788 494 FEDERAL REPORTER, 3d SERIES - Berkeley Law788 494 FEDERAL REPORTER, 3d SERIES Contrary to...

788 494 FEDERAL REPORTER, 3d SERIES

Contrary to Judge Smith’s suggestion, itappears that too much logging, rather thannot enough, has caused the economic de-cline in Boundary County. A spokesper-son for Riley Creek Lumber Company, thecompany that bought the mill site fromLouisiana–Pacific, explained why the millwould not reopen: ‘‘There’s not enoughraw material to support a mill operation atBonners Ferry.’’ 2 A Louisiana–Pacificspokesperson also explained the closure,stating, ‘‘In the lumber business, we con-tinue to see an oversupply situation, withhistoric low prices.’’ 3 By depleting the‘‘raw materials’’ and depressing the priceof lumber through oversupply, the indus-try has put people out of work.

I have the utmost sympathy for thoseleft unemployed by these recent trends,but I cannot accept Judge Smith’s asser-tion that the judiciary, rather than theindustry, is primarily to blame.4

,

PERFECT 10, INC., Plaintiff–Appellant,

v.

VISA INTERNATIONAL SERVICE,ASSOCIATION; First Data Corpora-tion; Cardservice International, Inc.;Humboldt Bank; Mastercard Interna-tional, Inc., Defendants–Appellees.

No. 05–15170.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Dec. 4, 2006.

Filed July 3, 2007.

Background: Internet website publisherbrought action against credit card compa-nies and several affiliated banks and dataprocessing services alleging secondary lia-bility under federal copyright and trade-mark law and liability under Californiastatutory and common law for processingcredit card payments to Internet websitesthat infringed publisher’s intellectual prop-erty rights after being notified by publish-er of infringement by those websites. TheUnited States District Court for theNorthern District of California, James

2. Dan Hansen, Bonners Ferry Mill Won’t Re-open, Spokesman Rev. (Spokane, WA), July23, 2003, at A8.

3. Becky Kramer, Timber Town May Buy TwoL–P Sawmills, Spokesman Rev. (Spokane,WA), May 30, 2003, at A1 (emphasis added).

4. Notably, while low-income workers havebeen laid-off, the world’s largest paper com-panies have provided multi-million dollar paypackages to their CEOs. Louisiana–Pacific’sCEO received a ten-percent salary increaseand a package worth $3.6 million in 2006.Louisiana–Pacific, Notice of Annual Meetingof Stockholders 21, 25 (2007), available athttp://library.corporate-ir.net/library/73/730/73030/items/ 237173/2006p̈roxy.pdf. Interna-tional Paper’s CEO received a package worth$13.7 million in 2006. International Paper,Notice of Annual Meeting of Shareholders 50

(2007), available at http://www.internationalpaper.com/PDF/PDFs for Our Company/2007 Proxy Statement.pdf. Weyerhaeuser’sCEO received a package worth $4 million in2006. Weyerhaeuser, Notice of 2007 AnnualMeeting of Shareholders and Proxy Statement27 (2007), available at http://library.corporate-ir.net/library/92/922/92287/items/235323/WY2007ProxyStatement.pdf. Geor-gia–Pacific’s former CEO received a $92 mil-lion package when the multi-billion dollarKoch Industries acquired Georgia–Pacific in2005 to become the largest privately ownedcompany in the United States. Emily Thorn-ton, Fat Merger Payouts For CEOs, Bus. Wk.,Dec. 12, 2005, at 34; Koch Industries Inc.:Acquisition of Georgia–Pacific For $13.2 Bil-lion Is Completed, Wall St. J., Dec. 24, 2005,at B2.

789PERFECT 10, INC. v. VISA INTERN. SERVICE ASS’NCite as 494 F.3d 788 (9th Cir. 2007)

Ware, J., 2004 WL 3217732, dismissed ac-tion. Publisher appealed.

Holdings: The Court of Appeals, Milan D.Smith, Jr., Circuit Judge, held that:

(1) payment processing by credit cardcompanies did not constitute materialcontribution to infringement by com-peting Internet websites that stemmedfrom failure to obtain license to distrib-ute;

(2) payment processing by credit cardcompanies did not induce competingInternet websites to infringe copy-rights;

(3) credit card companies had not vicari-ously infringed copyrights by process-ing payments;

(4) payment processing for infringing In-ternet websites did not constitute sec-ondary trademark infringement;

(5) payment processing did not inducecompeting Internet websites to in-fringe trademarks;

(6) credit card companies did not havesymbiotic relationship with infringingInternet websites or joint ownership orcontrol over content by processing pay-ments;

(7) credit card companies were not second-arily liable under California unfaircompetition and false advertising lawsfor images stolen by infringing Inter-net websites; and

(8) mere availability of bank-card paymentsystem did not make credit card com-pany liable, as aider and abettor underCalifornia unfair competition and falseadvertising laws, for images stolen byinfringing Internet websites.

Affirmed.

Kozinski, Circuit Judge, filed dissentingopinion.

1. Federal Courts O762

The Court of Appeals may affirm onany ground supported by the record, evenif the district court did not consider theissue.

2. Federal Courts O781

De novo review applies to a districtcourt’s interpretation of state law.

3. Copyrights and Intellectual PropertyO77

Contributory copyright infringementis a form of secondary liability with rootsin the tort-law concepts of enterprise lia-bility and imputed intent. 17 U.S.C.A.§ 101 et seq.


One contributorily infringes a copy-right when he: (1) has knowledge of an-other’s infringement, and (2) either (a)materially contributes to or (b) inducesthat infringement. 17 U.S.C.A. § 101 etseq.


Payment processing by credit cardcompanies did not constitute material con-tribution to infringement by competing In-ternet websites that stemmed from failureto obtain license to distribute, for purposeof contributory copyright infringementclaim of Internet website owner, sincecompanies did not have direct connectionto infringement and infringement couldhave occurred without using payment sys-tem; although payment systems made iteasier for infringement to be profitableand had effect of increasing infringement,services provided by companies did nothelp locate and were not used to distributeinfringing images. 17 U.S.C.A. § 101 etseq.



Payment processing by credit cardcompanies did not induce competing Inter-net websites to infringe copyrights by notobtaining license to distribute, for purposeof infringement claim of Internet websiteowner, since companies did not take affir-mative steps to foster infringement andcompanies did not promote their paymentsystem as means to infringe; althoughcompanies marketed their credit cards asmeans to pay for goods and services, com-panies had not affirmatively promotedeach product that their cards were used topurchase. 17 U.S.C.A. § 101 et seq.


Whereas contributory copyright in-fringement is based on tort-law principlesof enterprise liability and imputed intent,vicarious infringement’s roots lie in theagency principles of respondeat superior.17 U.S.C.A. § 101 et seq.


To state a claim for vicarious copy-right infringement, a plaintiff must allegethat the defendant has (1) the right andability to supervise the infringing conductand (2) a direct financial interest in theinfringing activity. 17 U.S.C.A. § 101 etseq.


Credit card companies did not haveright or ability to supervise and controlcontent of infringing Internet websites, forpurpose of vicarious copyright infringe-ment claim of Internet website owner, al-though companies could have refused toprocess credit card payments to websiteswhich likely would have had indirect effectof reducing infringing activity on Internetat large; infringing images did not reside

on or pass through companies’ systems orany systems over which companies exer-cised direct control and companies did nothave ability to actually remove infringingmaterial from Internet or directly block itsdistribution. 17 U.S.C.A. § 101 et seq.


Credit card companies did not haveright and ability to supervise and controlcontent of infringing Internet websites bytheir contractual right to refuse to processcredit card payments to offending mer-chant within their payment network or bythreatening to do so if merchant did notcomply with request to alter content, forpurpose of vicarious copyright infringe-ment claim of Internet website owner,since enforcing their own rules and regula-tions would have only reduced number ofsales, which would have been result ofindirect economic pressure rather than af-firmative exercise of contractual rights.17 U.S.C.A. § 101 et seq.

11. Trademarks O1565

Payment processing for infringing In-ternet websites by credit card companiesdid not constitute secondary trademark in-fringement in violation of Lanham Act, forpurpose of infringement claim of Internetwebsite owner, since companies did nottake affirmative steps to foster infringe-ment, companies did not promote theirpayment system as means to infringe, andinfringement could have occurred withoutusing payment system. Lanham Act,§ 32(1)(a), 15 U.S.C.A. § 1114(1)(a).


To be liable for contributory trade-mark infringement under Lanham Act, adefendant must have (1) intentionally in-duced the primary infringer to infringe, or(2) continued to supply an infringing prod-uct to an infringer with knowledge that the


infringer is mislabeling the particularproduct supplied. Lanham Act, § 32(1)(a),15 U.S.C.A. § 1114(1)(a).

13. Trademarks O1566On a claim of contributory trademark

infringement under Lanham Act, when thealleged direct infringer supplies a servicerather than a product, the court must con-sider the extent of control exercised by thedefendant over the third party’s means ofinfringement; for liability to attach, theremust be direct control and monitoring ofthe instrumentality used by a third partyto infringe the plaintiff’s mark. LanhamAct, § 32(1)(a), 15 U.S.C.A. § 1114(1)(a).

14. Trademarks O1566Payment processing by credit card

companies did not induce competing Inter-net websites to infringe trademarks in vio-lation of Lanham Act, for purpose of con-tributory infringement claim of Internetwebsite owner, since companies did nottake affirmative steps to foster infringe-ment and companies did not promote theirpayment system as means to infringe; al-though companies marketed their creditcards as means to pay for goods and ser-vices, companies had not affirmatively pro-moted each product that their cards wereused to purchase. Lanham Act, § 32(1)(a),15 U.S.C.A. § 1114(1)(a).

