FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PERFECT 10, INC., 

Plaintiff-Appellant,

v.

No. 05-15170

VISA INTERNATIONAL SERVICE

D.C. No. ASSOCIATION; FIRST DATA 

CORPORATION; CARDSERVICE CV-04-00371-JW

INTERNATIONAL, INC.; HUMBOLDT OPINION

BANK; MASTERCARD INTERNATIONAL,

INC.,

Defendants-Appellees. 

Appeal from the United States District Court

for the Northern District of California

James Ware, District Judge, Presiding

Argued and Submitted

December 4, 2006—Pasadena, California

Filed July 3, 2007

Before: Stephen Reinhardt, Alex Kozinski, and

Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.;

Dissent by Judge Kozinski

7829
COUNSEL

Howard E. King (argued) and Stephen D. Rothschild, King,

Holmes, Paterno & Berliner, LLP, Los Angeles, California,

for the plaintiff-appellant.

Jeffrey N. Mausner, Berman, Mausner & Resser, Los Angeles, California, for the plaintiff-appellant.

Daniel J. Cooper, Los Angeles, California, for the plaintiffappellant. 

Andrew P. Bridges (argued), John C. Nishi, Winston &

Strawn LLP, San Francisco, California, for defendantappellee Mastercard International Incorporated.

Mark T. Jansen, Nancy L. Tompkins, Anthony J. Malutta,

Townsend and Townsend and Crew LLP, San Francisco, California, for defendant-appellee Visa International Service

Association.

Robert A. Van Nest, Michael H. Page, R. James Slaughter,

Keker & Van Nest, LLP, San Francisco, California, for

defendants-appellees First Data Corp., Cardservice International, Inc., and Humboldt Bank. 

OPINION

MILAN D. SMITH, JR., Circuit Judge: 

Perfect 10, Inc. (Perfect 10) sued Visa International Service

Association, MasterCard International Inc., and several affiliPERFECT 10 v. VISA INTERNATIONAL 7833
ated banks and data processing services (collectively, the

Defendants), alleging secondary liability under federal copyright and trademark law and liability under California statutory and common law. It sued because Defendants continue

to process credit card payments to websites that infringe Perfect 10’s intellectual property rights after being notified by

Perfect 10 of infringement by those websites. The district

court dismissed all causes of action under Federal Rule of

Civil Procedure 12(b)(6) for failure to state a claim upon

which relief can be granted. We affirm the decision of the district court. 

FACTS AND PRIOR PROCEEDINGS

Perfect 10 publishes the magazine “PERFECT10” and

operates the subscription website www.perfect10.com., both

of which “feature tasteful copyrighted images of the world’s

most beautiful natural models.” Appellant’s Opening Brief at

1. Perfect 10 claims copyrights in the photographs published

in its magazine and on its website, federal registration of the

“PERFECT 10” trademark and blanket publicity rights for

many of the models appearing in the photographs. Perfect 10

alleges that numerous websites based in several countries

have stolen its proprietary images, altered them, and illegally

offered them for sale online. 

Instead of suing the direct infringers in this case, Perfect 10

sued Defendants, financial institutions that process certain

credit card payments to the allegedly infringing websites. The

Visa and MasterCard entities are associations of member

banks that issue credit cards to consumers, automatically process payments to merchants authorized to accept their cards,

and provide information to the interested parties necessary to

settle the resulting debits and credits. Defendants collect fees

for their services in these transactions. Perfect 10 alleges that

it sent Defendants repeated notices specifically identifying

infringing websites and informing Defendants that some of

their consumers use their payment cards to purchase infring7834 PERFECT 10 v. VISA INTERNATIONAL
ing images. Defendants admit receiving some of these notices,

but they took no action in response to the notices after receiving them. 

Perfect 10 separately alleges that it formerly had a merchant account with defendant First Data Corporation (FDC)

but that in the Spring of 2001 FDC terminated the account.

FDC’s stated reason for the termination is that the percentage

of Perfect 10’s customers who later disputed the charges attributed to them (the chargeback rate) exceeded contractual limits. Perfect 10 claims these chargeback rates were temporarily

and substantially inflated because Perfect 10 was the “victim

of hackers who were subsequently investigated by the Secret

Service.” Appellant’s Opening Brief at 13. Perfect 10 claims

that FDC was aware of this and was also aware that Perfect

10’s chargeback rate dropped to within association limits once

the hacking ceased, but that FDC nevertheless placed Perfect

10 on an industry-wide “black list” of terminated accounts. 

Perfect 10 filed suit against Defendants on January 28,

2004 alleging contributory and vicarious copyright and trademark infringement as well as violations of California laws

proscribing unfair competition and false advertising, violation

of the statutory and common law right of publicity, libel, and

intentional interference with prospective economic advantage.

Defendants moved to dismiss the initial complaint under

FRCP 12(b)(6). The district court granted the motion, dismissing the libel and intentional interference claims with prejudice but granting leave to amend the remaining claims. In its

first amended complaint, Perfect 10 essentially repeated the

allegations in its original complaint concerning the surviving

causes of action and Defendants again moved to dismiss

under FRCP 12(b)(6). The district court granted the Defendants’ second motion in full, dismissing all remaining causes

of action with prejudice. Perfect 10 appealed to this court. 

JURISDICTION

The district court had original jurisdiction over the copyright and trademark claims pursuant to 28 U.S.C. §§ 1331 and

PERFECT 10 v. VISA INTERNATIONAL 7835
1338 and supplemental jurisdiction over the related state law

claims pursuant to 28 U.S.C. § 1367. This court has appellate

jurisdiction pursuant to 28 U.S.C. § 1291. 

STANDARDS OF REVIEW

We review de novo the district court’s dismissal for failure

to state a claim upon which relief can be granted pursuant to

FRCP 12(b)(6). Rodriguez v. Panayiotou, 314 F.3d 979, 983

(9th Cir. 2002). On appeal, “we take all of the allegations of

material fact stated in the complaint as true and construe them

in the light most favorable to the nonmoving party. A complaint should not be dismissed unless it appears beyond doubt

that plaintiff can prove no set of facts in support of his claim

which would entitle him to relief.” Id. (internal citations omitted). 

Although a plaintiff’s allegations are generally taken as

true, the court need not accept conclusory allegations of law

or unwarranted inferences, and dismissal is required if the

facts are insufficient to support a cognizable claim. City of

Arcadia v. U.S. Envtl. Prot. Agency, 411 F.3d 1103, 1106 n.3

(9th Cir. 2005); see also Pena v. Gardner, 976 F.2d 469, 471-

72 (9th Cir. 1992). The court may also affirm on any ground

supported by the record even if the district court did not consider the issue. Fields v. Legacy Health Sys., 413 F.3d 943,

958 n.13 (9th Cir. 2005); Arc Ecology v. United States Dep’t

of the Air Force, 411 F.3d 1092, 1096 (9th Cir. 2005). 

We review de novo the district court’s interpretation of

state law. Rodriguez, 314 F.3d at 983. 

7836 PERFECT 10 v. VISA INTERNATIONAL
DISCUSSION

SECONDARY LIABILITY UNDER FEDERAL

COPYRIGHT AND TRADEMARK LAW

A. Secondary Liability for Copyright Infringement

Perfect 10 alleges that numerous websites based in several

countries—and their paying customers—have directly

infringed its rights under the Copyright Act, 17 U.S.C. § 101,

et. seq.1 In the present suit, however, Perfect 10 has sued

Defendants, not the direct infringers, claiming contributory

and vicarious copyright infringement because Defendants process credit card charges incurred by customers to acquire the

infringing images. 

We evaluate Perfect 10’s claims with an awareness that

credit cards serve as the primary engine of electronic commerce and that Congress has determined it to be the “policy

of the United States—(1) to promote the continued development of the Internet and other interactive computer services

and other interactive media [and] (2) to preserve the vibrant

and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by

Federal or State regulation.” 47 U.S.C. §§ 230 (b)(1), (2).2

1While Perfect 10’s complaint does not clearly specify which of Perfect

10’s rights are being infringed, it appears that at least four such rights are

potentially at issue: reproduction (17 U.S.C. § 106(1)); derivative works

(17 U.S.C. § 106(2)); distribution of copies (17 U.S.C. § 106(3)); and public display (17 U.S.C. § 106(5)). 

2Congress expressed similar sentiments when it enacted the Digital Millennium Copyright Act (DMCA), 17 U.S.C. § 512, one of the stated purposes of which was to “facilitate the robust development and world-wide

expansion of electronic commerce, communications, research, development, and education in the digital age.” S. Rep. 105-190, at 1-2 (1998). 

PERFECT 10 v. VISA INTERNATIONAL 7837
1. Contributory Copyright Infringement 

Contributory copyright infringement is a form of secondary

liability with roots in the tort-law concepts of enterprise liability and imputed intent. See Fonovisa, Inc. v. Cherry Auction,

Inc., 76 F.3d 259, 264 (9th Cir. 1996); Perfect 10, Inc. v.

Amazon.com, Inc. et.al., ___ F.3d ___, 2007 WL 1428632

(9th Cir. May 16, 2007). This court and the United States

Supreme Court (Supreme Court) have announced various formulations of the same basic test for such liability. We have

found that a defendant is a contributory infringer if it (1) has

knowledge of a third party’s infringing activity, and (2) “induces, causes, or materially contributes to the infringing conduct.” Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.

