Yesterday, the Ninth Circuit issued its opinion in Perfect 10 v. Visa.  (You may remember the Perfect 10 v. Amazon opinion of a couple of months ago, also from the Ninth Circuit - Eric Goldman wrote about it here.)

Perfect 10 operates a subscription site that “feature[s] tasteful copyrighted images of the world’s most beautiful natural models.”  It sued Google and Amazon claiming that the display of thumbnail images in response to search queries constituted copyright infringement, and it sued Visa and MasterCard for furnishing payment services that forwarded the business of allegedly infringing sites - many of which operate offshore.

Although both of these decisions are facially "good" for these intermediaries -- none of them are found directly liable for copyright infringement, the search engines aren't necessarily secondarily liable for copyright infringement, and the functions of the credit card actors are found to be sufficiently different from those of the search engines that the secondary liability claim as to them is dismissed -- they both have strange and troubling vibrations.  They both suggest that infringement liability can exist everywhere, in every part of the chain of relationships between end-users and infringement, as long as the right kind of "knowledge" exists.

Copyright plaintiffs have long wanted to use intermediaries like search engines and credit card companies as easy-to-pound levers to solve the plaintiffs' perceived online problems.  The actual infringers are small and agile, and may not be reachable by service of process in the U.S.  Plus, you don't make yourself popular by suing grandmothers, and there is always the risk that an innocent, young or old, will be in the pile of end-users that you go after.  So it's a very popular move to go after the big actors providing multiple-use platforms to end-users.  They have money, corporate ties, and physical offices - and when those offices are in the U.S. it's easy to serve them with process.

The Amazon case suggests that a search engine “could be held contributorily liable if it had knowledge that infringing Perfect 10 images were available using its search engine, could take simple measures to prevent further damage to Perfect 10’s copyrighted works, and failed to take such steps.”  That standard creates quite a cloud for intermediaries.  How much knowledge is required?  A phone call to customer service? A chat session?  How expensive do the fixer-upper measures (taken to "prevent further damage") have to be before they cease to be "simple"?  How much failure is actionable, across what span of time?

The Visa case says that standard is fine for search engines, but tries manfully to distinguish credit card services from search engine facilities.  Judge Kozinski, dissenting, isn't buying the distinctions his colleagues establish:

According to the majority, “Google may materially contribute to infringement by making it fast and easy for third parties to locate and distribute infringing material, whereas Defendants [credit card cos] make it easier for infringement to be profitable, which tends to increase financial incentives to infringe, which in turn tends to increase infringement.” The majority is mistaken; there is no “additional step.” Defendants participate in every credit card sale of pirated images; the images are delivered to the buyer only after defendants approve the transaction and process the payment. This is not just an economic incentive for infringement; it’s an essential step in the infringement process. In any event, I don’t see why it matters whether there is an “additional step.” Materiality turns on how significantly the activity helps infringement, not on whether it’s characterized as one step or two steps removed from it.

The Amazon standard is a swamp, which isn't great news for the internet ecosystem.  Kozinski's reasoning may be persuasive - his point is:  what's the difference between one link in the chain of connection and another?  Who cares when and by whom an unauthorized copy is made?  He sees copyright law as economic policy; we've decided to protect owners of copyright, and that means protecting them against the depredations of everyone involved in the infringement, whether they're duplicating files or just handing over the cash.

Because it's a web out there, and because we've got lots of U.S. actors who depend on protection from liability in order to operate massive free multi-purpose platforms that end-users really like, extending the monopoly of copyright to cover every possible intermediary would bring the system to its knees.  Unlimited liability for intermediaries housed in this country could have the effect of driving a great deal of innovation offshore.
 
These are just vibrations - the opinions both go mostly in the "right" direction.  But other shoes, in other circuits, can always drop.

==update:  report that a Belgian court has ruled that an ISP must stop file-sharing on its network.  Thanks to Dirk van der Woude. 

"This is an extremely significant ruling which bears out exactly what we have been saying for the last two years - that the internet's gatekeepers, the ISPs, have a responsibility to help control copyright-infringing traffic on their networks," IFPI Chairman and CEO John Kennedy said.

"The court has confirmed that the ISPs have both a legal responsibility and the technical means to tackle piracy. This is a decision that we hope will set the mould for government policy and for courts in other countries in Europe and around the world," he added.