15. Trademarks O1566Credit card companies did not have

right or ability to directly control or moni-tor content of infringing Internet websites,for purpose of contributory trademark in-fringement claim of Internet website own-er under Lanham Act, although companiescould have refused to process credit cardpayments to websites which likely wouldhave had indirect effect of reducing in-fringing activity on Internet at large; in-fringing images did not reside on or passthrough companies’ systems or any sys-tems over which companies exercised di-

rect control and companies did not haveability to actually remove infringing mate-rial from Internet or directly block itsdistribution. Lanham Act, § 32(1)(a), 15U.S.C.A. § 1114(1)(a).


Vicarious liability for trademark in-fringement under the Lanham Act re-quires a finding that the defendant and theinfringer have an apparent or actual part-nership, have authority to bind one anoth-er in transactions with third parties orexercise joint ownership or control overthe infringing product. Lanham Act,§ 32(1)(a), 15 U.S.C.A. § 1114(1)(a).


Credit card companies did not havesymbiotic relationship with infringing In-ternet websites or joint ownership or con-trol over content by processing paymentsof infringing websites, for purpose of vicar-ious trademark infringement claim of In-ternet website owner under Lanham Act;although companies could have refused toprocess credit card payments to websiteswhich likely would have had indirect effectof reducing infringing activity on Internetat large, infringing images did not resideon or pass through companies’ systems orany systems over which companies exer-cised direct control and companies did nothave ability to actually remove infringingmaterial from Internet or directly block itsdistribution. Lanham Act, § 32(1)(a), 15U.S.C.A. § 1114(1)(a).

18. Antitrust and Trade RegulationO291

Credit card companies were not sec-ondarily liable under California unfaircompetition and false advertising laws forimages stolen by infringing Internet web-sites simply because those websites accept-ed payment through payment system.


West’s Ann.Cal.Bus. & Prof.Code § 17200et seq.

19. Antitrust and Trade RegulationO291

Mere availability of bank-card pay-ment system did not make credit cardcompany liable, as aider and abettor underCalifornia unfair competition and false ad-vertising laws, for images stolen by in-fringing Internet websites that acceptedpayment through system. West’s Ann.Cal.Bus. & Prof.Code § 17200 et seq.

20. Torts O397

By processing payments, credit cardcompanies did aid and abet infringing In-ternet websites’ violations of other websiteowner’s rights of publicity, acquired byassignment from its models, in violation ofCalifornia statutory and common law rightof publicity, since companies lacked suffi-cient control or personal involvement ininfringing activities. West’s Ann.Cal.Civ.Code § 3344.

21. Limitation of Actions O55(1, 5)

Limitations period for internet web-site’s claims of libel and intentional inter-ference with prospective economic advan-tage under California law began to runwhen it was placed on industry ‘‘black list.’’West’s Ann.Cal.C.C.P. §§ 339, 340(c).

Trademarks O1800

PERFECT 10.

Howard E. King (argued) and StephenD. Rothschild, King, Holmes, Paterno &Berliner, LLP, Los Angeles, California, forthe plaintiff-appellant.

Jeffrey N. Mausner, Berman, Mausner& Resser, Los Angeles, California, for theplaintiff–appellant.

Daniel J. Cooper, Los Angeles, Califor-nia, for the plaintiff–appellant.

Andrew P. Bridges (argued), John C.Nishi, Winston & Strawn LLP, San Fran-cisco, California, for defendant-appelleeMastercard International Incorporated.

Mark T. Jansen, Nancy L. Tompkins,Anthony J. Malutta, Townsend and Town-send and Crew LLP, San Francisco, Cali-fornia, for defendant-appellee Visa Inter-national Service Association.

Robert A. Van Nest, Michael H. Page,R. James Slaughter, Keker & Van Nest,LLP, San Francisco, California, for defen-dants-appellees First Data Corp., Cardser-vice International, Inc., and HumboldtBank.

Appeal from the United States DistrictCourt for the Northern District of Califor-nia; James Ware, District Judge, Presid-ing. D.C. No. CV–04–00371–JW.

Before: STEPHEN REINHARDT,ALEX KOZINSKI, and MILAN D.SMITH, JR., Circuit Judges.

Opinion by Judge MILAN D. SMITH,JR.; Dissent by Judge KOZINSKI.

MILAN D. SMITH, JR., Circuit Judge:

Perfect 10, Inc. (Perfect 10) sued VisaInternational Service Association, Master-Card International Inc., and several affili-ated banks and data processing services(collectively, the Defendants), alleging sec-ondary liability under federal copyrightand trademark law and liability under Cal-ifornia statutory and common law. It suedbecause Defendants continue to processcredit card payments to websites that in-fringe Perfect 10’s intellectual propertyrights after being notified by Perfect 10 ofinfringement by those websites. The dis-trict court dismissed all causes of actionunder Federal Rule of Civil Procedure12(b)(6) for failure to state a claim upon


which relief can be granted. We affirmthe decision of the district court.

FACTS AND PRIOR PROCEEDINGS

Perfect 10 publishes the magazine‘‘PERFECT10’’ and operates the subscrip-tion website www.perfect10.com., both ofwhich ‘‘feature tasteful copyrighted imagesof the world’s most beautiful natural mod-els.’’ Appellant’s Opening Brief at 1. Per-fect 10 claims copyrights in the photo-graphs published in its magazine and onits website, federal registration of the‘‘PERFECT 10’’ trademark and blanketpublicity rights for many of the modelsappearing in the photographs. Perfect 10alleges that numerous websites based inseveral countries have stolen its proprie-tary images, altered them, and illegallyoffered them for sale online.

Instead of suing the direct infringers inthis case, Perfect 10 sued Defendants, fi-nancial institutions that process certaincredit card payments to the allegedly in-fringing websites. The Visa and Master-Card entities are associations of memberbanks that issue credit cards to consumers,automatically process payments to mer-chants authorized to accept their cards,and provide information to the interestedparties necessary to settle the resultingdebits and credits. Defendants collectfees for their services in these transac-tions. Perfect 10 alleges that it sent De-fendants repeated notices specifically iden-tifying infringing websites and informingDefendants that some of their consumersuse their payment cards to purchase in-fringing images. Defendants admit receiv-ing some of these notices, but they took noaction in response to the notices after re-ceiving them.

Perfect 10 separately alleges that it for-merly had a merchant account with defen-dant First Data Corporation (FDC) butthat in the Spring of 2001 FDC terminated

the account. FDC’s stated reason for thetermination is that the percentage of Per-fect 10’s customers who later disputed thecharges attributed to them (the charge-back rate) exceeded contractual limits.Perfect 10 claims these chargeback rateswere temporarily and substantially inflatedbecause Perfect 10 was the ‘‘victim ofhackers who were subsequently investigat-ed by the Secret Service.’’ Appellant’sOpening Brief at 13. Perfect 10 claimsthat FDC was aware of this and was alsoaware that Perfect 10’s chargeback ratedropped to within association limits oncethe hacking ceased, but that FDC never-theless placed Perfect 10 on an industry-wide ‘‘black list’’ of terminated accounts.

Perfect 10 filed suit against Defendantson January 28, 2004 alleging contributoryand vicarious copyright and trademark in-fringement as well as violations of Califor-nia laws proscribing unfair competitionand false advertising, violation of the stat-utory and common law right of publicity,libel, and intentional interference with pro-spective economic advantage. Defendantsmoved to dismiss the initial complaint un-der FRCP 12(b)(6). The district courtgranted the motion, dismissing the libeland intentional interference claims withprejudice but granting leave to amend theremaining claims. In its first amendedcomplaint, Perfect 10 essentially repeatedthe allegations in its original complaintconcerning the surviving causes of actionand Defendants again moved to dismissunder FRCP 12(b)(6). The district courtgranted the Defendants’ second motion infull, dismissing all remaining causes of ac-tion with prejudice. Perfect 10 appealedto this court.

JURISDICTION

The district court had original jurisdic-tion over the copyright and trademarkclaims pursuant to 28 U.S.C. §§ 1331 and


1338 and supplemental jurisdiction overthe related state law claims pursuant to 28U.S.C. § 1367. This court has appellatejurisdiction pursuant to 28 U.S.C. § 1291.

STANDARDS OF REVIEW

We review de novo the district court’sdismissal for failure to state a claim uponwhich relief can be granted pursuant toFRCP 12(b)(6). Rodriguez v. Panayiotou,314 F.3d 979, 983 (9th Cir.2002). On ap-peal, ‘‘we take all of the allegations ofmaterial fact stated in the complaint astrue and construe them in the light mostfavorable to the nonmoving party. A com-plaint should not be dismissed unless itappears beyond doubt that plaintiff canprove no set of facts in support of his claimwhich would entitle him to relief.’’ Id.(internal citations omitted).

[1] Although a plaintiff’s allegationsare generally taken as true, the court neednot accept conclusory allegations of law orunwarranted inferences, and dismissal isrequired if the facts are insufficient tosupport a cognizable claim. City of Arca-dia v. U.S. Envtl. Prot. Agency, 411 F.3d1103, 1106 n. 3 (9th Cir.2005); see alsoPena v. Gardner, 976 F.2d 469, 471–72(9th Cir.1992). The court may also affirmon any ground supported by the recordeven if the district court did not considerthe issue. Fields v. Legacy Health Sys.,413 F.3d 943, 958 n. 13 (9th Cir.2005);ARC Ecology v. United States Dep’t of theAir Force, 411 F.3d 1092, 1096 (9th Cir.2005).