2004) (citing Gershwin Publ’g Corp. v. Columbia Artists

Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)). In an Internet context, we have found contributory liability when the

defendant “engages in personal conduct that encourages or

assists the infringement.” A&M Records, Inc. v. Napster, Inc.,

239 F.3d 1004, 1019 (9th Cir. 2001) (internal citations omitted). In Metro-Goldwin-Mayer Studios, Inc. v. Grokster, Ltd.,

the Supreme Court adopted from patent law the concept of

“inducement” and found that “[o]ne infringes contributorily

by intentionally inducing or encouraging direct infringement.”

545 U.S. 913, 930 (2005).3 Most recently, in a case also

brought by Perfect 10, we found that “an actor may be contributorily liable [under Grokster] for intentionally encouraging

direct infringement if the actor knowingly takes steps that are

substantially certain to result in such direct infringement.”

Amazon.com, 2007 WL 1428632, at *17. 

3

In her concurring opinion in Grokster, Justice Ginsburg identified

another strand of contributory liability in the Supreme Court’s jurisprudence, i.e., liability based on “distributing a product distributees use to

infringe copyrights, if the product is not capable of ‘substantial’ or ‘commercially significant’ noninfringing uses.” Grokster, 545 U.S. at 942 (citing Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417,

442 (1984)). Even assuming Defendants offer a “product” for these purposes, Perfect 10 does not claim that the “product” of credit card services

is incapable of substantial and commercially significant noninfringing

uses. 

7838 PERFECT 10 v. VISA INTERNATIONAL
[1] We understand these several criteria to be noncontradictory variations on the same basic test, i.e., that one

contributorily infringes when he (1) has knowledge of another’s infringement and (2) either (a) materially contributes to

or (b) induces that infringement. Viewed in isolation, the language of the tests described is quite broad, but when one

reviews the details of the actual “cases and controversies”

before the relevant court in each of the test-defining cases and

the actual holdings in those cases, it is clear that the factual

circumstances in this case are not analogous. To find that

Defendants’ activities fall within the scope of such tests

would require a radical and inappropriate expansion of existing principles of secondary liability and would violate the

public policy of the United States. 

a. Knowledge of the Infringing Activity 

[2] Because we find that Perfect 10 has not pled facts sufficient to establish that Defendants induce or materially contribute to the infringing activity, Perfect 10’s contributory

copyright infringement claim fails and we need not address

the Defendants’ knowledge of the infringing activity.4

4We note that an anomaly exists regarding the concept of notice in secondary copyright infringement cases outside a FRCP 12(b)(6) context.

Congress addressed the issue of notice in the DMCA, which grants a safe

harbor against liability to certain Internet service providers, even those

with actual knowledge of infringement, if they have not received

statutorily-compliant notice. See Perfect 10 v. CCBill LLC, 481 F.3d 751

(9th Cir. 2007), amended and superceded, ___ F.3d ___, 2007 WL

1557475 (9th Cir. May 31, 2007); 17 U.S.C. § 512(c)(3). Because Defendants are not “service providers” within the scope of the DMCA, they are

not eligible for these safe harbors. The result, under Perfect 10’s theories,

would therefore be that a service provider with actual knowledge of

infringement and the actual ability to remove the infringing material, but

which has not received a statutorily compliant notice, is entitled to a safe

harbor from liability, while credit card companies with actual knowledge

but without the actual ability to remove infringing material, would benefit

from no safe harbor. We recognize that the DMCA was not intended to

displace the development of secondary liability in the courts; rather, we

simply take note of the anomalous result Perfect 10 seeks. 

PERFECT 10 v. VISA INTERNATIONAL 7839
b. Material Contribution, Inducement, or Causation

[3] To state a claim of contributory infringement, Perfect

10 must allege facts showing that Defendants induce, cause,

or materially contribute to the infringing conduct. See, e.g.,

Ellison, 357 F.3d at 1076. Three key cases found defendants

contributorily liable under this standard: Fonovisa, 76 F.3d

259; Napster, 239 F.3d 1004; and Grokster, 545 U.S. 913. In

Fonovisa, we held a swap meet operator contributorily liable

for the sale of pirated works at the swap meet. In Napster, we

held the operator of an electronic file sharing system liable

when users of that system employed it to exchange massive

quantities of copyrighted music. In Grokster, the Supreme

Court found liability for the substantially similar act of distributing software that enabled exchange of copyrighted

music on a peer-to-peer, rather than a centralized basis.5 Perfect 10 argues that by continuing to process credit card payments to the infringing websites despite having knowledge of

ongoing infringement, Defendants induce, enable and contribute to the infringing activity in the same way the defendants

did in Fonovisa, Napster and Grokster. We disagree. 

1. Material Contribution

[4] The credit card companies cannot be said to materially

contribute to the infringement in this case because they have

no direct connection to that infringement. Here, the infringement rests on the reproduction, alteration, display and distribution of Perfect 10’s images over the Internet. Perfect 10 has

not alleged that any infringing material passes over Defendants’ payment networks or through their payment processing

systems, or that Defendants’ systems are used to alter or display the infringing images. In Fonovisa, the infringing material was physically located in and traded at the defendant’s

5Because the Grokster court focused primarily on an “inducement” theory rather than a “material contribution” theory, our primary discussion of

Grokster is located below in the “inducement” section of this opinion. 

7840 PERFECT 10 v. VISA INTERNATIONAL
market. Here, it is not. Nor are Defendants’ systems used to

locate the infringing images. The search engines in Amazon.com provided links to specific infringing images, and the

services in Napster and Grokster allowed users to locate and

obtain infringing material. Here, in contrast, the services provided by the credit card companies do not help locate and are

not used to distribute the infringing images. While Perfect 10

has alleged that Defendants make it easier for websites to

profit from this infringing activity, the issue here is reproduction, alteration, display and distribution, which can occur

without payment. Even if infringing images were not paid for,

there would still be infringement. See Napster, 239 F.3d at

1014 (Napster users infringed the distribution right by uploading file names to the search index for others to copy, despite

the fact that no money changed hands in the transaction). 

Our analysis is fully consistent with this court’s recent

decision in Perfect 10 v. Amazon.com, where we found that

“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.” 2007 WL 1428632, at *19. The dissent claims

this statement applies squarely to Defendants if we just substitute “payment systems” for “search engine.” Dissent at 7866.

But this is only true if search engines and payment systems

are equivalents for these purposes, and they are not. The

salient distinction is that Google’s search engine itself assists

in the distribution of infringing content to Internet users,

while Defendants’ payment systems do not. The Amazon.com

court noted that “Google substantially assists websites to distribute their infringing copies to a worldwide market and

assists a worldwide audience of users to access infringing

materials.” Id. Defendants do not provide such a service. They

in no way assist or enable Internet users to locate infringing

material, and they do not distribute it. They do, as alleged,

make infringement more profitable, and people are generally

more inclined to engage in an activity when it is financially

PERFECT 10 v. VISA INTERNATIONAL 7841
profitable. However, there is an additional step in the causal

chain: Google may materially contribute to infringement by

making it fast and easy for third parties to locate and distribute infringing material, whereas Defendants make it easier for

infringement to be profitable, which tends to increase financial incentives to infringe, which in turn tends to increase

infringement.6

[5] The dissent disagrees with our reading of Amazon.com

and charges us with wishful thinking, dissent at 7866, and

with “draw[ing] a series of ephemeral distinctions,” dissent at

7890. We respectfully disagree and assert that our construction of the relevant statutes and case law is completely consistent with existing federal law, is firmly grounded in both

commercial and technical reality and conforms to the public

policy of the United States. Helping users to locate an image

might substantially assist users to download infringing

images, but processing payments does not. If users couldn’t

pay for images with credit cards, infringement could continue

on a large scale because other viable funding mechanisms are

available. For example, a website might decide to allow users

to download some images for free and to make its profits

from advertising, or it might develop other payment mechanisms that do not depend on the credit card companies.7

 In

either case, the unlicensed use of Perfect 10’s copyrighted

images would still be infringement.8 We acknowledge that

6As discussed in note 11, infra, the dissent’s claims that payment processing is “an essential step in the infringement process,” dissent at 7867,

and that “Defendants are directly involved in every infringing transaction

where payment is made by credit card,” dissent at 7873, suggests that the

dissent believes that the Defendants are directly infringing when they process these payments. 

7As discussed more fully in the vicarious infringement section, infra,

Perfect 10’s factual allegations are not to the contrary. 

8We recognize that Google is not the only search engine available to

Internet users, and that users do not necessarily need Google to locate

infringing images. The distinction we draw, however, is not specific to

7842 PERFECT 10 v. VISA INTERNATIONAL
Defendants’ payment systems make it easier for such an

infringement to be profitable, and that they therefore have the

effect of increasing such infringement, but because infringement of Perfect 10’s copyrights can occur without using

Defendants’ payment system, we hold that payment processing by the Defendants as alleged in Perfect 10’s First

Amended Complaint does not constitute a “material contribution” under the test for contributory infringement of copyrights.9

Google; it is between location services and payment services. Because

location services lead Internet users directly to infringing images and often

display them on the website of the service itself, we find that location services are more important and more essential—indeed, more “material”—

to infringement than payment services are. 

