyright infringement, a plaintiff must allege that the defendant has (1) the right and ability to supervise the infringing conduct and (2) a direct financial interest in the infringing activity."
• The credit card companies could not be vicariously liable for copyright infringement because they did not have the right and ability to control the infringing sites. Withdrawing the ability for those site to process credit cards would not have stopped the infringement.
• Establishing secondary liability for trademark infringement is more difficult than for copyright infringement. To be liable for contributory trademark infringement, a defendant must have (1) “intentionally induced” the primary infringer to infringe, or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied.
• The credit card companies did not induce trademark infringement or control the sites, so were not liable for secondary infringement.
• Vicarious liability for trademark infringement requires “a finding that the defendant and the infringer have an apparent or actual partnership, have authority to bind one another in
  transactions with third parties or exercise joint ownership or control over the infringing product.” Plaintiffs failed to allege sufficient facts that the credit card companies met this test.
• Defendants were not liable under California's Unfair Competition Law, Business & Professions Code § 17200, because they did not participate directly in the unlawful infringement.
• Defendants lacked sufficient control to be liable for aiding and abetting a right of publicity violation under California Civil Code § 3344.
• The libel and intentional interference claims alleging blacklisting were barred by the statute of limitations.