[2] We review de novo the districtcourt’s interpretation of state law. Rodri-guez, 314 F.3d at 983.

DISCUSSION

SECONDARY LIABILITY UNDERFEDERAL COPYRIGHT AND

TRADEMARK LAW

A. Secondary Liability for CopyrightInfringement

Perfect 10 alleges that numerous web-sites based in several countries—and theirpaying customers—have directly infringedits rights under the Copyright Act, 17U.S.C. § 101, et seq.1 In the present suit,however, Perfect 10 has sued Defendants,not the direct infringers, claiming contrib-utory and vicarious copyright infringementbecause Defendants process credit cardcharges incurred by customers to acquirethe infringing images.

We evaluate Perfect 10’s claims with anawareness that credit cards serve as theprimary engine of electronic commerceand that Congress has determined it to bethe ‘‘policy of the United States—(1) topromote the continued development of theInternet and other interactive computerservices and other interactive media [and](2) to preserve the vibrant and competitivefree market that presently exists for theInternet and other interactive computerservices, unfettered by Federal or Stateregulation.’’ 47 U.S.C. §§ 230(b)(1), (2).2

1. Contributory Copyright Infringe-ment

[3] Contributory copyright infringe-ment is a form of secondary liability with

1. While Perfect 10’s complaint does not clear-ly specify which of Perfect 10’s rights arebeing infringed, it appears that at least foursuch rights are potentially at issue: reproduc-tion (17 U.S.C. § 106(1)); derivative works(17 U.S.C. § 106(2)); distribution of copies(17 U.S.C. § 106(3)); and public display (17U.S.C. § 106(5)).

2. Congress expressed similar sentimentswhen it enacted the Digital Millennium Copy-right Act (DMCA), 17 U.S.C. § 512, one of thestated purposes of which was to ‘‘facilitate therobust development and worldwide expansionof electronic commerce, communications, re-search, development, and education in thedigital age.’’ S. Rep. 105–190, at 1–2 (1998).


roots in the tort-law concepts of enterpriseliability and imputed intent. See Fonovi-sa, Inc. v. Cherry Auction, Inc., 76 F.3d259, 264 (9th Cir.1996); Perfect 10, Inc. v.Amazon.com, Inc. et al., 487 F.3d 701 (9thCir.2007). This court and the UnitedStates Supreme Court (Supreme Court)have announced various formulations ofthe same basic test for such liability. Wehave found that a defendant is a contribu-tory infringer if it (1) has knowledge of athird party’s infringing activity, and (2)‘‘induces, causes, or materially contributesto the infringing conduct.’’ Ellison v. Rob-ertson, 357 F.3d 1072, 1076 (9th Cir.2004)(citing Gershwin Publ’g Corp. v. ColumbiaArtists Mgmt., Inc., 443 F.2d 1159, 1162(2d Cir.1971)). In an Internet context, wehave found contributory liability when thedefendant ‘‘engages in personal conductthat encourages or assists the infringe-ment.’’ A & M Records, Inc. v. Napster,Inc., 239 F.3d 1004, 1019 (9th Cir.2001)(internal citations omitted). In Metro–Goldwyn–Mayer Studios, Inc. v. Grokster,Ltd., the Supreme Court adopted frompatent law the concept of ‘‘inducement’’and found that ‘‘[o]ne infringes contribu-torily by intentionally inducing or encour-aging direct infringement.’’ 545 U.S. 913,930, 125 S.Ct. 2764, 162 L.Ed.2d 781(2005).3 Most recently, in a case alsobrought by Perfect 10, we found that ‘‘anactor may be contributorily liable [underGrokster ] for intentionally encouraging di-

rect infringement if the actor knowinglytakes steps that are substantially certainto result in such direct infringement.’’ Am-azon.com, 487 F.3d at 727.

[4] We understand these several crite-ria to be non-contradictory variations onthe same basic test, i.e., that one contribu-torily infringes when he (1) has knowledgeof another’s infringement and (2) either (a)materially contributes to or (b) inducesthat infringement. Viewed in isolation, thelanguage of the tests described is quitebroad, but when one reviews the details ofthe actual ‘‘cases and controversies’’ beforethe relevant court in each of the test-defining cases and the actual holdings inthose cases, it is clear that the factualcircumstances in this case are not analo-gous. To find that Defendants’ activitiesfall within the scope of such tests wouldrequire a radical and inappropriate expan-sion of existing principles of secondaryliability and would violate the public policyof the United States.

a. Knowledge of the InfringingActivity

Because we find that Perfect 10 has notpled facts sufficient to establish that De-fendants induce or materially contribute tothe infringing activity, Perfect 10’s contrib-utory copyright infringement claim failsand we need not address the Defendants’knowledge of the infringing activity.4

3. In her concurring opinion in Grokster, Jus-tice Ginsburg identified another strand ofcontributory liability in the Supreme Court’sjurisprudence, i.e., liability based on ‘‘distrib-uting a product distributees use to infringecopyrights, if the product is not capable of‘substantial’ or ‘commercially significant’noninfringing uses.’’ Grokster, 545 U.S. at942, 125 S.Ct. 2764 (citing Sony Corp. ofAmerica v. Universal City Studios, Inc., 464U.S. 417, 442, 104 S.Ct. 774, 78 L.Ed.2d 574(1984)). Even assuming Defendants offer a‘‘product’’ for these purposes, Perfect 10 does

not claim that the ‘‘product’’ of credit cardservices is incapable of substantial and com-mercially significant noninfringing uses.

4. We note that an anomaly exists regardingthe concept of notice in secondary copyrightinfringement cases outside a FRCP 12(b)(6)context. Congress addressed the issue of no-tice in the DMCA, which grants a safe harboragainst liability to certain Internet serviceproviders, even those with actual knowledgeof infringement, if they have not received stat-utorily-compliant notice. See Perfect 10 v.CCBill LLC, 481 F.3d 751 (9th Cir.2007),


b. Material Contribution, Inducement,or Causation

To state a claim of contributory infringe-ment, Perfect 10 must allege facts showingthat Defendants induce, cause, or material-ly contribute to the infringing conduct.See, e.g., Ellison, 357 F.3d at 1076. Threekey cases found defendants contributorilyliable under this standard: Fonovisa, 76F.3d 259; Napster, 239 F.3d 1004; andGrokster, 545 U.S. 913, 125 S.Ct. 2764, 162L.Ed.2d 781. In Fonovisa, we held a swapmeet operator contributorily liable for thesale of pirated works at the swap meet.In Napster, we held the operator of anelectronic file sharing system liable whenusers of that system employed it to ex-change massive quantities of copyrightedmusic. In Grokster, the Supreme Courtfound liability for the substantially similaract of distributing software that enabledexchange of copyrighted music on a peer-to-peer, rather than a centralized basis.5

Perfect 10 argues that by continuing toprocess credit card payments to the in-fringing websites despite having knowl-edge of ongoing infringement, Defendantsinduce, enable and contribute to the in-fringing activity in the same way the de-fendants did in Fonovisa, Napster andGrokster. We disagree.

1. Material Contribution

[5] The credit card companies cannotbe said to materially contribute to the

infringement in this case because theyhave no direct connection to that infringe-ment. Here, the infringement rests onthe reproduction, alteration, display anddistribution of Perfect 10’s images overthe Internet. Perfect 10 has not allegedthat any infringing material passes overDefendants’ payment networks orthrough their payment processing sys-tems, or that Defendants’ systems areused to alter or display the infringing im-ages. In Fonovisa, the infringing materi-al was physically located in and traded atthe defendant’s market. Here, it is not.Nor are Defendants’ systems used to lo-cate the infringing images. The searchengines in Amazon.com provided links tospecific infringing images, and the ser-vices in Napster and Grokster allowedusers to locate and obtain infringing ma-terial. Here, in contrast, the servicesprovided by the credit card companies donot help locate and are not used to dis-tribute the infringing images. While Per-fect 10 has alleged that Defendants makeit easier for websites to profit from thisinfringing activity, the issue here is re-production, alteration, display and distri-bution, which can occur without payment.Even if infringing images were not paidfor, there would still be infringement.See Napster, 239 F.3d at 1014 (Napsterusers infringed the distribution right byuploading file names to the search indexfor others to copy, despite the fact that

amended and superceded, 488 F.3d 1102 (9thCir.2007); 17 U.S.C. § 512(c)(3). BecauseDefendants are not ‘‘service providers’’ withinthe scope of the DMCA, they are not eligiblefor these safe harbors. The result, under Per-fect 10’s theories, would therefore be that aservice provider with actual knowledge of in-fringement and the actual ability to removethe infringing material, but which has notreceived a statutorily compliant notice, is en-titled to a safe harbor from liability, whilecredit card companies with actual knowledgebut without the actual ability to remove in-

fringing material, would benefit from no safeharbor. We recognize that the DMCA wasnot intended to displace the development ofsecondary liability in the courts; rather, wesimply take note of the anomalous result Per-fect 10 seeks.

5. Because the Grokster court focused primari-ly on an ‘‘inducement’’ theory rather than a‘‘material contribution’’ theory, our primarydiscussion of Grokster is located below in the‘‘inducement’’ section of this opinion.


no money changed hands in the transac-tion).