9Our dissenting colleague assures us that we would not jeopardize Internet commerce by finding Defendants liable because he has “every confidence” that this court will simply find that other providers of essential

services may contribute to infringement, but not materially so. Dissent at

7875. We take little comfort in his assurances because the predicate of our

colleague’s optimistic view of future judicial refinement of his new world

of secondary liability is a large number of expensive and drawn-out pieces

of litigation that may, or may not, ever be filed. Meanwhile, what would

stop a competitor of a web-site from sending bogus notices to a credit card

company claiming infringement by its competitor in the hope of putting

a competitor out of business, or, at least, requiring it to spend a great deal

of money to clear its name? Threatened with significant potential secondary liability on a variety of fronts under the dissent’s proposed expansion

of existing secondary liability law, perhaps the credit card companies

would soon decline to finance purchases that are more legally risky. They,

after all, are as moved by Adam Smith’s “invisible hand” as the next set

of merchants. If that happened, would First Amendment rights of consumers be trampled? Would Perfect 10 itself be adversely impacted because

no credit card company would want to take a chance on becoming secondarily liable? 

We similarly take little comfort in the dissent’s resurrection of the

“dance-hall-owner/absentee-landlord” cases as a source of any principled

distinction in this area. Dissent at 7874-75. Those tests were developed for

a brick-and-mortar world, and, as the Napster and Grokster courts implicitly recognized by paying little attention to them, they do not lend themselves well to application in an electronic commerce context. In deciding

this case, we are well-advised to follow the lead of the Supreme Court’s

and our own court’s cases confronting online commerce issues. 

PERFECT 10 v. VISA INTERNATIONAL 7843
Our holding is also fully consistent with and supported by

this court’s previous holdings in Fonovisa and Napster. While

there are some limited similarities between the factual scenarios in Fonovisa and Napster and the facts in this case, the differences in those scenarios are substantial, and, in our view,

dispositive. In Fonovisa, we held a flea market proprietor liable as a contributory infringer when it provided the facilities

for and benefitted from the sale of pirated works. 76 F.3d 259.

The court found that the primary infringers and the swap meet

were engaged in a mutual enterprise of infringement and

observed that “it would be difficult for the infringing activity

to take place in the massive quantities alleged without the

support services provided by the swap meet. These services

include, among other things, the provision of space, utilities,

parking, advertising, plumbing, and customers.” 76 F.3d at

264. But the swap meet owner did more to encourage the

enterprise. In 1991, the Fresno County Sheriff raided the swap

meet and seized 38,000 counterfeit recordings. Id. at 261. The

Sheriff sent a letter to the swap meet operator the following

year notifying it that counterfeit sales continued and reminding it that it had agreed to provide the Sheriff with identifying

information from each vendor, but had failed to do so. Id. The

Fonovisa court found liability because the swap meet operator

knowingly provided the “site and facilities” for the infringing

activity. Id. at 264. 

In Napster, this court found the designer and distributor of

a software program liable for contributory infringement. 239

F.3d 1004. Napster was a file-sharing program which, while

capable of non-infringing use, was expressly engineered to

enable the easy exchange of pirated music and was widely so

used. See Napster, 239 F.3d at 1020 n.5 (quoting document

authored by Napster co-founder which mentioned “the need

to remain ignorant of users’ real names and IP addresses

‘since they are exchanging pirated music’ ”). Citing the

Fonovisa standard, the Napster court found that Napster

materially contributes to the users’ direct infringement by

7844 PERFECT 10 v. VISA INTERNATIONAL
knowingly providing the “site and facilities” for that infringement. 239 F.3d at 1022. 

Seeking to draw an analogy to Fonovisa and, by extension,

Napster, Perfect 10 pleads that Defendants materially contribute to the infringement by offering services that allow it to

happen on a larger scale than would otherwise be possible.

Specifically, because the swap meet in Fonovisa created a

commercial environment which allowed the frequency of that

infringement to increase, and the Napster program increased

the frequency of infringement by making it easy, Perfect 10

argues that the Defendants have made available a payment

system that allows third-party infringement to be profitable,

and, consequently, more widespread than it otherwise might

be. This analogy fails. 

The swap meet operator in Fonovisa and the administrators

of the Napster and Grokster programs increased the level of

infringement by providing a centralized place, whether physical or virtual, where infringing works could be collected,

sorted, found, and bought, sold, or exchanged.10 The provision

of parking lots, plumbing and other accoutrements in

Fonovisa was significant only because this was part of providing the environment and market for counterfeit recording

sales to thrive. 

Defendants, in contrast, do no such thing. While Perfect 10

has alleged that it is easy to locate images that infringe its

copyrights, the Defendants’ payment systems do not cause

this. Perfect 10’s images are easy to locate because of the very

nature of the Internet—the website format, software allowing

10In fact, as virtually every interested college student knew—and as the

program’s creator expressly admitted—the sole purpose of the Napster

program was to provide a forum for easy copyright infringement. See Napster, 239 F.3d at 1020 n.5. Perfect 10 does not contend that Defendants’

payment systems were engineered for infringement in this way, and we

decline to radically expand Napster’s cursory treatment of “material contribution” to cover a credit card payment system that was not so designed.

PERFECT 10 v. VISA INTERNATIONAL 7845
for the easy alteration of images, high-speed connections

allowing for the rapid transfer of high-resolution image files,

and perhaps most importantly, powerful search engines that

can aggregate and display those images in a useful and efficient manner, without charge, and with astounding speed.

Defendants play no role in any of these functions. 

Perfect 10 asserts otherwise by arguing for an extremely

broad conception of the term “site and facilities” that bears no

relationship to the holdings in the actual “cases and controversies” decided in Fonovisa and Napster. Taken literally, Perfect 10’s theory appears to include any tangible or intangible

component related to any transaction in which infringing

material is bought and sold. But Fonovisa and Napster do not

require or lend themselves to such a construction. The actual

display, location, and distribution of infringing images in this

case occurs on websites that organize, display, and transmit

information over the wires and wireless instruments that make

up the Internet. The websites are the “site” of the infringement, not Defendants’ payment networks. Defendants do not

create, operate, advertise, or otherwise promote these websites. They do not operate the servers on which they reside.

Unlike the Napster (and Grokster) defendants, they do not

provide users the tools to locate infringing material, nor does

any infringing material ever reside on or pass through any network or computer Defendants operate.11 Defendants merely

provide a method of payment, not a “site” or “facility” of

infringement. Any conception of “site and facilities” that

11Moreover, if the processing of payment for an infringing transaction

were as central to the infringement as the dissent believes it to be—see,

e.g., dissent at 7867 (payment processing is “an essential step in the

infringement process”), dissent at 7873 (“Defendants are directly involved

in every infringing transaction where payment is made by credit card”)—

it is difficult to see why Defendants would be not be direct infringers of

the distribution right. Not even Perfect 10 has gone so far as to allege that

theory here—Perfect 10 would undoubtedly be quite surprised to learn,

after years of litigation attempting to expand the scope of secondary liability, that Defendants are direct infringers after all. 

7846 PERFECT 10 v. VISA INTERNATIONAL
encompasses Defendants would also include a number of

peripherally-involved third parties, such as computer display

companies, storage device companies, and software companies that make the software necessary to alter and view the

pictures and even utility companies that provide electricity to

the Internet. 

Perfect 10 seeks to side-step this reality by alleging that

Defendants are still contributory infringers because they could

refuse to process payments to the infringing websites and

thereby undermine their commercial viability.12 Even though

we must take this factual allegation as true, that Defendants

have the power to undermine the commercial viability of

infringement does not demonstrate that the Defendants materially contribute to that infringement. As previously noted, the

direct infringement here is the reproduction, alteration, display and distribution of Perfect 10’s images over the Internet.

Perfect 10 has not alleged that any infringing material passes

over Defendants’ payment networks or through their payment

processing systems, or that Defendants designed or promoted

their payment systems as a means to infringe. While Perfect

10 has alleged that Defendants make it easier for websites to

profit from this infringing activity, the infringement stems

from the failure to obtain a license to distribute, not the processing of payments. 

2. Inducement

[6] In Grokster, the Supreme Court applied the patent law

concept of “inducement” to a claim of contributory infringement against a file-sharing program. 545 U.S. 913. The court

found that “one who distributes a device with the object of

promoting its use to infringe copyright, as shown by clear

expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third

12This allegation is considered below under vicarious infringement, but

we also address it here in terms of contributory infringement. 

PERFECT 10 v. VISA INTERNATIONAL 7847
parties.” Id. at 936-37. Perfect 10 claims that Grokster is analogous because Defendants induce customers to use their cards

to purchase goods and services, and are therefore guilty of

specifically inducing infringement if the cards are used to purchase images from sites that have content stolen from Perfect

10. This is mistaken. Because Perfect 10 alleges no “affirmative steps taken to foster infringement” and no facts suggesting that Defendants promoted their payment system as a

means to infringe, its claim is premised on a fundamental misreading of Grokster that would render the concept of “inducement” virtually meaningless. 

[7] The Grokster court announced that the standard for

inducement liability is providing a service “with the object of

promoting its use to infringe copyright.” Id. “[M]ere knowledge of infringing potential or actual infringing uses would

not be enough here to subject [a defendant] to liability.” Id.

at 937. Instead, inducement “premises liability on purposeful,

culpable expression and conduct, and thus does nothing to

compromise legitimate commerce or discourage innovation

having a lawful promise.” Id. Moreover, to establish inducement liability, it is crucial to establish that the distributors

“communicated an inducing message to their . . . users,” the

classic example of which is an “advertisement or solicitation

that broadcasts a message designed to stimulate others to

commit violations.” Id. The Grokster court summarized the

“inducement” rule as follows: 

In sum, where an article is good for nothing else but

infringement, there is no legitimate public interest in

its unlicensed availability, and there is no injustice in

presuming or imputing an intent to infringe. Conversely, the doctrine absolves the equivocal conduct

of selling an item with substantial lawful as well as

unlawful uses, and limits liability to instances of

more acute fault than the mere understanding that

some of one’s products will be misused. It leaves

7848 PERFECT 10 v. VISA INTERNATIONAL
breathing room for innovation and a vigorous commerce. 

545 U.S. at 932-33 (internal citations and quotation marks

omitted). 

