9th Circuit Finds for Google in Perfect 10 Copyright Appeal

SAN FRANCISCO—In a second significant ruling this week involving Perfect 10, the Ninth Circuit Court of Appeals in Perfect 10 v Google has upheld a lower court ruling from last year that found Google not liable for alleged infringement of Perfect 10 content.

Today’s ruling, penned by Judge Sandra S. Ikuta, “effectively overruled” the Ninth Circuit’s own “longstanding rule that “[a] showing of a reasonable likelihood of success on the merits in a copyright infringement claim raises a presumption of irreparable harm.” Instead, the court determined that that “the propriety of injunctive relief in cases arising under the Copyright Act must be evaluated on a case-by-case basis in accord with traditional equitable principles and without the aid of presumptions or a ‘thumb on the scale’ in favor of issuing such relief.”

The reversal comes as a result of a new precedent established by the U.S. Supreme Court in eBay Inc. v Mercantile Exchange (2006), which determined that “an injunction in a patent infringement case may issue only in accordance with ‘traditional equitable principles’ and warned against reliance on presumptions or categorical rules.”

In other words, eBay has effectively killed the default decision by courts to automatically issue injunctive relief once any level of infringing behavior has been established. As a result of eBay, the existence and extent of “irreparable harm” caused by the infringing activity now needs to be determined before injunctive relief is granted.

“In eBay,” wrote Ikuta, “The Supreme Court [held] that ‘the traditional four-factor framework that governs the award of injunctive relief’ applies to ‘disputes arising under the Patent Act.’ The use of presumptions or categorical rules in issuing injunctive relief would constitute ‘a major departure from the long tradition of equity practice,’ and ‘should not be lightly implied.’ The Court detected no evidence in the language of the Patent Act that Congress ‘intended such a departure’ from traditional equity practice, rejecting the argument that courts could find congressional intent to depart from the four-factor framework in statutory language giving patent holders a ‘right to exclude others from making, using, offering for sale, or selling the invention.

“According to the Court,” Ikuta continued, “this language did not require the issuance of injunctive relief whenever there was patent infringement, because ‘the creation of a right is distinct from the provision of remedies for violations of that right,’ and the relevant remedial provision stated only that injunctive relief ‘may’ issue ‘in accordance with the principles of equity. Therefore, both the district and appellate courts had erred in adopting a categorical rule instead of making a fact-specific application of the traditional four-factor test for injunctive relief.”

In relying on the Copyright Act to reach its conclusion, the Supreme Court noted that, like the Patent Act, the Copyright Act gives the courts a certain amount of discretion by stating they “may” grant injunctive relief “on such terms as [they] may deem reasonable to prevent or restrain infringement of a copyright.”

In the current case, despite the fact that Perfect 10 had declared that “the number of thumbnail versions of Perfect 10 images available via Google’s Image Search had increased significantly between 2005 and 2010 … and that the company’s ‘revenues have declined from close to $2,000,000 a year to less than $150,000 a year,’ resulting in over $50 million in losses from 1996 to 2007, and an annual loss of at least $3 million since then, pushing the company ‘very close to bankruptcy,” the appeals court, like the circuit court before it, found that “Perfect 10 has not established that the requested injunction would forestall that fate.”

Indeed, according to the ruling Perfect 10 founder Norm Zada undermined his own argument regarding Google’s impact on his business by declaring that “in addition to spending ‘at least 2,000 hours using Google’s search engine to locate infringements of Perfect 10’s copyrighted works,’ he has also ‘spent thousands of hours viewing [infringing] websites and search results of other search engines, including Yahoo! and MSN.’”

“In sum,” Ikuta concluded, “Perfect 10 has not shown a sufficient causal connection between irreparable harm to Perfect 10’s business and Google’s operation of its search engine. Because Perfect 10 has failed to satisfy this necessary requirement for obtaining preliminary injunctive relief, the district court’s ruling was not an abuse of discretion.”

Perfect 10 recently received a favorable ruling on a motion in an ongoing copyright infringement lawsuit the company brought against Megaupload, but this unfavorable decision has to smart nonetheless. In the face of so many places like Google, Yahoo! and MSN, to name a few, that not only make possible infringing activity but also seem to exacerbate it by, in the case of Google, forwarding DMCA takedown notices, along with the alleged infringed content, to the Chilling Effects Clearinghouse for posting on its site, it remains to be seen whether the bar has been reset so high that content producers will find it difficult if not impossible to ever prove “irreparable harm.”

The Ninth Circuit ruling can be accessed here.