Our analysis is fully consistent with thiscourt’s recent decision in Perfect 10 v.Amazon.com, where we found that ‘‘Goo-gle could be held contributorily liable if ithad knowledge that infringing Perfect 10images were available using its search en-gine, could take simple measures to pre-vent further damage to Perfect 10’s copy-righted works, and failed to take suchsteps.’’ 487 F.3d at 729. The dissentclaims this statement applies squarely toDefendants if we just substitute ‘‘paymentsystems’’ for ‘‘search engine.’’ Dissent at811. But this is only true if search en-gines and payment systems are equiva-lents for these purposes, and they are not.The salient distinction is that Google’ssearch engine itself assists in the distribu-tion of infringing content to Internet users,while Defendants’ payment systems donot. The Amazon.com court noted that‘‘Google substantially assists websites todistribute their infringing copies to aworldwide market and assists a worldwideaudience of users to access infringing ma-terials.’’ Id. Defendants do not providesuch a service. They in no way assist orenable Internet users to locate infringingmaterial, and they do not distribute it.They do, as alleged, make infringementmore profitable, and people are generallymore inclined to engage in an activitywhen it is financially profitable. However,there is an additional step in the causal

chain: Google may materially contribute toinfringement by making it fast and easyfor third parties to locate and distributeinfringing material, whereas Defendantsmake it easier for infringement to be prof-itable, which tends to increase financialincentives to infringe, which in turn tendsto increase infringement.6

The dissent disagrees with our readingof Amazon.com and charges us with wish-ful thinking, dissent at 811, and with‘‘draw[ing] a series of ephemeral distinc-tions,’’ dissent at 825. We respectfullydisagree and assert that our constructionof the relevant statutes and case law iscompletely consistent with existing federallaw, is firmly grounded in both commer-cial and technical reality and conforms tothe public policy of the United States.Helping users to locate an image mightsubstantially assist users to download in-fringing images, but processing paymentsdoes not. If users couldn’t pay for im-ages with credit cards, infringement couldcontinue on a large scale because otherviable funding mechanisms are available.For example, a website might decide toallow users to download some images forfree and to make its profits from advertis-ing, or it might develop other paymentmechanisms that do not depend on thecredit card companies.7 In either case,the unlicensed use of Perfect 10’s copy-righted images would still be infringe-ment.8 We acknowledge that Defendants’

6. As discussed in note 11, infra, the dissent’sclaims that payment processing is ‘‘an essen-tial step in the infringement process,’’ dissentat 812, and that ‘‘Defendants are directly in-volved in every infringing transaction wherepayment is made by credit card,’’ dissent at815, suggests that the dissent believes that theDefendants are directly infringing when theyprocess these payments.

7. As discussed more fully in the vicariousinfringement section, infra, Perfect 10’s factu-al allegations are not to the contrary.

8. We recognize that Google is not the onlysearch engine available to Internet users, andthat users do not necessarily need Google tolocate infringing images. The distinction wedraw, however, is not specific to Google; it isbetween location services and payment ser-vices. Because location services lead Internetusers directly to infringing images and oftendisplay them on the website of the serviceitself, we find that location services are moreimportant and more essential—indeed, more


payment systems make it easier for suchan infringement to be profitable, and thatthey therefore have the effect of increas-ing such infringement, but because in-fringement of Perfect 10’s copyrights canoccur without using Defendants’ paymentsystem, we hold that payment processingby the Defendants as alleged in Perfect10’s First Amended Complaint does notconstitute a ‘‘material contribution’’ underthe test for contributory infringement ofcopyrights.9

Our holding is also fully consistent withand supported by this court’s previousholdings in Fonovisa and Napster. Whilethere are some limited similarities betweenthe factual scenarios in Fonovisa and Nap-ster and the facts in this case, the differ-ences in those scenarios are substantial,and, in our view, dispositive. In Fonovisa,we held a flea market proprietor liable as acontributory infringer when it provided thefacilities for and benefitted from the saleof pirated works. 76 F.3d 259. The courtfound that the primary infringers and theswap meet were engaged in a mutual en-

terprise of infringement and observed that‘‘it would be difficult for the infringingactivity to take place in the massive quan-tities alleged without the support servicesprovided by the swap meet. These ser-vices include, among other things, the pro-vision of space, utilities, parking, advertis-ing, plumbing, and customers.’’ 76 F.3d at264. But the swap meet owner did moreto encourage the enterprise. In 1991, theFresno County Sheriff raided the swapmeet and seized 38,000 counterfeit record-ings. Id. at 261. The Sheriff sent a letterto the swap meet operator the followingyear notifying it that counterfeit sales con-tinued and reminding it that it had agreedto provide the Sheriff with identifying in-formation from each vendor, but had failedto do so. Id. The Fonovisa court foundliability because the swap meet operatorknowingly provided the ‘‘site and facilities’’for the infringing activity. Id. at 264.

In Napster, this court found the design-er and distributor of a software programliable for contributory infringement. 239F.3d 1004. Napster was a file-sharing

‘‘material’’—to infringement than paymentservices are.

9. Our dissenting colleague assures us that wewould not jeopardize Internet commerce byfinding Defendants liable because he has ‘‘ev-ery confidence’’ that this court will simplyfind that other providers of essential servicesmay contribute to infringement, but not mate-rially so. Dissent at 816. We take little com-fort in his assurances because the predicate ofour colleague’s optimistic view of future judi-cial refinement of his new world of secondaryliability is a large number of expensive anddrawn-out pieces of litigation that may, ormay not, ever be filed. Meanwhile, whatwould stop a competitor of a web-site fromsending bogus notices to a credit card compa-ny claiming infringement by its competitor inthe hope of putting a competitor out of busi-ness, or, at least, requiring it to spend a greatdeal of money to clear its name? Threatenedwith significant potential secondary liabilityon a variety of fronts under the dissent’s pro-

posed expansion of existing secondary liabili-ty law, perhaps the credit card companieswould soon decline to finance purchases thatare more legally risky. They, after all, are asmoved by Adam Smith’s ‘‘invisible hand’’ asthe next set of merchants. If that happened,would First Amendment rights of consumersbe trampled? Would Perfect 10 itself be ad-versely impacted because no credit card com-pany would want to take a chance on becom-ing secondarily liable?

We similarly take little comfort in the dis-sent’s resurrection of the ‘‘dance-hall-own-er/absentee-landlord’’ cases as a source of anyprincipled distinction in this area. Dissent at815–16. Those tests were developed for abrick-and-mortar world, and, as the Napsterand Grokster courts implicitly recognized bypaying little attention to them, they do notlend themselves well to application in an elec-tronic commerce context. In deciding thiscase, we are well-advised to follow the lead ofthe Supreme Court’s and our own court’scases confronting online commerce issues.


program which, while capable of non-in-fringing use, was expressly engineered toenable the easy exchange of pirated musicand was widely so used. See Napster, 239F.3d at 1020 n. 5 (quoting document au-thored by Napster co-founder which men-tioned ‘‘the need to remain ignorant ofusers’ real names and IP addresses ‘sincethey are exchanging pirated music’ ’’).Citing the Fonovisa standard, the Napstercourt found that Napster materially con-tributes to the users’ direct infringementby knowingly providing the ‘‘site and facili-ties’’ for that infringement. 239 F.3d at1022.

Seeking to draw an analogy to Fonovisaand, by extension, Napster, Perfect 10pleads that Defendants materially contrib-ute to the infringement by offering ser-vices that allow it to happen on a largerscale than would otherwise be possible.Specifically, because the swap meet in Fo-novisa created a commercial environmentwhich allowed the frequency of that in-fringement to increase, and the Napsterprogram increased the frequency of in-fringement by making it easy, Perfect 10argues that the Defendants have madeavailable a payment system that allowsthird-party infringement to be profitable,and, consequently, more widespread thanit otherwise might be. This analogy fails.

The swap meet operator in Fonovisaand the administrators of the Napster andGrokster programs increased the level ofinfringement by providing a centralizedplace, whether physical or virtual, whereinfringing works could be collected, sorted,found, and bought, sold, or exchanged.10

The provision of parking lots, plumbingand other accoutrements in Fonovisa was

significant only because this was part ofproviding the environment and market forcounterfeit recording sales to thrive.

Defendants, in contrast, do no suchthing. While Perfect 10 has alleged thatit is easy to locate images that infringe itscopyrights, the Defendants’ payment sys-tems do not cause this. Perfect 10’s im-ages are easy to locate because of thevery nature of the Internet—the websiteformat, software allowing for the easy al-teration of images, high-speed connectionsallowing for the rapid transfer of high-res-olution image files, and perhaps most im-portantly, powerful search engines thatcan aggregate and display those images ina useful and efficient manner, withoutcharge, and with astounding speed. De-fendants play no role in any of these func-tions.

Perfect 10 asserts otherwise by arguingfor an extremely broad conception of theterm ‘‘site and facilities’’ that bears norelationship to the holdings in the actual‘‘cases and controversies’’ decided in Fo-novisa and Napster. Taken literally, Per-fect 10’s theory appears to include anytangible or intangible component relatedto any transaction in which infringing ma-terial is bought and sold. But Fonovisaand Napster do not require or lend them-selves to such a construction. The actualdisplay, location, and distribution of in-fringing images in this case occurs onwebsites that organize, display, and trans-mit information over the wires and wire-less instruments that make up the Inter-net. The websites are the ‘‘site’’ of theinfringement, not Defendants’ paymentnetworks. Defendants do not create, op-

10. In fact, as virtually every interested collegestudent knew—and as the program’s creatorexpressly admitted-the sole purpose of theNapster program was to provide a forum foreasy copyright infringement. See Napster,239 F.3d at 1020 n. 5. Perfect 10 does not

contend that Defendants’ payment systemswere engineered for infringement in this way,and we decline to radically expand Napster’scursory treatment of ‘‘material contribution’’to cover a credit card payment system thatwas not so designed.


erate, advertise, or otherwise promotethese websites. They do not operate theservers on which they reside. Unlike theNapster (and Grokster ) defendants, theydo not provide users the tools to locateinfringing material, nor does any infring-ing material ever reside on or passthrough any network or computer Defen-dants operate.11 Defendants merely pro-vide a method of payment, not a ‘‘site’’ or‘‘facility’’ of infringement. Any conceptionof ‘‘site and facilities’’ that encompassesDefendants would also include a numberof peripherally-involved third parties, suchas computer display companies, storagedevice companies, and software companiesthat make the software necessary to alterand view the pictures and even utilitycompanies that provide electricity to theInternet.