Perfect 10 has not alleged that any of these standards are

met or that any of these considerations are present here.

Defendants do, of course, market their credit cards as a means

to pay for goods and services, online and elsewhere. But it

does not follow that Defendants affirmatively promote each

product that their cards are used to purchase. The software

systems in Napster and Grokster were engineered, disseminated, and promoted explicitly for the purpose of facilitating

piracy of copyrighted music and reducing legitimate sales of

such music to that extent. Most Napster and Grokster users

understood this and primarily used those systems to purloin

copyrighted music. Further, the Grokster operators explicitly

targeted then-current users of the Napster program by sending

them ads for its OpenNap program. Id. at 925-26. In contrast,

Perfect 10 does not allege that Defendants created or promote

their payment systems as a means to break laws. Perfect 10

simply alleges that Defendants generally promote their cards

and payment systems but points to no “clear expression” or

“affirmative acts” with any specific intent to foster infringement. 

[8] The Amazon.com court recognized this distinction and

applied it in a matter fully consistent with our analysis in this

case. While the Amazon.com court did not bifurcate its analysis of contributory liability into “material contribution” liability and “inducement” liability, it did recognize that

contributory liability “may be predicated on actively encouraging (or inducing) infringement through specific acts.” Amazon.com, 2007 WL 1428632, at *16 (quoting Grokster, 545

U.S. at 942 (Ginsburg, J., concurring)). It also found that

Google could be held contributorily liable if it has “actual

knowledge that specific infringing material is available using

PERFECT 10 v. VISA INTERNATIONAL 7849
its system, and can take simple measures to prevent further

damage,” but does not. Id. at *18 (internal citations and quotation marks omitted). While this test is read more naturally

as a test for “material contribution” than as a test for “inducement,” under an “inducement” analysis Defendants are not

within its scope. As discussed above, Perfect 10 has not

alleged any “specific acts” intended to encourage or induce

infringement. And moreover, Defendants are distinguishable

under the Amazon.com test because, unlike Google, infringing

material is not “available using [their] system” of payment

processing. Id. That system does not “facilitate access to websites,” id.; infringers do not use it to copy, alter, distribute or

display infringing material; and consumers do not use it to

locate, view or download the infringing images. Rather, all

parties involved simply use Defendants’ system to process

payments for that infringing material. 

[9] Finally, we must take as true the allegations that Defendants lend their names and logos to the offending websites

and continue to allow their cards to be used to purchase

infringing images despite actual knowledge of the

infringement—and perhaps even bending their association

rules to do so. But we do not and need not, on this factual

basis, take as true that Defendants “induce” consumers to buy

pirated content with their cards. “Inducement” is a legal determination, and dismissal may not be avoided by characterizing

a legal determination as a factual one. We must determine

whether the facts as pled constitute a “clear expression” of a

specific intent to foster infringement, and, for the reasons

above noted, we hold that they do not. 

2. Vicarious Copyright Infringement

[10] Vicarious infringement is a concept related to, but distinct from, contributory infringement. Whereas contributory

infringement is based on tort-law principles of enterprise liability and imputed intent, vicarious infringement’s roots lie in

the agency principles of respondeat superior. See Fonovisa,

7850 PERFECT 10 v. VISA INTERNATIONAL
76 F.3d at 261-62. To state a claim for vicarious copyright

infringement, a plaintiff must allege that the defendant has (1)

the right and ability to supervise13 the infringing conduct and

(2) a direct financial interest in the infringing activity. Ellison,

357 F.3d at 1078; Napster, 239 F.3d at 1022 (citations omitted). The Supreme Court has recently offered (in dictum) an

alternate formulation of the test: “One . . . infringes vicariously by profiting from direct infringement while declining to

exercise a right to stop or limit it.” Grokster, 545 U.S. at 930

(internal citations omitted). Perfect 10 alleges that Defendants

have the right and ability to control the content of the infringing websites by refusing to process credit card payments to

the websites, enforcing their own rules and regulations, or

both. We hold that Defendants’ conduct alleged in Perfect

10’s first amended complaint fails to state a claim for vicarious copyright infringement. 

a. Right and Ability to Supervise the Infringing

Activity

[11] In order to join a Defendant’s payment network, merchants and member banks must agree to follow that Defendant’s rules and regulations. These rules, among other things,

prohibit member banks from providing services to merchants

engaging in certain illegal activities and require the members

and member banks to investigate merchants suspected of

engaging in such illegal activity and to terminate their participation in the payment network if certain illegal activity is

found. Perfect 10 has alleged that certain websites are infringing Perfect 10’s copyrights and that Perfect 10 sent notices of

this alleged infringement to Defendants. Accordingly, Perfect

10 has adequately pled that (1) infringement of Perfect 10’s

copyrights was occurring, (2) Defendants were aware of the

13Fonovisa essentially viewed “supervision” in this context in terms of

the swap meet operator’s ability to control the activities of the vendors, 76

F.3d at 262, and Napster essentially viewed it in terms of Napster’s ability

to police activities of its users, 239 F.3d at 1023. 

PERFECT 10 v. VISA INTERNATIONAL 7851
infringement, and (3) on this basis, Defendants could have

stopped processing credit card payments to the infringing

websites. These allegations are not, however, sufficient to

establish vicarious liability because even with all reasonable

inferences drawn in Perfect 10’s favor, Perfect 10’s allegations of fact cannot support a finding that Defendants have the

right and ability to control the infringing activity. 

In reasoning closely analogous to the present case, the

Amazon.com court held that Google was not vicariously liable

for third-party infringement that its search engine facilitates.

In so holding, the court found that Google’s ability to control

its own index, search results, and webpages does not give

Google the right to control the infringing acts of third parties

even though that ability would allow Google to affect those

infringing acts to some degree. Amazon.com, 2007 WL

1428632, at *20-21. Moreover, and even more importantly,

the Amazon.com court rejected a vicarious liability claim

based on Google’s policies with sponsored advertisers, which

state that it reserves “the right to monitor and terminate partnerships with entities that violate others’ copyright[s].” Id. at

*20 (alteration in original). The court found that

Google’s right to terminate an AdSense partnership

does not give Google the right to stop direct

infringement by third-party websites. An infringing

third-party website can continue to reproduce, display, and distribute its infringing copies of Perfect

10 images after its participation in the AdSense program has ended. 

Id. This reasoning is equally applicable to the Defendants in

this case. Just like Google, Defendants could likely take certain steps that may have the indirect effect of reducing

infringing activity on the Internet at large. However, neither

Google nor Defendants has any ability to directly control that

activity, and the mere ability to withdraw a financial “carrot”

does not create the “stick” of “right and ability to control” that

7852 PERFECT 10 v. VISA INTERNATIONAL
vicarious infringement requires. A finding of vicarious liability here, under the theories advocated by the dissent, would

also require a finding that Google is vicariously liable for

infringement—a conflict we need not create, and radical step

we do not take. 

Perfect 10 argues that this court’s decision in Napster compels a contrary result. The Napster court found a likelihood of

vicarious liability because Napster “had the right and ability

to police its system and failed to exercise that right to prevent

the exchange of copyrighted material.” 239 F.3d at 1023. The

Napster program created a forum for the exchange of digital

music files and the program administrators had the ability to

block certain users from accessing that forum to upload or

download such files. As pled by Perfect 10, Defendants also

provide a system that allows the business of infringement for

profit to operate on a larger scale than it otherwise might, and

Defendants have the ability to deny users access to that payment system. 

This argument fails. The Napster program’s involvement

with—and hence its “policing” power over—the infringement

was much more intimate and directly intertwined with it than

Defendants’ payment systems are. Napster provided users

with the tools to enable the easy reproduction and distribution

of the actual infringing content and to readily search out and

identify infringing material. Defendants’ payment systems do

not. Napster also had the right and ability to block user access

to its program and thereby deprive particular users of access

to their forum and use of their location and distribution tools.

Defendants can block access to their payment system, but

they cannot themselves block access to the Internet, to any

particular websites, or to search engines enabling the location

of such websites. Defendants are involved with the payment

resulting from violations of the distribution right, but have no

direct role in the actual reproduction, alteration, or distribution of the infringing images.14 They cannot take away the

14The same analysis of Defendants’ role in any violation of the distribution right under 17 U.S.C. §106(3), discussed in note 11, supra, is equally

PERFECT 10 v. VISA INTERNATIONAL 7853
tools the offending websites use to reproduce, alter, and distribute the infringing images over the Internet. They can only

take away the means the websites currently use to sell them.15

Perfect 10 offers two counter-arguments. Perfect 10 first

claims that Defendants’ rules and regulations permit them to

require member merchants to cease illegal activity—

presumably including copyright infringement—as a condition

to their continuing right to receive credit card payments from

the relevant Defendant entities. Perfect 10 argues that these

contractual terms effectively give Defendants contractual control over the content of their merchants’ websites, and that

contractual control over content is sufficient to establish the

“right and ability” to control that content for purposes of

vicarious liability. In the sense that economic considerations

can influence behavior, these contractual rules and regulations

do give Defendants some measure of control over the offending websites since it is reasonable to believe that fear of losing access to credit card payment processing services would

be a sufficient incentive for at least some website operators to

applicable here. While the Napster program allowed its operators to block

users from violation of the distribution right, Defendants’ “policing”

power is limited to refusing to process payments resulting from such violations and does not extend to directly stopping the violations themselves.

