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Supreme Court Lets Stand Credit Card Web Case

The U.S. Supreme Court on Monday let stand a lower court ruling that credit card companies can't be held liable when cards are used for payment on Web sites selling pirated material.

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WASHINGTON — The U.S. Supreme Court on Monday let stand a lower court ruling that credit card companies can't be held liable when cards are used for payment on Web sites selling pirated material.

The High Court declined to review a case initially filed by Perfect 10 Inc., a men's magazine, against defendants that included Visa International Service Association, First Data and MasterCard International for alleged third-party liability for enabling consumers to buy infringing images online. The Ninth Circuit U.S. Court of Appeals in San Francisco ruled 2 to 1 against Perfect 10 last July and the case was appealed to the Supreme Court in December.

A Supreme Court ruling in favor of Perfect 10 could have set a precedent that might have helped companies fighting knockoffs and counterfeits online.

The court's denial "could signal the limits of the current trend toward [intellectual property] holders' pursuit of third-party liability for infringement or it could be that the court is simply waiting for more lower courts to tackle the issue," said Susan Scafidi, a law professor at Fordham University in New York. "I wouldn't be surprised to see this issue arise again after more circuits have had a chance to consider the parameters of vicarious liability in the online context."

Plaintiffs have had some success in other cases in holding Internet service providers responsible for illegal online activity and Tiffany & Co.'s highly publicized case against online auction house eBay Inc. is still pending. That lawsuit argued that eBay is ultimately responsible for the sale of counterfeit and knockoff goods on its site.

The American Apparel & Footwear Association and the International AntiCounterfeiting Coalition filed an amicus brief with the Supreme Court in March arguing that the court should overturn the Perfect 10 Ninth Circuit decision because it "sets a dangerous precedent in the law of secondary liability for copyright and trademark infringement."

In its decision, the Ninth Circuit said Perfect 10 failed to prove its argument that the credit card companies made copyright infringement profitable and therefore more widespread than it would have been because of the availability of a payment system. Ninth Circuit Chief Judge Alex Kozinski wrote in the dissent that the card providers actively participated in the infringing activity and knowingly provided a financial bridge between buyers and sellers of pirated works.
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