Perfect 10 seeks to side-step this reali-ty by alleging that Defendants are stillcontributory infringers because theycould refuse to process payments to theinfringing websites and thereby under-mine their commercial viability.12 Eventhough we must take this factual allega-tion as true, that Defendants have thepower to undermine the commercial via-bility of infringement does not demon-strate that the Defendants materiallycontribute to that infringement. As pre-viously noted, the direct infringementhere is the reproduction, alteration, dis-play and distribution of Perfect 10’s im-ages over the Internet. Perfect 10 hasnot alleged that any infringing material

passes over Defendants’ payment net-works or through their payment process-ing systems, or that Defendants designedor promoted their payment systems as ameans to infringe. While Perfect 10 hasalleged that Defendants make it easierfor websites to profit from this infringingactivity, the infringement stems from thefailure to obtain a license to distribute,not the processing of payments.

2. Inducement

[6] In Grokster, the Supreme Courtapplied the patent law concept of ‘‘induce-ment’’ to a claim of contributory infringe-ment against a file-sharing program. 545U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2d 781.The court found that ‘‘one who distributesa device with the object of promoting itsuse to infringe copyright, as shown byclear expression or other affirmative stepstaken to foster infringement, is liable forthe resulting acts of infringement by thirdparties.’’ Id. at 936–37, 125 S.Ct. 2764.Perfect 10 claims that Grokster is analo-gous because Defendants induce customersto use their cards to purchase goods andservices, and are therefore guilty of specif-ically inducing infringement if the cardsare used to purchase images from sitesthat have content stolen from Perfect 10.This is mistaken. Because Perfect 10 al-leges no ‘‘affirmative steps taken to fosterinfringement’’ and no facts suggesting thatDefendants promoted their payment sys-tem as a means to infringe, its claim ispremised on a fundamental misreading of

11. Moreover, if the processing of payment foran infringing transaction were as central tothe infringement as the dissent believes it tobe—see, e.g., dissent at 811 (payment process-ing is ‘‘an essential step in the infringementprocess’’), dissent at 815 (‘‘Defendants aredirectly involved in every infringing transac-tion where payment is made by creditcard’’)—it is difficult to see why Defendantswould be not be direct infringers of the distri-

bution right. Not even Perfect 10 has gone sofar as to allege that theory here—Perfect 10would undoubtedly be quite surprised tolearn, after years of litigation attempting toexpand the scope of secondary liability, thatDefendants are direct infringers after all.

12. This allegation is considered below undervicarious infringement, but we also address ithere in terms of contributory infringement.


Grokster that would render the concept of‘‘inducement’’ virtually meaningless.

The Grokster court announced that thestandard for inducement liability is provid-ing a service ‘‘with the object of promotingits use to infringe copyright.’’ Id. ‘‘[M]ereknowledge of infringing potential or actualinfringing uses would not be enough hereto subject [a defendant] to liability.’’ Id.at 937, 125 S.Ct. 2764. Instead, induce-ment ‘‘premises liability on purposeful, cul-pable expression and conduct, and thusdoes nothing to compromise legitimatecommerce or discourage innovation havinga lawful promise.’’ Id. Moreover, to estab-lish inducement liability, it is crucial toestablish that the distributors ‘‘communi-cated an inducing message to their TTTusers,’’ the classic example of which is an‘‘advertisement or solicitation that broad-casts a message designed to stimulate oth-ers to commit violations.’’ Id. The Grok-ster court summarized the ‘‘inducement’’rule as follows:

In sum, where an article is good fornothing else but infringement, there isno legitimate public interest in its unli-censed availability, and there is no injus-tice in presuming or imputing an intentto infringe. Conversely, the doctrineabsolves the equivocal conduct of sellingan item with substantial lawful as well asunlawful uses, and limits liability to in-stances of more acute fault than themere understanding that some of one’sproducts will be misused. It leavesbreathing room for innovation and a vig-orous commerce.

545 U.S. at 932–33, 125 S.Ct. 2764 (internalcitations and quotation marks omitted).

Perfect 10 has not alleged that any ofthese standards are met or that any ofthese considerations are present here.Defendants do, of course, market theircredit cards as a means to pay for goodsand services, online and elsewhere. But

it does not follow that Defendants affir-matively promote each product that theircards are used to purchase. The soft-ware systems in Napster and Groksterwere engineered, disseminated, and pro-moted explicitly for the purpose of facili-tating piracy of copyrighted music and re-ducing legitimate sales of such music tothat extent. Most Napster and Groksterusers understood this and primarily usedthose systems to purloin copyrighted mu-sic. Further, the Grokster operators ex-plicitly targeted then-current users of theNapster program by sending them adsfor its OpenNap program. Id. at 925–26,125 S.Ct. 2764. In contrast, Perfect 10does not allege that Defendants createdor promote their payment systems as ameans to break laws. Perfect 10 simplyalleges that Defendants generally promotetheir cards and payment systems butpoints to no ‘‘clear expression’’ or ‘‘affir-mative acts’’ with any specific intent tofoster infringement.

The Amazon.com court recognized thisdistinction and applied it in a matter fullyconsistent with our analysis in this case.While the Amazon.com court did not bi-furcate its analysis of contributory liabilityinto ‘‘material contribution’’ liability and‘‘inducement’’ liability, it did recognizethat contributory liability ‘‘may be predi-cated on actively encouraging (or induc-ing) infringement through specific acts.’’Amazon.com, 487 F.3d at 726 (quotingGrokster, 545 U.S. at 942, 125 S.Ct. 2764(Ginsburg, J., concurring)). It also foundthat Google could be held contributorilyliable if it has ‘‘actual knowledge that spe-cific infringing material is available usingits system, and can take simple measuresto prevent further damage,’’ but does not.Id. at 728 (internal citations and quotationmarks omitted). While this test is readmore naturally as a test for ‘‘material con-tribution’’ than as a test for ‘‘inducement,’’


under an ‘‘inducement’’ analysis Defen-dants are not within its scope. As dis-cussed above, Perfect 10 has not allegedany ‘‘specific acts’’ intended to encourageor induce infringement. And moreover,Defendants are distinguishable under theAmazon.com test because, unlike Google,infringing material is not ‘‘available using[their] system’’ of payment processing.Id. That system does not ‘‘facilitate accessto websites,’’ id.; infringers do not use itto copy, alter, distribute or display infring-ing material; and consumers do not use itto locate, view or download the infringingimages. Rather, all parties involved sim-ply use Defendants’ system to processpayments for that infringing material.

Finally, we must take as true the allega-tions that Defendants lend their namesand logos to the offending websites andcontinue to allow their cards to be used topurchase infringing images despite actualknowledge of the infringement—and per-haps even bending their association rulesto do so. But we do not and need not, onthis factual basis, take as true that Defen-dants ‘‘induce’’ consumers to buy piratedcontent with their cards. ‘‘Inducement’’ isa legal determination, and dismissal maynot be avoided by characterizing a legaldetermination as a factual one. We mustdetermine whether the facts as pled consti-tute a ‘‘clear expression’’ of a specific in-tent to foster infringement, and, for thereasons above noted, we hold that they donot.

2. Vicarious Copyright Infringement

[7, 8] Vicarious infringement is a con-cept related to, but distinct from, contribu-tory infringement. Whereas contributoryinfringement is based on tort-law princi-

ples of enterprise liability and imputedintent, vicarious infringement’s roots lie inthe agency principles of respondeat superi-or. See Fonovisa, 76 F.3d at 261–62. Tostate a claim for vicarious copyright in-fringement, a plaintiff must allege that thedefendant has (1) the right and ability tosupervise 13 the infringing conduct and (2)a direct financial interest in the infringingactivity. Ellison, 357 F.3d at 1078; Nap-ster, 239 F.3d at 1022 (citations omitted).The Supreme Court has recently offered(in dictum) an alternate formulation of thetest: ‘‘One TTT infringes vicariously byprofiting from direct infringement whiledeclining to exercise a right to stop orlimit it.’’ Grokster, 545 U.S. at 930, 125S.Ct. 2764 (internal citations omitted).Perfect 10 alleges that Defendants havethe right and ability to control the contentof the infringing websites by refusing toprocess credit card payments to the web-sites, enforcing their own rules and regula-tions, or both. We hold that Defendants’conduct alleged in Perfect 10’s firstamended complaint fails to state a claimfor vicarious copyright infringement.

a. Right and Ability to Supervisethe Infringing Activity

[9] In order to join a Defendant’s pay-ment network, merchants and memberbanks must agree to follow that Defen-dant’s rules and regulations. These rules,among other things, prohibit memberbanks from providing services to mer-chants engaging in certain illegal activitiesand require the members and memberbanks to investigate merchants suspectedof engaging in such illegal activity and toterminate their participation in the pay-ment network if certain illegal activity is

13. Fonovisa essentially viewed ‘‘supervision’’in this context in terms of the swap meetoperator’s ability to control the activities ofthe vendors, 76 F.3d at 262, and Napster

essentially viewed it in terms of Napster’sability to police activities of its users, 239F.3d at 1023.


found. Perfect 10 has alleged that certainwebsites are infringing Perfect 10’s copy-rights and that Perfect 10 sent notices ofthis alleged infringement to Defendants.Accordingly, Perfect 10 has adequatelypled that (1) infringement of Perfect 10’scopyrights was occurring, (2) Defendantswere aware of the infringement, and (3) onthis basis, Defendants could have stoppedprocessing credit card payments to theinfringing websites. These allegations arenot, however, sufficient to establish vicari-ous liability because even with all reason-able inferences drawn in Perfect 10’s favor,Perfect 10’s allegations of fact cannot sup-port a finding that Defendants have theright and ability to control the infringingactivity.

