July 3, 2007 / 9:31 PM / 12 years ago

Credit card processors shielded in Web copyright suit

SAN FRANCISCO (Reuters) - Companies processing credit card payments for Web sites featuring pirated content are not liable for copyright violations, a U.S. appeals court panel ruled on Tuesday.

The ruling by the three-judge panel of the San Francisco-based U.S. 9th Circuit Court of Appeals affirms a lower court decision against Perfect 10 Inc. in its dispute with Visa International Service Association, MasterCard International Inc. and affiliated banks.

Perfect 10, which operates a Web site featuring images of nude models, has also tangled in court with Google Inc., claiming the Web search leader violates its copyrights by linking Internet users to sites that republish its images without authorization.

A 9th Circuit Court panel in May allowed Google to display images of Perfect 10 models, but said the Internet giant may be liable for linking pirated content. Beverly Hills, California-based Perfect 10 asked the court to reconsider its lawsuit against Google and will ask the court to reconsider its challenge against credit card processors.

Norm Zada, president of Perfect 10, said the court majority’s opinion in favor of the companies would encourage theft of intellectual property over the Internet by giving thieves a means to profit.

“On the Internet, it is easy to steal and almost impossible to defend against that,” Zada told Reuters in a telephone interview. “How much business do I lose? There are least 70 sites I subscribe to that sell every picture that I own.”

Perfect 10 should focus on such Web sites and not on providers of business services, said Andrew Bridges, the lawyer who defended MasterCard.

“The plaintiffs want to create an economic blockade of anybody accused of infringement,” Bridges said.

Writing for the majority, Judge Milan Smith Jr. said credit card processors, unlike Web search providers, do not direct online traffic. “They in no way assist or enable Internet users to locate infringing material, and they do not distribute it,” Smith wrote.

“Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10’s images over the Internet,” Smith wrote.

Judge Alex Kozinski dissented, arguing credit card companies violate copyrights by providing a “financial bridge” between buyer and seller on Web sites stocked with pirated content. Sites with sexual content especially rely on credit card data to determine if visitors and subscribers are adults.

“If cards don’t process payment, pirates don’t deliver booty. The credit cards, in fact, control distribution of the infringing material,” Kozinski said. “It does not serve the interests of a free market, or a free society, to abet marauders who pilfer the property of law-abiding, tax-paying rights holders, and who turn consumers into recipients of stolen property.”

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