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Reuters has reported that the 9th Circuit has ruled that Google is allowed to make thumbnails of Perfect 10’s images. The lower court’s ruling was affirmed in part, reversed in part, and remanded.

“We conclude that the significantly transformative nature of Google’s search engine, particularly in light of its public benefit, outweighs Google’s superseding and commercial uses of the thumbnails in this case,” the judge wrote.

The courts have overturned the injunction placed on Google. The text of the decision covers many interesting areas. Although the court considered fair use an affirmative defense,

…a party seeking a preliminary injunction in the copyright context bears the burden of showing its likely success in overcoming a fair use defense is consistent with decisions of the Federal Circuit purporting to apply Ninth Circuit law. See Atari Games Corp. v. Nintendo of Am. Inc., 975 F.2d 832, 837 (Fed. Cir. 1992)

The courts also stated that linking does not infringe on the copyright holder’s right to display, although they note that

Google may facilitate the user’s access to infringing images. However, such assistance raises only contributory liability issues, see Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 929-30 (2005), Napster, 239 F.3d at 1019, and does not constitute direct infringement of the copyright owner’s display right.

The same held true for Google’s cache- Google only copied the text with links, not Perfect 10’s images, and so was not infringing on the display or distribution rights. The court also looks at users’ cache copies:

The copying function performed automatically by a user’s computer to assist in accessing the Internet is a transformative use. Moreover, as noted by the district court, a cache copies no more than is necessary to assist the user in Internet use. It is designed to enhance an individual’s computer use, not to supersede the copyright holders’ exploitation of their works.

Not everything in the decision will please Google- although the court determined that Google was not vicariously liable for infringement, the remanded potion of the case seems to be based on whether or not Google has contributory liability, and has specified guides to determine whether or not they are liable.

… Google 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.

The courts will also need to consider whether Google’s liability is limited under Title II of the DMCA.

Update: Alfred Yen shares some thoughts on the case at madisonian.net.