In reasoning closely analogous to thepresent case, the Amazon.com court heldthat Google was not vicariously liable forthird-party infringement that its searchengine facilitates. In so holding, the courtfound that Google’s ability to control itsown index, search results, and webpagesdoes not give Google the right to controlthe infringing acts of third parties eventhough that ability would allow Google toaffect those infringing acts to some degree.Amazon.com, 487 F.3d at 730–32. More-over, and even more importantly, the Am-azon.com court rejected a vicarious liabili-ty claim based on Google’s policies withsponsored advertisers, which state that itreserves ‘‘the right to monitor and termi-nate partnerships with entities that violateothers’ copyright[s].’’ Id. at 730 (altera-tion in original). The court found that

Google’s right to terminate an AdSensepartnership does not give Google theright to stop direct infringement bythird-party websites. An infringingthird-party website can continue to re-produce, display, and distribute its in-fringing copies of Perfect 10 images af-ter its participation in the AdSenseprogram has ended.

Id. This reasoning is equally applicable tothe Defendants in this case. Just likeGoogle, Defendants could likely take cer-tain steps that may have the indirect effectof reducing infringing activity on the In-ternet at large. However, neither Googlenor Defendants has any ability to directlycontrol that activity, and the mere abilityto withdraw a financial ‘‘carrot’’ does notcreate the ‘‘stick’’ of ‘‘right and ability tocontrol’’ that vicarious infringement re-quires. A finding of vicarious liabilityhere, under the theories advocated by thedissent, would also require a finding thatGoogle is vicariously liable for infringe-ment—a conflict we need not create, andradical step we do not take.

Perfect 10 argues that this court’s deci-sion in Napster compels a contrary result.The Napster court found a likelihood ofvicarious liability because Napster ‘‘hadthe right and ability to police its systemand failed to exercise that right to preventthe exchange of copyrighted material.’’239 F.3d at 1023. The Napster programcreated a forum for the exchange of digitalmusic files and the program administra-tors had the ability to block certain usersfrom accessing that forum to upload ordownload such files. As pled by Perfect10, Defendants also provide a system thatallows the business of infringement forprofit to operate on a larger scale than itotherwise might, and Defendants have theability to deny users access to that pay-ment system.

This argument fails. The Napster pro-gram’s involvement with—and hence its‘‘policing’’ power over—the infringementwas much more intimate and directly in-tertwined with it than Defendants’ pay-ment systems are. Napster providedusers with the tools to enable the easyreproduction and distribution of the actualinfringing content and to readily search


out and identify infringing material. De-fendants’ payment systems do not. Nap-ster also had the right and ability to blockuser access to its program and therebydeprive particular users of access to theirforum and use of their location and distri-bution tools. Defendants can block accessto their payment system, but they cannotthemselves block access to the Internet, toany particular websites, or to search en-gines enabling the location of such web-sites. Defendants are involved with thepayment resulting from violations of thedistribution right, but have no direct rolein the actual reproduction, alteration, ordistribution of the infringing images.14

They cannot take away the tools the of-fending websites use to reproduce, alter,and distribute the infringing images overthe Internet. They can only take awaythe means the websites currently use tosell them.15

[10] Perfect 10 offers two counter-ar-guments. Perfect 10 first claims that De-fendants’ rules and regulations permitthem to require member merchants to

cease illegal activity—presumably includ-ing copyright infringement—as a conditionto their continuing right to receive creditcard payments from the relevant Defen-dant entities. Perfect 10 argues thatthese contractual terms effectively giveDefendants contractual control over thecontent of their merchants’ websites, andthat contractual control over content issufficient to establish the ‘‘right and abili-ty’’ to control that content for purposes ofvicarious liability. In the sense that eco-nomic considerations can influence behav-ior, these contractual rules and regulationsdo give Defendants some measure of con-trol over the offending websites since it isreasonable to believe that fear of losingaccess to credit card payment processingservices would be a sufficient incentive forat least some website operators to complywith a content-based suggestion from De-fendants. But the ability to exert financialpressure does not give Defendants theright or ability to control the actual in-fringing activity at issue in this case. De-fendants have no absolute right 16 to stopthat activity—they cannot stop websites

14. The same analysis of Defendants’ role inany violation of the distribution right under17 U.S.C. § 106(3), discussed in note 11, su-pra, is equally applicable here. While theNapster program allowed its operators toblock users from violation of the distributionright, Defendants’ ‘‘policing’’ power is limitedto refusing to process payments resultingfrom such violations and does not extend todirectly stopping the violations themselves.

15. The conclusion that the Defendants oper-ate outside the scope of the Napster rule isfurther bolstered by consideration—though aspersuasive authority only—of this court’sopinion in Metro–Goldwyn–Mayer Studios,Inc. v. Grokster Ltd., 380 F.3d 1154 (9th Cir.2004), which the Supreme Court vacated onother grounds, 545 U.S. 913, 125 S.Ct. 2764,162 L.Ed.2d 781 (2005). In Grokster, wefound the defendants not vicariously liable inpart because they could not block individualusers or remove copyrighted material fromthe network. Id. at 1165. Similarly, because

none of the infringing images resides on orpasses through present Defendants’ own sys-tems or any systems over which Defendantsexercise direct control, Defendants have noability to actually remove infringing materialfrom the Internet or directly block its distri-bution. This distinguishes credit card compa-nies from Napster, which could block accessto the tools needed for the easy reproductionand distribution of the actual infringing con-tent.

16. We do not, as the dissent suggests, holdthat an absolute right to stop the infringe-ment is a prerequisite for vicarious liability.Dissent at 818–19. Rather, we consider theDefendants’ inability to directly control theactual infringing activities of third-party web-sites—reproduction, alteration, display, anddistribution over the Internet, not over Defen-dants’ payment systems—as evidence thatthey, much like Google, lack the right andability to control those activities.


from reproducing, altering, or distributinginfringing images. Rather, the credit cardcompanies are analogous to Google, whichwe held was not liable for vicarious copy-right infringement even though search en-gines could effectively cause a website todisappear by removing it from their searchresults, and reserve the right to do so.Like Google, the credit card companies‘‘cannot stop any of the third-party web-sites from reproducing, displaying, anddistributing unauthorized copies of Perfect10’s images because that infringing con-duct takes place on the third-party web-sites.’’ Amazon.com, 487 F.3d at 731.Defendants can only refuse to processcredit card payments to the offending mer-chant within their payment network, orthey can threaten to do so if the merchantdoes not comply with a request to altercontent. While either option would likelyhave some indirect effect on the infringingactivity, as we discuss at greater length inour analysis of the Grokster ‘‘stop or limit’’standard below, so might any number ofactions by any number of actors. Forvicarious liability to attach, however, thedefendant must have the right and abilityto supervise and control the infringement,

not just affect it, and Defendants do nothave this right or ability.

Perfect 10 relies heavily on the reason-ing of Fonovisa and Napster to supportthis argument, but that reliance is mis-placed. The swap meet operator in Fonovi-sa and the software operator in Napsterboth had the right to remove individualinfringers from the very place the infringe-ment was happening. Defendants, like thedefendants in Amazon.com, have no suchright. As already discussed, Defendantscannot take away the software the offend-ing websites use to copy, alter, and distrib-ute the infringing images, cannot removethose websites from the Internet, and can-not themselves block the distribution ofthose images over the Internet. Defen-dants can refuse to process credit cardpayments for those images, but while thisrefusal would reduce the number of thosesales, that reduction is the result of indi-rect economic pressure rather than an af-firmative exercise of contractual rights.17

Perfect 10 also argues that were infring-ing websites barred from accepting theDefendants’ credit cards, it would be im-possible for an online website selling adultimages to compete and operate at a prof-it.18 While we must take this allegation as

17. We do not hold, as the dissent suggests,that the ability to exert financial pressure iscategorically insufficient to establish sufficientcontrol for vicarious liability. We recognizethat financial pressure is often very powerful,but it is precisely for this reason that wehesitate to expand the law of vicarious liabili-ty to encompass the sort of financial pressureDefendants may exert. The dissent believesthat the gravamen of ‘‘right and ability tocontrol’’ is the ‘‘practical ability’’ to limit in-fringement. Dissent at 818–19. But if thiswere true, despite the dissent’s protestationsto the contrary, there are many providers ofessential services who could limit infringe-ment by refusing to offer those services. If‘‘practical ability’’ is the test, it does not mat-ter if software operators, network technicians,or even utility companies do not have a con-tractual right to affect the websites’ content.

It is an article of faith of the free market that,subject to certain limited exceptions, one canrefuse to deal with anyone for any reason,and by refusing to deal with the offendingwebsites, these providers could limit infringe-ment.