15The conclusion that the Defendants operate outside the scope of the

Napster rule is further bolstered by consideration—though as persuasive

authority only—of this court’s opinion in Metro-Goldwyn-Mayer Studios,

Inc. v. Grokster Ltd., 380 F.3d 1154 (9th Cir. 2004), which the Supreme

Court vacated on other grounds, 545 U.S. 913 (2005). In Grokster, we

found the defendants not vicariously liable in part because they could not

block individual users or remove copyrighted material from the network.

Id. at 1165. Similarly, because none of the infringing images resides on

or passes through present Defendants’ own systems or any systems over

which Defendants exercise direct control, Defendants have no ability to

actually remove infringing material from the Internet or directly block its

distribution. This distinguishes credit card companies from Napster, which

could block access to the tools needed for the easy reproduction and distribution of the actual infringing content. 

7854 PERFECT 10 v. VISA INTERNATIONAL
comply with a content-based suggestion from Defendants. But

the ability to exert financial pressure does not give Defendants the right or ability to control the actual infringing activity at issue in this case. Defendants have no absolute right16

to stop that activity—they cannot stop websites from reproducing, altering, or distributing infringing images. Rather, the

credit card companies are analogous to Google, which we

held was not liable for vicarious copyright infringement even

though search engines could effectively cause a website to

disappear by removing it from their search results, and reserve

the right to do so. Like Google, the credit card companies

“cannot stop any of the third-party websites from reproducing, displaying, and distributing unauthorized copies of Perfect 10’s images because that infringing conduct takes place

on the third-party websites.” Amazon.com, 2007 WL

1428632, at *20. Defendants can only refuse to process credit

card payments to the offending merchant within their payment

network, or they can threaten to do so if the merchant does

not comply with a request to alter content. While either option

would likely have some indirect effect on the infringing activity, as we discuss at greater length in our analysis of the Grokster “stop or limit” standard below, so might any number of

actions by any number of actors. For vicarious liability to

attach, however, the defendant must have the right and ability

to supervise and control the infringement, not just affect it,

and Defendants do not have this right or ability. 

Perfect 10 relies heavily on the reasoning of Fonovisa and

Napster to support this argument, but that reliance is misplaced. The swap meet operator in Fonovisa and the software

operator in Napster both had the right to remove individual

16We do not, as the dissent suggests, hold that an absolute right to stop

the infringement is a prerequisite for vicarious liability. Dissent at 7878-

79. Rather, we consider the Defendants’ inability to directly control the

actual infringing activities of third-party websites—reproduction, alteration, display, and distribution over the Internet, not over Defendants’

payment systems—as evidence that they, much like Google, lack the right

and ability to control those activities. 

PERFECT 10 v. VISA INTERNATIONAL 7855
infringers from the very place the infringement was happening. Defendants, like the defendants in Amazon.com, have no

such right. As already discussed, Defendants cannot take

away the software the offending websites use to copy, alter,

and distribute the infringing images, cannot remove those

websites from the Internet, and cannot themselves block the

distribution of those images over the Internet. Defendants can

refuse to process credit card payments for those images, but

while this refusal would reduce the number of those sales, that

reduction is the result of indirect economic pressure rather

than an affirmative exercise of contractual rights.17

Perfect 10 also argues that were infringing websites barred

from accepting the Defendants’ credit cards, it would be

impossible for an online website selling adult images to compete and operate at a profit.18 While we must take this allega17We do not hold, as the dissent suggests, that the ability to exert financial pressure is categorically insufficient to establish sufficient control for

vicarious liability. We recognize that financial pressure is often very powerful, but it is precisely for this reason that we hesitate to expand the law

of vicarious liability to encompass the sort of financial pressure Defendants may exert. The dissent believes that the gravamen of “right and ability to control” is the “practical ability” to limit infringement. Dissent at

7878-79. But if this were true, despite the dissent’s protestations to the

contrary, there are many providers of essential services who could limit

infringement by refusing to offer those services. If “practical ability” is the

test, it does not matter if software operators, network technicians, or even

utility companies do not have a contractual right to affect the websites’

content. It is an article of faith of the free market that, subject to certain

limited exceptions, one can refuse to deal with anyone for any reason, and

by refusing to deal with the offending websites, these providers could limit

infringement. 

18Specifically, Perfect 10 defines “Stolen Content Websites” as “websites . . . that routinely offer for sale to the public stolen [images],” First

Am. Compl. at 2, ¶ 6 (emphasis added), and alleges that “Stolen Content

Websites cannot exist without the knowledge and direct participation of

the financial institutions that process the credit card transactions for such

unlawful material,” id. at 2, ¶ 7. We do acknowledge that at this procedural stage, Perfect 10 is entitled to all reasonable inferences, but we

7856 PERFECT 10 v. VISA INTERNATIONAL
tion as true, it still fails to state a claim because it conflates

the power to stop profiteering with the right and ability to

control infringement. Perfect 10’s allegations do not establish

that Defendants have the authority to prevent theft or alteration of the copyrighted images, remove infringing material

from these websites or prevent its distribution over the Internet. Rather, they merely state that this infringing activity

could not be profitable without access to Defendants’ credit

card payment systems. The alleged infringement does not turn

on the payment; it turns on the reproduction, alteration and

distribution of the images, which Defendants do not do, and

which occurs over networks Defendants do not control. 

[12] The Supreme Court’s recent decision in Grokster does

not undermine the validity of this distinction. As we held in

Amazon.com, 2007 WL 1428632, at *19-20, Grokster does

not stand for the proposition that just because the services

provided by a company help an infringing enterprise generate

revenue, that company is necessarily vicariously liable for

that infringement. Numerous services are required for the

third party infringers referred to by Perfect 10 to operate. In

addition to the necessity of creating and maintaining a website, numerous hardware manufacturers must produce the

computer on which the website physically sits; a software

engineer must create the program that copies and alters the

stolen images; technical support companies must fix any hardware and software problems; utility companies must provide

the electricity that makes all these different related operations

run, etc. All these services are essential to make the businesses described viable, they all profit to some degree from

those businesses, and by withholding their services, they

understand this to be a factual allegation that the “Stolen Content Websites” could not continue to exist as websites offering images for sale

online should defendants withdraw their services, not an allegation that the

websites would completely vanish or that infringement by these sites in all

its forms would necessarily cease. 

PERFECT 10 v. VISA INTERNATIONAL 7857
could impair—perhaps even destroy—the commercial viability of those business. But that does not mean, and Grokster by

no means holds, that they are all potentially liable as vicarious

infringers. Even though they have the “right” to refuse their

services, and hence the literal power to “stop or limit” the

infringement, they, like Defendants, do not exercise sufficient

control over the actual infringing activity for vicarious liability to attach. 

b. Obvious and Direct Financial Interest in the

Infringing Activity 

[13] Because Perfect 10 has failed to show that Defendants

have the right and ability to control the alleged infringing conduct, it has not pled a viable claim of vicarious liability.

Accordingly, we need not reach the issue of direct financial

interest. 

B. Secondary Liability for Trademark Infringement 

The tests for secondary trademark infringement are even

more difficult to satisfy than those required to find secondary

copyright infringement. See Sony Corp. v. Universal City Studios, 464 U.S. 417, 439 n.19 (1984); Fonovisa, 76 F.3d at 265

(noting that “trademark infringement liability is more narrowly circumscribed than copyright infringement”). While the

tests for such infringement are somewhat different in the

trademark context, Perfect 10’s factual allegations in support

of these claims are essentially identical to those alleged in

Perfect 10’s copyright claims, and they fail to state a claim for

similar reasons. 

1. Contributory Trademark Infringement

[14] To be liable for contributory trademark infringement,

a defendant must have (1) “intentionally induced” the primary

infringer to infringe, or (2) continued to supply an infringing

product to an infringer with knowledge that the infringer is

7858 PERFECT 10 v. VISA INTERNATIONAL
mislabeling the particular product supplied. Inwood Labs.,

Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 (1982). When the

alleged direct infringer supplies a service rather than a product, under the second prong of this test, the court must “consider the extent of control exercised by the defendant over the

third party’s means of infringement.” Lockheed Martin Corp.

v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir. 1999).

For liability to attach, there must be “[d]irect control and

monitoring of the instrumentality used by a third party to

infringe the plaintiff’s mark.” Id. 

Perfect 10 has failed to plead a viable claim under either

prong of Inwood Labs—and, by extension, Lockheed Martin.

First, it has not pled facts showing that Defendants “intentionally induced” infringement of Perfect 10’s mark. Perfect 10

has alleged that Defendants are providing critical support to

websites that are using the PERFECT 10 mark in a manner

that is likely to cause the public to believe that they are authorized by Perfect 10. Its factual allegations in support of this

claim are identical to those it made in support of its copyright

claims. These allegations, however, cite no affirmative acts by

Defendants suggesting that third parties infringe Perfect 10’s

mark, much less induce them to do so. 

[15] Second, Perfect 10 has failed to allege facts sufficient

to show “[d]irect control and monitoring of the instrumentality used by a third party to infringe the plaintiff’s mark.”

