## Facts

- Perfect 10, Inc. published a magazine and operated a subscription website featuring copyrighted photographs and claimed rights in its “PERFECT 10” trademark and related publicity rights.
- Perfect 10 alleged that third-party websites copied, altered, displayed, and sold Perfect 10’s images online without authorization.
- Rather than suing the websites, Perfect 10 sued Visa, MasterCard, and related payment-processing entities that facilitated credit-card transactions for those websites and earned fees on the transactions.
- Perfect 10 alleged it sent defendants repeated notices identifying infringing websites and stating that consumers used defendants’ cards to buy infringing images; defendants allegedly did not act on the notices.
- Perfect 10 sought to impose secondary liability under copyright and trademark law, and also asserted California statutory and common-law claims based on the same alleged conduct.

## Issues

1. Whether payment networks and related entities can be liable for contributory copyright infringement based on knowledge of infringement and continued payment processing for infringing merchants.
2. Whether the complaint stated claims for inducement of copyright infringement based on defendants’ provision of payment services.
3. Whether defendants could be vicariously liable for copyright infringement based on transaction fees and an alleged ability to stop servicing infringing merchants.
4. Whether analogous theories supported secondary trademark infringement liability.
5. Whether the same allegations stated claims under California unfair competition, false advertising, right of publicity, and related state-law theories.

## Decision

- The Ninth Circuit affirmed dismissal under Rule 12(b)(6) of all claims with prejudice.
- Contributory copyright infringement was not plausibly alleged because payment processing did not materially contribute to the infringing acts of reproduction, display, or distribution.
- Inducement was not plausibly alleged because the complaint did not allege affirmative steps taken to encourage infringement.
- Vicarious copyright liability was not plausibly alleged because defendants lacked the right and ability to control the infringing activity itself, even if they could cut off payment services.
- Secondary trademark infringement was not plausibly alleged because defendants did not directly control or participate in the infringing use of marks.
- The state-law claims failed for the same reason: the allegations did not show the required level of participation or control over the unlawful conduct.

## Legal Principles

- Contributory copyright infringement requires knowledge of infringement plus material contribution to, or inducement of, the infringement; material contribution requires conduct that causes or significantly facilitates the infringing acts.
- Making infringement more profitable, without a sufficiently direct connection to the infringing conduct, is not material contribution.
- Inducement liability requires affirmative acts aimed at fostering infringement; providing a lawful service, without promotion or encouragement of infringement, is insufficient.
- Vicarious copyright liability requires both a direct financial benefit and the right and ability to supervise the infringing activity; the ability to withhold services affecting profitability does not alone establish control over infringement.
- Secondary trademark liability similarly requires direct control over, or active participation in, the infringing conduct; routine provision of payment services does not meet that standard.

## Conclusion

The court held that credit-card networks and related financial intermediaries are not secondarily liable for copyright or trademark infringement merely because they knowingly process payments for infringing websites, absent allegations showing material contribution, affirmative inducement, or a right and ability to control the infringing activity itself.


Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, 494 F.3d 788 (9th Cir. 2007)