18. Specifically, Perfect 10 defines ‘‘StolenContent Websites’’ as ‘‘websites TTT that rou-tinely offer for sale to the public stolen [im-ages],’’ First Am. Compl. at 2, ¶ 6 (emphasisadded), and alleges that ‘‘Stolen ContentWebsites cannot exist without the knowledgeand direct participation of the financial insti-tutions that process the credit card transac-tions for such unlawful material,’’ id. at 2, ¶ 7.We do acknowledge that at this proceduralstage, Perfect 10 is entitled to all reasonableinferences, but we understand this to be afactual allegation that the ‘‘Stolen Content


true, it still fails to state a claim because itconflates the power to stop profiteeringwith the right and ability to control in-fringement. Perfect 10’s allegations donot establish that Defendants have the au-thority to prevent theft or alteration of thecopyrighted images, remove infringing ma-terial from these websites or prevent itsdistribution over the Internet. Rather,they merely state that this infringing activ-ity could not be profitable without accessto Defendants’ credit card payment sys-tems. The alleged infringement does notturn on the payment; it turns on the re-production, alteration and distribution ofthe images, which Defendants do not do,and which occurs over networks Defen-dants do not control.

The Supreme Court’s recent decision inGrokster does not undermine the validityof this distinction. As we held in Ama-zon.com, 487 F.3d at 728–31, Grokster doesnot stand for the proposition that justbecause the services provided by a compa-ny help an infringing enterprise generaterevenue, that company is necessarily vicar-iously liable for that infringement. Nu-merous services are required for the thirdparty infringers referred to by Perfect 10to operate. In addition to the necessity ofcreating and maintaining a website, nu-merous hardware manufacturers must pro-duce the computer on which the websitephysically sits; a software engineer mustcreate the program that copies and altersthe stolen images; technical support com-panies must fix any hardware and softwareproblems; utility companies must providethe electricity that makes all these differ-ent related operations run, etc. All theseservices are essential to make the busi-nesses described viable, they all profit tosome degree from those businesses, and

by withholding their services, they couldimpair—perhaps even destroy—the com-mercial viability of those business. Butthat does not mean, and Grokster by nomeans holds, that they are all potentiallyliable as vicarious infringers. Eventhough they have the ‘‘right’’ to refusetheir services, and hence the literal powerto ‘‘stop or limit’’ the infringement, they,like Defendants, do not exercise sufficientcontrol over the actual infringing activityfor vicarious liability to attach.

b. Obvious and Direct FinancialInterest in the Infringing

Activity

Because Perfect 10 has failed to showthat Defendants have the right and abilityto control the alleged infringing conduct, ithas not pled a viable claim of vicariousliability. Accordingly, we need not reachthe issue of direct financial interest.

B. Secondary Liability for TrademarkInfringement

[11] The tests for secondary trade-mark infringement are even more difficultto satisfy than those required to find sec-ondary copyright infringement. See SonyCorp. v. Universal City Studios, 464 U.S.417, 439 n. 19, 104 S.Ct. 774, 78 L.Ed.2d574 (1984); Fonovisa, 76 F.3d at 265 (not-ing that ‘‘trademark infringement liabilityis more narrowly circumscribed than copy-right infringement’’). While the tests forsuch infringement are somewhat differentin the trademark context, Perfect 10’s fac-tual allegations in support of these claimsare essentially identical to those alleged inPerfect 10’s copyright claims, and they failto state a claim for similar reasons.

Websites’’ could not continue to exist as web-sites offering images for sale online shoulddefendants withdraw their services, not an

allegation that the websites would completelyvanish or that infringement by these sites inall its forms would necessarily cease.


1. Contributory Trademark Infringe-ment

[12, 13] To be liable for contributorytrademark infringement, a defendant musthave (1) ‘‘intentionally induced’’ the pri-mary infringer to infringe, or (2) continuedto supply an infringing product to an in-fringer with knowledge that the infringeris mislabeling the particular product sup-plied. Inwood Labs., Inc. v. Ives Labs.,Inc., 456 U.S. 844, 855, 102 S.Ct. 2182, 72L.Ed.2d 606 (1982). When the allegeddirect infringer supplies a service ratherthan a product, under the second prong ofthis test, the court must ‘‘consider theextent of control exercised by the defen-dant over the third party’s means of in-fringement.’’ Lockheed Martin Corp. v.Network Solutions, Inc., 194 F.3d 980, 984(9th Cir.1999). For liability to attach,there must be ‘‘[d]irect control and moni-toring of the instrumentality used by athird party to infringe the plaintiff’smark.’’ Id.

[14] Perfect 10 has failed to plead aviable claim under either prong of InwoodLabs—and, by extension, Lockheed Mar-tin. First, it has not pled facts showingthat Defendants ‘‘intentionally induced’’ in-fringement of Perfect 10’s mark. Perfect10 has alleged that Defendants are provid-ing critical support to websites that areusing the PERFECT 10 mark in a mannerthat is likely to cause the public to believethat they are authorized by Perfect 10.Its factual allegations in support of thisclaim are identical to those it made insupport of its copyright claims. Theseallegations, however, cite no affirmativeacts by Defendants suggesting that thirdparties infringe Perfect 10’s mark, muchless induce them to do so.

[15] Second, Perfect 10 has failed toallege facts sufficient to show ‘‘[d]irect con-trol and monitoring of the instrumentalityused by a third party to infringe the plain-

tiff’s mark.’’ Lockheed Martin, 194 F.3dat 984. Perfect 10 claims that the ‘‘prod-uct’’ or ‘‘instrumentality’’ at issue here isthe credit card payment network throughwhich Defendants process payments forinfringing material. Appellant’s OpeningBrief at 39. As discussed at length above,this network is not the instrument used toinfringe Perfect 10’s trademarks; that in-fringement occurs without any involvementof Defendants and their payment systems.Perfect 10 has not alleged that Defendantshave the power to remove infringing mate-rial from these websites or directly stoptheir distribution over the Internet. Atmost, Perfect 10 alleges that Defendantscan choose to stop processing payments tothese websites, and that this refusal mighthave the practical effect of stopping orreducing the infringing activity. This,without more, does not constitute ‘‘directcontrol.’’ See Lockheed Martin, 194 F.3dat 985 (‘‘While the landlord of a flea mar-ket might reasonably be expected to moni-tor the merchandise sold on his premises,[defendant] NSI cannot reasonably be ex-pected to monitor the Internet.’’) (citationomitted).

2. Vicarious Trademark Infringe-ment

[16] Vicarious liability for trademarkinfringement requires ‘‘a finding that thedefendant and the infringer have an appar-ent or actual partnership, have authorityto bind one another in transactions withthird parties or exercise joint ownership orcontrol over the infringing product.’’Hard Rock Café Licensing Corp. v. Con-cession Servs., Inc., 955 F.2d 1143, 1150(7th Cir.1992) (internal quotations omit-ted), followed by Symantec Corp. v. CDMicro, Inc., 286 F.Supp.2d 1265, 1275(D.Or.2003).

[17] Perfect 10 argues that Defendantsare liable as follows: ‘‘Defendants and the


Stolen Content Websites are in a symbioticfinancial partnership pursuant to which thewebsites operate their businesses accord-ing to defendants’ rules and regulationsand defendants share the profits, transac-tion by transaction.’’ Appellant’s OpeningBrief at 40. For the same reasons thatthis relationship does not establish ‘‘rightand ability to control’’ for copyright pur-poses, neither does it establish such a‘‘symbiotic’’ relationship or ‘‘joint owner-ship or control’’ for trademark purposes.Defendants process payments to thesewebsites and collect their usual processingfees, nothing more.

Perfect 10 further argues that ‘‘Defen-dants’ acceptance of a charge binds theStolen Content Website to provide the in-fringing images to third parties.’’ Appel-lant’s Opening Brief at 40. Even if legallyrelevant, Perfect 10’s allegation is legallyincorrect. It is the websites’ contractswith the consumers that bind the websitesto provide the infringing images, not thewebsites’ relationship with Defendants.19

The websites’ contracts with Defendantsare merely a means of settling the result-ing debits and credits among the websitesand the relevant consumers. We hold thatPerfect 10 fails to state a claim for vicari-ous trademark infringement.

CALIFORNIA STATUTORY ANDCOMMON LAW CLAIMS

In addition to its federal copyright andtrademark claims, Perfect 10 pled causesof action for unfair competition, false ad-vertising, violation of the right of publicity,libel, and intentional interference with eco-nomic relations. We hold that the district

court properly dismissed all these claimswith prejudice.

A. California State Law Claims of Un-fair Competition hand False Adver-tising

[18] Defendants do not dispute Perfect10’s claims that the websites themselvesare potentially violating California stateand common law prohibiting unfair compe-tition and false advertising. See Cal. Bus.& Prof.Code §§ 17200, et seq., and 17500,et seq. Defendants do, however, arguethat Emery v. Visa International ServiceAssociation, 95 Cal.App.4th 952, 116 Cal.Rptr.2d 25 (2002), precludes liability forDefendants in this case, both under sec-ondary liability and aiding and abettingtheories. Defendants are correct on bothcounts.