Lockheed Martin, 194 F.3d at 984. Perfect 10 claims that the

“product” or “instrumentality” at issue here is the credit card

payment network through which Defendants process payments for infringing material. Appellant’s Opening Brief at

39. As discussed at length above, this network is not the

instrument used to infringe Perfect 10’s trademarks; that

infringement occurs without any involvement of Defendants

and their payment systems. Perfect 10 has not alleged that

Defendants have the power to remove infringing material

from these websites or directly stop their distribution over the

Internet. At most, Perfect 10 alleges that Defendants can

PERFECT 10 v. VISA INTERNATIONAL 7859
choose to stop processing payments to these websites, and

that this refusal might have the practical effect of stopping or

reducing the infringing activity. This, without more, does not

constitute “direct control.” See Lockheed Martin, 194 F.3d at

985 (“While the landlord of a flea market might reasonably be

expected to monitor the merchandise sold on his premises,

[defendant] NSI cannot reasonably be expected to monitor the

Internet.”) (citation omitted). 

2. Vicarious Trademark Infringement

Vicarious liability for trademark infringement requires “a

finding that the defendant and the infringer have an apparent

or actual partnership, have authority to bind one another in

transactions with third parties or exercise joint ownership or

control over the infringing product.” Hard Rock Café Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1150 (7th

Cir. 1992) (internal quotations omitted), followed by Symantec Corp. v. CD Micro, Inc., 286 F. Supp. 2d 1265, 1275

(D. Or. 2003). 

Perfect 10 argues that Defendants are liable as follows:

“Defendants and the Stolen Content Websites are in a symbiotic financial partnership pursuant to which the websites operate their businesses according to defendants’ rules and

regulations and defendants share the profits, transaction by

transaction.” Appellant’s Opening Brief at 40. For the same

reasons that this relationship does not establish “right and

ability to control” for copyright purposes, neither does it

establish such a “symbiotic” relationship or “joint ownership

or control” for trademark purposes. Defendants process payments to these websites and collect their usual processing

fees, nothing more. 

[16] Perfect 10 further argues that “Defendants’ acceptance

of a charge binds the Stolen Content Website to provide the

infringing images to third parties.” Appellant’s Opening Brief

at 40. Even if legally relevant, Perfect 10’s allegation is

7860 PERFECT 10 v. VISA INTERNATIONAL
legally incorrect. It is the websites’ contracts with the consumers that bind the websites to provide the infringing

images, not the websites’ relationship with Defendants.19 The

websites’ contracts with Defendants are merely a means of

settling the resulting debits and credits among the websites

and the relevant consumers. We hold that Perfect 10 fails to

state a claim for vicarious trademark infringement.

CALIFORNIA STATUTORY AND COMMON LAW

CLAIMS

[17] In addition to its federal copyright and trademark

claims, Perfect 10 pled causes of action for unfair competition, false advertising, violation of the right of publicity, libel,

and intentional interference with economic relations. We hold

that the district court properly dismissed all these claims with

prejudice. 

A. California State Law Claims of Unfair Competition

and False Advertising 

Defendants do not dispute Perfect 10’s claims that the websites themselves are potentially violating California state and

common law prohibiting unfair competition and false advertising. See Cal. Bus. & Prof. Code §§ 17200, et. seq., and

17500, et. seq. Defendants do, however, argue that Emery v.

Visa International Service Association, 95 Cal. App. 4th 952

(2002), precludes liability for Defendants in this case, both

under secondary liability and aiding and abetting theories.

Defendants are correct on both counts. 

19The dissent claims that no contractual relationship arises between the

infringers and consumers until Defendants process a payment. Dissent at

7886. Even if true as a factual and legal matter—and given the absence

of any citation, it is difficult to know whether this is true—this results

from a decision of the websites to delay formation of the relationship, not

from any requirement Defendants impose on the transaction. 

PERFECT 10 v. VISA INTERNATIONAL 7861
In Emery, a California appellate court affirmed a grant of

summary judgment in favor of Visa, finding that Visa did not

exercise the requisite control over merchants marketing foreign lottery tickets to impose secondary liability under the

state’s unfair competition or false advertising laws. Id. at 959-

964. Emery found that an “unfair practices claim under section 17200 cannot be predicated on vicarious liability. . . . A

defendant’s liability must be based on his personal participation in the unlawful practices and unbridled control over the

practices that are found to violate section 17200 or 17500.”

Id. at 960 (internal citations omitted). Because “Visa itself

played no part in preparing or sending any ‘statement’ that

might be construed as untrue or misleading under the unfair

business practices statutes,” it could not be liable for unfair

competition. Id. at 964. The false advertising claim also necessarily failed because “even if Visa allowed the merchants to

use its logo, trade name, or trademark, it would not be liable

for false advertising. There is no duty to investigate the truth

of statements made by others.” Id. (citations omitted). Emery

is dispositive of Perfect 10’s claims that the Defendants are

secondarily liable under California unfair competition and

false advertising laws and the district court properly dismissed

them.20

In an attempt to avoid the impact of Emery, Perfect 10

argues on appeal that it alleged aiding and abetting theories of

liability in its complaints, and further, that the district court

improperly dismissed these civil claims under a criminal standard of aiding and abetting. Perfect 10 fails to establish a via20The dissent argues that Emery does not preclude Perfect 10’s claims

because the only defendant in Emery was Visa International Service Association, whereas Perfect 10 has also sued the member merchant banks who

issue cards and process payments from merchants. Dissent at 7886-87.

This distinction is only relevant if the activities of the member banks constitute personal participation in the infringing activity, and for all the reasons discussed above, those banks are not personally involved in the

reproduction, alteration, or distribution of the infringing images. Rather,

they merely process payments related to those activities. 

7862 PERFECT 10 v. VISA INTERNATIONAL
ble claim on these theories as well. The only authority offered

by Perfect 10 in support of such liability is an opinion which

is now uncitable in California: Schulz v. Neovi Data Corporation, 28 Cal. Rptr. 3d 46 (Cal. App. 4th Dist. 2005), superceded by 32 Cal. Rptr. 3d 758 (Cal. 2005), cause transferred

by 56 Cal. Rptr. 3d 471 (Cal. 2007), transferred to -- Cal.

Rptr. 3d --, 2007 WL 1723535 (Cal. App. 4th Dist. Jun 15,

2007). 

Furthermore, even under the standards announced in the

superceding Schulz opinion, Defendants would not be liable.

The Schulz court found a credit card company potentially liable for its role in facilitating an illegal online lottery because

that company “went far beyond merely processing credit

cards.” 2007 WL 1723535, at *6. In support, the court cited

specific statements from a company representative in which

he “personally assured” an agent of the website that the defendant company “did not have any problem with the operation

of the [illegal] lottery site” and had a “stronger stomach” than

other payment processors. Id. Perfect 10 alleges no similar

conduct here—Defendants merely process credit card payments. 

B. Aiding and Abetting the Websites’ Violations of

Perfect 10’s Right of Publicity 

Perfect 10 alleges that Defendants aided and abetted the

websites’ violations of Perfect 10’s rights of publicity,

acquired by assignment from its models, in violation of Cal.

Civil Code § 3344 and the common law right of publicity.

This aiding and abetting claim fails for the same reasons as

the aiding and abetting claims under unfair competition and

false advertising. Even if such liability is possible under California law—a proposition for which Perfect 10 has provided

no clear authority—Defendants lack sufficient control or personal involvement in the infringing activities to be so liable.

See Schulz, 2007 WL 1723535, at *5-6; Emery, 95 Cal. App.

4th at 962-63. 

PERFECT 10 v. VISA INTERNATIONAL 7863
C. Libel and Intentional Interference with Prospective

Economic Advantage

The district court dismissed Perfect 10’s claims of libel and

intentional interference with prospective economic advantage

with prejudice on multiple grounds. We affirm on the ground

that both are time-barred. Under California law, a libel claim

must be filed within one year of publication of the allegedly

libelous statement, Cal. Civ. Proc. § 340(c), and an intentional

interference claim must be filed within two years of the

underlying harmful act, Cal. Civ. Proc. § 339. Perfect 10

claims the same underlying wrongful act as the basis for both

claims: its placement on the industry “black list” in the Spring

of 2001. However, Perfect 10 failed to file suit until January

2004—well beyond the statute of limitations applicable to

each claim—and has failed to show any possible exception

under either statute. Those claims are time-barred. 

CONCLUSION

We decline to create any of the radical new theories of liability advocated by Perfect 10 and the dissent and we affirm

the district court’s dismissal with prejudice of all causes of

action in Perfect 10’s complaint for failure to state a claim

upon which relief can be granted. 

AFFIRMED. 

KOZINSKI, Circuit Judge, dissenting for the most part:1

Federal law gives copyright owners the exclusive right to

“distribute copies [of their works] . . . to the public by sale.”

1

I join part C of the “California Statutory and Common Law Claims”

section of the opinion, dealing with plaintiff’s libel and prospective economic advantage claims. 

7864 PERFECT 10 v. VISA INTERNATIONAL
17 U.S.C. § 106(3). Plaintiff alleges that certain third parties

it refers to as the “Stolen Content Websites” unlawfully copy

its protected images and sell them to the public, using defendants’ payment systems as financial intermediaries. According to plaintiff, the Stolen Content Websites “maintain no

physical presence in the United States in order to evade criminal and civil liability for their illegal conduct.” First Am.

Compl. at 8 ¶ 26. Plaintiff also claims that “Defendants do not

enforce their own rules against [the] Stolen Content Websites

because Defendants do not want to lose the substantial revenues and profits they receive from the websites.” Id. at 10

¶ 35. Plaintiff has repeatedly notified defendants that they are

abetting the sale of stolen merchandise by “knowingly providing crucial transactional support services for the sale of millions of stolen photos and film clips worth billions of dollars,”

id. at 1 ¶ 5, but to no avail. Frustrated in its effort to protect

the rights Congress has given it, plaintiff turns to the federal

courts for redress. We should not slam the courthouse door in

its face. 

