Perfect 10 v. Google, Inc., et al. (CASE NO. CV 04-9484 AHM (SHx)) is a U.S. court case between an adult men's magazine and the world's leading search engine company, in the district court of the Central District of California. The plaintiff requested a preliminary injunction for Google to stop creating and distributing thumbnails of its images in its Google Image Search service, and for it to stop indexing and linking to sites hosting such images. In early 2006, the court granted the request in part and denied it in part, ruling that the thumbnails were likely to be found infringing but the links were not.
On 16th May 2007, the U.S. 9th Circuit Court of Appeals based in San Francisco reversed the District Court on appeal on its fair use finding. "We conclude that Perfect 10 is unlikely to be able to overcome Google's fair use defense and, accordingly, we vacate the preliminary injunction regarding Google's use of thumbnail images," Judge Ikuta wrote for a three-judge panel. The opinion is captioned Perfect 10, Inc. v. Amazon.com, Inc., CV-05-04753-AHM (9th Cir. May 16, 2007).

Facts
Beginning in May 2001, Perfect 10 (P10) began sending notices to Google informing it of specific links to infringers in its general Web search and requesting their removal. In May 2004, it began sending similar notices for Google's comparatively new image search (first offered in 2003). Google states that it complied with the notices where it could find the infringement and determine that it was in fact an infringement, removing them from Google Search. However, it noted that it was unable to do this in many cases due to deficiencies in the requests.
On November 19, 2004, P10 filed suit against Google asserting various copyright and trademark infringement claims, including direct, contributory, and vicarious copyright infringement claims. After settlement discussions lasting several months, P10 filed for a preliminary injunction for Google to cease linking to and distributing its images.
Later, in February 2006, District Judge A. Howard Matz ruled that "P10 is likely to succeed in proving that Google directly infringes by creating and displaying thumbnail copies of its photographs. P10 is unlikely to succeed in proving that Google can be held secondarily liable", and consequently ordered that P10 and Google jointly propose a wording for a preliminary injunction to halt Google's distribution of thumbnails of P10's works.
Following the district court's decision, both sides cross-appealed to the United States Court of Appeals for the Ninth Circuit. The Appeals court reversed.

Case history
P10's claims of direct infringement were twofold. First, it argued that Google's framing of infringing websites constituted direct infringement by Google itself, and requested that Google be enjoined from so framing websites infringing its content; second, it argued that Google's creation and distribution of thumbnails was direct infringement, and requested that Google be enjoined from creating and distributing thumbnails of its images.

Framing
Google did not dispute that it displayed and distributed protected derivative works of the plaintiff's images. However, it argued that such thumbnails were protected under the copyright doctrine of fair use. Fair use is generally considered as being of four factors, as follows.

Thumbnails
The use was found to be commercial and partially transformative (intended to serve a fundamentally different purpose than the originals). The court found Google's use highly commercial, more so than in Kelly v. Arriba Soft Corporation (which was prevailing precedent), due mainly to its AdSense program, which a number of the infringing sites used. Additionally in distinction to Kelly, the court noted that in 2005 P10 leased the right to distribute reduced-size versions of its images for use on cell phones to Fonestarz Media Limited, putting it in direct competition with Google's thumbnails. Therefore, the court ruled that this factor "weigh[ed] slightly in favor of P10".

Purpose and character of the use.
Creative works are given more protection against fair use than factual works, and unpublished works more than published works. The court rejected Google's argument that the images were uncreative; however, since the works in question were all published, it ruled that this factor too weighed only slightly in favor of P10.

Nature of the copyrighted work.
Citing Kelly, the court stated that "'If the secondary user only copies as much as is necessary for his or her intended use, then this factor will not weigh against him or her.'" The court ruled that since Google could not have served its purpose of allowing identification if it cropped the images, this factor weighed in favor of neither party.

Amount and substantiality of portion used.
This requires considering the effect if the actions were widespread, not solely the effect of the particular user. A transformative work is less likely to have an adverse effect than one which merely supersedes the original. However, as noted above, the plaintiff had begun marketing images for cell phones of comparable quality to Google's images. Consequently, the court ruled that Google's infringement meant "[c]ommonsense dictates that [cell phone] users will be less likely to purchase the downloadable P10 content licensed to Fonestarz", and that this factor weighed against Google.

Effect of the use upon the potential market for or value of the copyrighted work.
On the fair use issue, the court wrote:
The first, second, and fourth fair use factors weigh slightly in favor of P10. The third weighs in neither party's favor. Accordingly, the Court concludes that Google's creation of thumbnails of P10's copyrighted full-size images, and the subsequent display of those thumbnails as Google Image Search results, likely do not fall within the fair use exception. The Court reaches this conclusion despite the enormous public benefit that search engines such as Google provide. Although the Court is reluctant to issue a ruling that might impede the advance of internet technology, and although it is appropriate for courts to consider the immense value to the public of such technologies, existing judicial precedents do not allow such considerations to trump a reasoned analysis of the four fair use factors.
Therefore, the court ruled that P10 was entitled to injunctive relief for Google's use of thumbnails.

Result of the analysis
P10 alleged two distinct forms of secondary infringement: first, that Google committed contributory infringement by encouraging users to visit infringing sites; and second, that it committed vicarious infringement by profiting from infringement. As summarized by MGM v. Grokster, "One infringes contributorily by intentionally inducing or encouraging direct infringement . . . and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. . . ."

Secondary infringement
According to the famous "Betamax case", secondary liability could not be found "based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement" (as paraphrased by MGM v. Grokster). The court ruled that Google did not, in any case, facilitate infringement, essentially because "[infringing] websites existed long before Google Image Search was developed and would continue to exist were Google Image Search shut down". Therefore, the court found that P10 did not demonstrate its likelihood to succeed in a contributory infringement claim, and consequently denied injunctive relief.

Vicarious infringement

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