In Emery, a California appellate courtaffirmed a grant of summary judgment infavor of Visa, finding that Visa did notexercise the requisite control over mer-chants marketing foreign lottery tickets toimpose secondary liability under thestate’s unfair competition or false advertis-ing laws. Id. at 959–964, 116 Cal.Rptr.2d25. Emery found that an ‘‘unfair prac-tices claim under section 17200 cannot bepredicated on vicarious liabilityTTTT A de-fendant’s liability must be based on hispersonal participation in the unlawfulpractices and unbridled control over thepractices that are found to violate section17200 or 17500.’’ Id. at 960, 116 Cal.Rptr.2d 25 (internal citations omitted).Because ‘‘Visa itself played no part in pre-paring or sending any ‘statement’ thatmight be construed as untrue or mislead-ing under the unfair business practices

19. The dissent claims that no contractual re-lationship arises between the infringers andconsumers until Defendants process a pay-ment. Dissent at 822–23. Even if true as afactual and legal matter—and given the ab-

sence of any citation, it is difficult to knowwhether this is true—this results from a deci-sion of the websites to delay formation of therelationship, not from any requirement Defen-dants impose on the transaction.


statutes,’’ it could not be liable for unfaircompetition. Id. at 964, 116 Cal.Rptr.2d25. The false advertising claim also nec-essarily failed because ‘‘even if Visa al-lowed the merchants to use its logo, tradename, or trademark, it would not be liablefor false advertising. There is no duty toinvestigate the truth of statements madeby others.’’ Id. (citations omitted). Em-ery is dispositive of Perfect 10’s claimsthat the Defendants are secondarily liableunder California unfair competition andfalse advertising laws and the districtcourt properly dismissed them.20

[19] In an attempt to avoid the impactof Emery, Perfect 10 argues on appealthat it alleged aiding and abetting theoriesof liability in its complaints, and further,that the district court improperly dis-missed these civil claims under a criminalstandard of aiding and abetting. Perfect10 fails to establish a viable claim on thesetheories as well. The only authority of-fered by Perfect 10 in support of suchliability is an opinion which is now uncita-ble in California: Schulz v. Neovi DataCorporation, 28 Cal.Rptr.3d 46 (Cal.App.4th Dist.2005), superceded by 32 Cal.Rptr.3d 758, 117 P.3d 475 (Cal.2005), causetransferred by 56 Cal.Rptr.3d 471, 154P.3d 998 (Cal.2007), transferred to, 152Cal.App.4th 86, 60 Cal.Rptr.3d 810 (4thDist. Jun 15, 2007).

Furthermore, even under the standardsannounced in the superceding Schulz opin-ion, Defendants would not be liable. TheSchulz court found a credit card companypotentially liable for its role in facilitatingan illegal online lottery because that com-pany ‘‘went far beyond merely processing

credit cards.’’ 152 Cal.App.4th at 95, 60Cal.Rptr.3d 810. In support, the court cit-ed specific statements from a companyrepresentative in which he ‘‘personally as-sured’’ an agent of the website that thedefendant company ‘‘did not have anyproblem with the operation of the [illegal]lottery site’’ and had a ‘‘stronger stomach’’than other payment processors. Id. Per-fect 10 alleges no similar conduct here—Defendants merely process credit cardpayments.

B. Aiding and Abetting the Websites’Violations of Perfect 10’s Right ofPublicity

[20] Perfect 10 alleges that Defendantsaided and abetted the websites’ violationsof Perfect 10’s rights of publicity, acquiredby assignment from its models, in violationof Cal. Civil Code § 3344 and the commonlaw right of publicity. This aiding andabetting claim fails for the same reasonsas the aiding and abetting claims underunfair competition and false advertising.Even if such liability is possible underCalifornia law—a proposition for whichPerfect 10 has provided no clear authori-ty—Defendants lack sufficient control orpersonal involvement in the infringing ac-tivities to be so liable. See Schulz, 152Cal.App.4th at 93–94, 60 Cal.Rptr.3d 810;Emery, 95 Cal.App.4th at 962–63, 116 Cal.Rptr.2d 25.

C. Libel and Intentional Interferencewith Prospective Economic Advan-tage

[21] The district court dismissed Per-fect 10’s claims of libel and intentional

20. The dissent argues that Emery does notpreclude Perfect 10’s claims because the onlydefendant in Emery was Visa InternationalService Association, whereas Perfect 10 hasalso sued the member merchant banks whoissue cards and process payments from mer-chants. Dissent at 822–23. This distinctionis only relevant if the activities of the member

banks constitute personal participation in theinfringing activity, and for all the reasonsdiscussed above, those banks are not person-ally involved in the reproduction, alteration,or distribution of the infringing images.Rather, they merely process payments relatedto those activities.


interference with prospective economic ad-vantage with prejudice on multiplegrounds. We affirm on the ground thatboth are time-barred. Under Californialaw, a libel claim must be filed within oneyear of publication of the allegedly libelousstatement, Cal. Civ. Proc. § 340(c), and anintentional interference claim must be filedwithin two years of the underlying harmfulact, Cal. Civ. Proc. § 339. Perfect 10claims the same underlying wrongful actas the basis for both claims: its placementon the industry ‘‘black list’’ in the Springof 2001. However, Perfect 10 failed to filesuit until January 2004—well beyond thestatute of limitations applicable to eachclaim—and has failed to show any possibleexception under either statute. Thoseclaims are time-barred.

CONCLUSION

We decline to create any of the radicalnew theories of liability advocated by Per-fect 10 and the dissent and we affirm thedistrict court’s dismissal with prejudice ofall causes of action in Perfect 10’s com-plaint for failure to state a claim uponwhich relief can be granted.

AFFIRMED.

KOZINSKI, Circuit Judge, dissentingfor the most part: 1

Federal law gives copyright owners theexclusive right to ‘‘distribute copies [oftheir works] TTT to the public by sale.’’ 17

U.S.C. § 106(3). Plaintiff alleges that cer-tain third parties it refers to as the ‘‘StolenContent Websites’’ unlawfully copy its pro-tected images and sell them to the public,using defendants’ payment systems as fi-nancial intermediaries. According toplaintiff, the Stolen Content Websites‘‘maintain no physical presence in theUnited States in order to evade criminaland civil liability for their illegal conduct.’’First Am. Compl. at 8 ¶ 26. Plaintiff alsoclaims that ‘‘Defendants do not enforcetheir own rules against [the] Stolen Con-tent Websites because Defendants do notwant to lose the substantial revenues andprofits they receive from the websites.’’Id. at 10 ¶ 35. Plaintiff has repeatedlynotified defendants that they are abettingthe sale of stolen merchandise by ‘‘know-ingly providing crucial transactional sup-port services for the sale of millions ofstolen photos and film clips worth billionsof dollars,’’ id. at 1 ¶ 5, but to no avail.Frustrated in its effort to protect therights Congress has given it, plaintiff turnsto the federal courts for redress. Weshould not slam the courthouse door in itsface.

Accepting the truth of plaintiff’s allega-tions, as we must on a motion to dismiss,the credit cards 2 are easily liable for indi-rect copyright infringement: They know-ingly provide a financial bridge betweenbuyers and sellers of pirated works, en-abling them to consummate infringing

1. I join part C of the ‘‘California Statutoryand Common Law Claims’’ section of theopinion, dealing with plaintiff’s libel and pro-spective economic advantage claims.

2. Throughout this dissent, I refer to defen-dants collectively as credit card companies orcredit cards. In so doing, I am adopting thesame simplifying assumptions as the majority.I am aware that Visa and MasterCard don’tdeal directly with merchants; rather, mer-chants obtain credit card accounts frombanks, which are in turn authorized by Visa

or MasterCard to use their respective pay-ment systems. Some of the other defendantsare involved in clearing these transactions.For a description of how the system works,see Emery v. Visa Int’l Serv. Ass’n, 95 Cal.App.4th 952, 956, 116 Cal.Rptr.2d 25 (2002).It may well be that some of the defendantswill be absolved of liability because they haveno direct contact with merchants or consum-ers, but that is a matter to be sorted out afterdiscovery.


transactions, while making a profit on ev-ery sale. If such active participation ininfringing conduct does not amount to indi-rect infringement, it’s hard to imaginewhat would.3 By straining to absolve de-fendants of liability, the majority leavesour law in disarray.

Contributory Infringement

We have long held that a defendant isliable for contributory infringement if it‘‘materially contributes to the infringingconduct.’’ A & M Records, Inc. v. Nap-ster, Inc., 239 F.3d 1004, 1019 (9th Cir.2001) (internal quotations omitted) (citingGershwin Publ’g Corp. v. Columbia Art-ists Mgmt., Inc., 443 F.2d 1159, 1162 (2dCir.1971)). Our recent opinion in Perfect10, Inc. v. Amazon.com, Inc., 487 F.3d701 (9th Cir.2007), canvasses the caselawin this area and concludes that Google‘‘could be held contributorily liable if ithad knowledge that infringing Perfect 10images were available using its search en-gine, could take simple measures to pre-vent further damage to Perfect 10’s copy-righted works, and failed to take suchsteps.’’ Amazon, 487 F.3d at 729. Sub-stitute ‘‘payment systems’’ for ‘‘search en-gine’’ in this sentence, and it describesdefendants here: If a consumer wishes tobuy an infringing image from one of the

Stolen Content Websites, he can do so byusing Visa or MasterCard, just as he canuse Google to find the infringing imagesin the first place. My colleagues engagein wishful thinking when they claim that‘‘Google’s search engine itself assists inthe distribution of infringing content toInternet users, while Defendants’ paymentsystems do not’’ and that ‘‘[h]elping usersto locate an image might substantially as-sist users to download infringing images,but processing payments does not.’’ Maj.op. at 797, 797.4

The majority struggles to distinguishAmazon by positing an ‘‘additional step inthe causal chain’’ between defendants’ ac-tivities and the infringing conduct. Id. at797. According to the majority, ‘‘Googlemay materially contribute to infringementby making it fast and easy for third partiesto locate and distribute infringing material,whereas Defendants make it easier forinfringement to be profitable, which tendsto increase financial incentives to infringe,which in turn tends to increase infringe-ment.’’ Id. The majority is mistaken;there is no ‘‘additional step.’’ Defendantsparticip

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