Accepting the truth of plaintiff’s allegations, as we must on

a motion to dismiss, the credit cards2 are easily liable for indirect copyright infringement: They knowingly provide a financial bridge between buyers and sellers of pirated works,

enabling them to consummate infringing transactions, while

making a profit on every sale. If such active participation in

infringing conduct does not amount to indirect infringement,

2Throughout this dissent, I refer to defendants collectively as credit card

companies or credit cards. In so doing, I am adopting the same simplifying

assumptions as the majority. I am aware that Visa and MasterCard don’t

deal directly with merchants; rather, merchants obtain credit card accounts

from banks, which are in turn authorized by Visa or MasterCard to use

their respective payment systems. Some of the other defendants are

involved in clearing these transactions. For a description of how the system works, see Emery v. Visa Int’l Serv. Ass’n, 95 Cal. App. 4th 952, 956

(2002). It may well be that some of the defendants will be absolved of liability because they have no direct contact with merchants or consumers,

but that is a matter to be sorted out after discovery. 

PERFECT 10 v. VISA INTERNATIONAL 7865
it’s hard to imagine what would.3

 By straining to absolve

defendants of liability, the majority leaves our law in disarray.

Contributory Infringement

We have long held that a defendant is liable for contributory infringement if it “materially contributes to the infringing

conduct.” A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,

1019 (9th Cir. 2001) (internal quotations omitted) (citing

Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443

F.2d 1159, 1162 (2d Cir. 1971)). Our recent opinion in Perfect 10, Inc. v. Amazon.com, Inc., slip op. at 5751 (9th Cir.

2007), canvasses the caselaw in this area and concludes that

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.” Amazon, slip op. at 5793. Substitute “payment

systems” for “search engine” in this sentence, and it describes

defendants here: If a consumer wishes to buy an infringing

image from one of the Stolen Content Websites, he can do so

by using Visa or MasterCard, just as he can use Google to

find the infringing images in the first place. My colleagues

engage in wishful thinking when they claim that “Google’s

search engine itself assists in the distribution of infringing

content to Internet users, while Defendants’ payment systems

3As the majority points out, maj. op. at 7842 n.6, 7846 n.11, plaintiff’s

allegations might also support a theory of direct infringement. See First

Am. Compl. at 8 ¶ 30 (“Defendants, jointly with the Stolen Content Websites, are engaged in . . . the willful and systematic infringement of the

intellectual property rights of” plaintiff and others). Because plaintiff has

not argued this theory on appeal, we have no occasion to address it. But

the fact that defendants may also be committing direct infringement does

not diminish their responsibility as indirect infringers for providing essential services to buyers and sellers of stolen merchandise. A defendant can

be liable for both direct and indirect infringement based on the same conduct. See, e.g., Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772,

791 (5th Cir. 1999). 

7866 PERFECT 10 v. VISA INTERNATIONAL
do not” and that “[h]elping users to locate an image might

substantially assist users to download infringing images, but

processing payments does not.” Maj. op. at 7841, 7842.4

The majority struggles to distinguish Amazon by positing

an “additional step in the causal chain” between defendants’

activities and the infringing conduct. Id. at 7842. According

to the majority, “Google may materially contribute to

infringement by making it fast and easy for third parties to

locate and distribute infringing material, whereas Defendants

make it easier for infringement to be profitable, which tends

to increase financial incentives to infringe, which in turn tends

to increase infringement.” Id. The majority is mistaken; there

is no “additional step.” Defendants participate in every credit

card sale of pirated images; the images are delivered to the

buyer only after defendants approve the transaction and process the payment. This is not just an economic incentive for

infringement; it’s an essential step in the infringement process. 

In any event, I don’t see why it matters whether there is an

“additional step.” Materiality turns on how significantly the

activity helps infringement, not on whether it’s characterized

as one step or two steps removed from it. The majority recognizes that “Defendants make it easier for websites to profit

from this infringing activity,” maj. op. at 7841; that defendants’ conduct “tends to increase infringement,” id. at 7842;

that defendants “have the effect of increasing . . . infringement,” id. at 7843; that “Defendants have the power to undermine the commercial viability of” the Stolen Content

4Neither Google nor the credit cards here were designed for infringement. The majority tries to distinguish this case from Napster and MetroGoldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005),

where defendants’ services were designed for no other purpose. Maj. op.

at 7845 n.10, 7849. But Napster and Grokster are not the endpoint of this

court’s caselaw: Even though Google has many legitimate, noninfringing

uses, Amazon held that it would be guilty of contributory infringement if

it could modify its service to avoid helping infringers. 

PERFECT 10 v. VISA INTERNATIONAL 7867
Websites and that they “make it easier for websites to profit

from this infringing activity,” id. at 7847; that “Defendants

could likely take certain steps that may have the indirect

effect of reducing infringing activity on the Internet,” id. at

7852-53; and that defendants could “reduce the number of

those [infringing] sales,” id. at 7856. Taking the majority at

its word, it sounds like defendants are providing very significant help to the direct infringers. 

My colleagues recognize, as they must, that helping consumers locate infringing content can constitute contributory

infringement,5 but they consign the means of payment to secondary status. Maj. op. at 7846 (“Defendants merely provide

a method of payment . . . .”); id. at 7850 (“[A]ll parties

involved simply use Defendants’ system to process payments

for that infringing material.”); id. at 7854 (“They can only

take away the means the websites currently use to sell [the

infringing images].”); id. at 7855 (“Defendants can only

refuse to process credit card payments to the offending merchant within their payment network . . . .”). But why is locating infringing images more central to infringement than

paying for them? If infringing images can’t be found, there

can be no infringement; but if infringing images can’t be paid

for, there can be no infringement either. Location services and

payment services are equally central to infringement; the

majority’s contrary assertion is supported largely by disparaging use of “merely,” “simply” and “only.” See also id. at 7852

(“[M]ere ability to withdraw a financial ‘carrot’ does not

create the ‘stick’ of ‘right and ability to control’ . . . .”).6

5Amazon, as well as Napster and Grokster, hold as much. 

6The majority argues that “[b]ecause location services lead Internet

users directly to infringing images, and often display them on the website

of the service itself, we find that location services are more important and

more essential—indeed, more ‘material’—to infringement than payment

services are.” Maj. op. at 7842-43 n.8. Skipping lightly over the fact that

we lack the power to “find” anything, the majority admits that payment

services are important, essential and material. That location services may

—or may not—be more so, is of no consequence; this is not a race where

there can be only one winner. 

7868 PERFECT 10 v. VISA INTERNATIONAL
The majority dismisses the significance of credit cards by

arguing that “infringement could continue on a large scale

[without them] because other viable funding mechanisms are

available.” Maj. op. at 7842.7 Of course, the same could be

said about Google. As the majority admits, if Google were

unwilling or unable to serve up infringing images, consumers

could use Yahoo!, Ask.com, Microsoft Live Search, A9.com

or AltaVista instead. Id. at 7842-43 n.8. Even if none of these

were available, consumers could still locate websites with

infringing images through e-mails from friends, messages on

discussion forums, tips via online chat, “typo-squatting,”

peer-to-peer networking using BitTorrent or eDonkey, offline

and online advertisements (see pp. 7882 infra), disreputable

search engines hosted on servers in far-off jurisdictions or

even old-fashioned word of mouth. The majority’s claim that

search engines “could effectively cause a website to disappear

by removing it from their search results,” maj. op. at 7855, is

quite a stretch. 

If the test for contributory infringement really were whether

“infringement could continue on a large scale [without the aid

of the defendant] because other viable . . . mechanisms are

available,” Amazon should have absolved Google of liability

because of the availability of such obvious alternatives. But

Amazon held that Google could be liable for contributory

infringement because it “substantially assists” users in finding

infringing materials; the existence of other means of infringe7The majority’s claim that “Perfect 10’s factual allegations are not to

the contrary,” maj. op. at 7842 n.7, is simply not accurate. Indeed, elsewhere in the opinion, the majority concedes that plaintiff has made “a factual allegation” that the Stolen Content Websites “could not continue to

exist as websites offering images for sale online.” Id. at 7856 n.18. How

then can the majority hold here, apparently as a matter of law, that defendants are absolved of liability because “other viable funding mechanisms

are available”? Maj. op. at 7842. If we accept as true, as the majority says

it does, that the Stolen Content Websites will no longer be able to sell their

images, how can we hold that they could still do so by developing other

(unknown and unsuspected) ways to get paid? 

PERFECT 10 v. VISA INTERNATIONAL 7869
ment was not even considered because no case has suggested

this to be a relevant consideration. The majority’s “other viable . . . mechanisms” test conflicts with Amazon, Napster,

Grokster and every other material assistance case that I know

of. 

