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Of Credit Cards and Counterfeits

Landlords, distributors of electronic file sharing systems, and even creators of search engines may be liable for contributory infringement of protected works -- but credit card companies are in the clear, according to a decision last week by the U.S. Court of Appeals for the Ninth Circuit. 

Perfect 10, Inc. v. Visa Int'l Service Ass'n., an opinion particularly concerned with the potential effects of a contrary ruling on e-commerce, upheld the district court's dismissal of a complaint alleging contributory and vicarious liability in both copyright and trademark, as well as California statutory and common law violations.  The 9th Circuit was at some pains to distinguish its recent decision in Perfect 10, Inc. v. Amazon.com, Inc. and to explain why helping consumers find infringing material online may be problematic but helping consumers buy the same material isn't.  Ultimately, the majority was persuaded by the argument that payment services do not materially contribute to infringement itself in the form of reproduction, alteration, display, or distribution; they merely make infringement more profitable. 

Judge Alex Kozinski, however, was having none of it.  In his dissent, he argued inter alia that credit card services "knowingly provide a financial bridge between buyers and sellers of pirated works, enabling them to consummate infringing transactions, while making a profit on every sale.  If such active participation in infringing conduct does not amount to indirect infringement, it's hard to imagine what would." 

Kozinski also noted that credit card companies have mechanisms in place to oversee merchants, "which is why we don't see credit card sales of illegal drugs or child pornography."  Of course, the real reason that consumers don't whip out the Visa to buy street drugs or kiddie porn is that possessing these items is illegal, and paying with plastic leaves a trail.  Consumers who knowingly purchase infringing copies of legal items -- whether pirated versions of porn by Perfect 10 or replica Rolexes -- may reasonably be concerned about privacy, but not about their own legal liability. 

Despite the dissent's reasoning, Perfect 10 has been denied a happy ending for now.  So, too, for that matter are you, dear readers -- I'm so not linking to a porn site.  Especially after Counterfeit Chic was recently cloned by a different, presumably unrelated porn site for nefarious purposes, much to my chagrin.  But that's a war story for another day. 

P.S.  For additional analysis, check out Likelihood of Confusion and 43(B)log

UPDATES:  The 9th Circuit issued an amended opinion in Perfect 10 v. Amazon.  In addition, the Supreme Court is considering a cert petition in Perfect 10 v. Visa.