The majority does even worse when it tries to describe the

“other viable funding mechanisms” that could serve as alternatives to credit cards: According to the majority, the Stolen

Content Websites “might . . . make [their] profits from advertising” or “might develop other payment mechanisms that do

not depend on the credit card companies.” Maj. op. at 7842

(emphasis added). This shows that my colleagues have a

healthy imagination but contravenes our responsibilities, the

most fundamental of which is that we must work with the

facts the parties presented below, not invent new facts on

appeal. Defendants have presented no evidence that the

pirates could survive without credit cards, nor could they, as

the case is still at the motion to dismiss stage. Even if speculation as to what the Stolen Content Websites “might” do were

admissible evidence, which I seriously doubt, we must still

wait for one of the parties to present it, not conjure it up ourselves.8

 At the pleadings stage, we must accept plaintiff’s allegations that credit cards are indispensable to the operation of

the Stolen Content Websites, and that these websites would be

forced out of business without them. See First Am. Compl. at

2 ¶ 7 (“Stolen Content Websites cannot exist without the

knowledge and direct participation of [defendants].”); id. at

10 ¶ 35 (“[T]he Stolen Content Websites would be eradicated.”). If my colleagues can’t justify their result without con8

I note in passing that, even if we were to accept the majority’s speculations, they would be insufficient. That the Stolen Content Websites

“might” change the way they do business or develop alternative payment

mechanisms hardly proves that “other viable funding mechanisms are

available.” Maj. op. at 7842 (emphasis added). The majority’s prognostication as to what “might” happen in the future leaves open the likelihood

that it will not happen, and positively admits that there are no viable alternative payment mechanisms today. 

7870 PERFECT 10 v. VISA INTERNATIONAL
tradicting plaintiff’s allegations, this is a pretty good hint that

they’re wrong. See also p. 7869 n.7 supra; pp. 7878 n.15,

7848-50 infra. 

The majority’s attempt to distinguish location services from

payment services by trying to show that there are viable alternatives for the latter but not the former cuts entirely against

them. As plaintiff alleges, and experience tells us, there are

numerous ways of locating infringing images on the Internet,

but there are no adequate substitutes for credit cards when it

comes to paying for them. A few consumers might use checks

or money orders to pay for infringing images, but this would

be far more cumbersome, time-consuming and risky than

using credit cards. See pp. 7845-46 & n.14 infra. If it mattered

whether search engines or credit cards are more important to

peddling infringing content on the Internet, the cards would

win hands down. 

But it doesn’t matter. Material assistance turns on whether

the activity in question “substantially assists” infringement.

Amazon, slip op. at 5793. It makes no difference whether the

primary infringers might do without it by finding a workaround, which is why the majority can cite no case supporting its analysis. We presume that primary infringers have

good reasons for selecting a particular means to infringe, and

that other ways to do so will be more costly, more cumbersome and less efficient. Moreover, infringement can always

be carried out by other means; if the existence of alternatives

were a defense to contributory infringement then there could

never be a case of contributory infringement based on material assistance. The majority makes some very new—and very

bad—law here. 

The majority also makes a slightly different argument:

“While Perfect 10 has alleged that Defendants make it easier

for websites to profit from this infringing activity, the issue

here is reproduction, alteration, display and distribution,

which can occur without payment. Even if infringing images

PERFECT 10 v. VISA INTERNATIONAL 7871
were not paid for, there would still be infringement.” Maj. op.

at 7840-41. What the majority seems to be arguing here is that

helping an infringer get paid cannot materially assist infringement because the actual process of infringement—

“reproduction, alteration, display and distribution”—does not

include payment. There are two problems with this argument.

The first is that the Stolen Content Websites are alleged to

infringe plaintiff’s right of distribution “by sale.” 17 U.S.C.

§ 106(3). It’s not possible to distribute by sale without receiving compensation, so payment is in fact part of the infringement process. Second, this argument runs head-on into

Amazon, where we held that helping to find infringing images

materially assists infringement, even though locating infringing images also isn’t “reproduction, alteration, display [or]

distribution.” To be sure, locating images, like paying for

them, makes it a lot easier to infringe, but neither is intrinsic

to the infringement process, as the majority conceives it. 

Nor can today’s opinion be squared with Fonovisa, Inc. v.

Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996). In

Fonovisa, defendant allowed known infringers to sell pirated

works from stalls at its swap meet. We found material assistance based on the fact that “it would [have been] difficult for

the infringing activity to take place in the massive quantities

alleged without the support services provided by the swap

meet.” 76 F.3d at 264. The pivotal role played by the swap

meet in Fonovisa is played by the credit cards in cyberspace,

in that they make “massive quantities” of infringement possible that would otherwise be impossible. Indeed, the assistance

provided here is far more material than in Fonovisa. A pirate

kicked out of a swap meet could still peddle his illicit wares

through newspaper ads or by word of mouth, but you can’t do

business at all on the Internet without credit cards. Plaintiff

thus plausibly alleges that the “Stolen Content Websites

would be eradicated” if defendants withdrew their support.

First Am. Compl. at 10 ¶ 35. 

7872 PERFECT 10 v. VISA INTERNATIONAL
The majority rejects Fonovisa by pointing out that the swap

meet there provided a “centralized place” for the infringement

to take place, maj. op. at 7845, whereas defendants here “have

no direct connection to [the] infringement,” id. at 7840.9 But

material assistance does not depend on physical contact with

the infringing activity. If you lend money to a drug dealer

knowing he will use it to finance a drug deal, you materially

assist the transaction, even if you never see the drugs. Or, if

you knowingly drive a principal to the scene of the crime, you

provide material assistance, even if nothing happens during

the ride. See United States v. Lopez, 482 F.3d 1067, 1076-79

(9th Cir. 2007). Material assistance turns on whether the conduct assists infringement in a significant way, not on pedantic

factual distinctions unrelated to how much the activity facilitates infringement. 

Sure, a marketplace for pirated works (as in Fonovisa) or

an index for such works (as in Napster and Grokster) is

important to infringement, but so is a means of getting paid.

Defendants are directly involved in every infringing transaction where payment is made by credit card, which (according

to plaintiff) amounts to virtually every sale of pirated works.

First Am. Compl. at 9 ¶ 35. Credit cards don’t provide some

tangential service that marginally affects sales; they are the

financial lifeblood of the Stolen Content Websites. 

The majority’s concern that imposing liability on defendants here would implicate vast numbers of other actors who

provide incidental services to infringers, maj. op. at 7847, is

unfounded. Line-drawing is always a bit tricky, but courts

have shown themselves adept at dealing with it from time out

of mind, in resolving such issues as proximate causation and

9The majority seeks to distinguish Napster and Grokster on similar

grounds by arguing that the defendants do not provide the “tools to locate

infringing material,” id. at 7846, and that the infringing material “[n]ever

reside[s] on or pass[es] through any network or computer Defendants

operate,” id.

PERFECT 10 v. VISA INTERNATIONAL 7873
reasonable suspicion. Contributory infringement requires

material assistance to the infringing activity, and those the

majority worries about would doubtless be absolved of liability because their contribution to the infringing activity is

insufficiently material. 

Courts have, in fact, had no difficulty in distinguishing

those who are materially involved in copyright infringement

from those who are not. As Fonovisa explains, two lines of

cases developed in the first part of the last century: the absentee landlord cases and the dance hall cases. The first line

involved landlords who “lacked knowledge of the infringing

acts of [their] tenant[s] and who exercised no control over the

leased premises.” Fonovisa, 76 F.3d at 262. These were held

not liable for the infringement committed by tenants on the

premises. See, e.g., Deutsch v. Arnold, 98 F.2d 686, 688 (2d

Cir. 1938). In the second line of cases, “the operator of an

entertainment venue was held liable for infringing performances when the operator (1) could control the premises and

(2) obtained a direct financial benefit from the audience, who

paid to enjoy the infringing performance.” 76 F.3d at 262 (citing Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191 (1931),

and Dreamland Ball Room, Inc. v. Shapiro, Bernstein & Co.,

36 F.2d 354 (7th Cir. 1929)).10

10The majority consigns the dance hall/absentee landlord cases to oblivion by holding that they have no relevance to the Internet. Maj. op. at 7843

n.9. It is true that these cases were developed in a brick and mortar world,

but the distinction they draw between those who materially assist infringement (and are therefore liable) and those who are more remotely involved

(and are therefore not liable) is equally important—perhaps even more

important—in cyberspace than in real space. That Napster and Grokster

did not consider these cases is hardly significant. The defendants there

were centrally involved in the infringing transactions—indeed, as the

majority reminds us, their systems were created solely to promote

infringement, maj. op. at 7845 n.10, 7849—and thus there could be no

argument that their involvement in the infringing transactions was too

peripheral to give rise to a claim of secondary infringement. The Seventh

Circuit managed to apply the dance hall cases to the Internet, see In re

Aimster Copyright Litig., 334 F.3d 643, 654 (7th Cir. 2003), and I’m confident that federal judges west of the Rockies could have figured out how

to do the same. 

7874 PERFECT 10 v. VISA INTERNATIONAL
These cases show that courts are able to forestall the majority’s parade of horribles. But our case does not present a close

or difficult question: Defendants here are alleged to provide

an essential service to infringers, a service that enables

infringement on a massive scale. Defendants know about the

infringements; they profit from them; they are intimately and

causally involved in a vast number of infringing transactions

that could not be consummated if they refused to process the

payments; they have ready means to stop the infringements.

Were we to rule for plaintiff, as we should, I have every confidence that future courts would be able to distinguish this

case when and if they are confronted with lawsuits against

utility companies, software vendors and others who provide

incidental services to infringers. 

Vicarious Infringement

A party “infringes vicariously by profiting from direct

infringement while declining to exercise a right to stop or

limit it.” Amazon, slip op. at 5794 (quoting Grokster, 545

U.S. at 930) (internal quotation marks omitted).11 There is no

doubt that defendants profit from the infringing activity of the

Stolen Content Websites; after all, they take a cut of virtually

every sale of pirated material. First Am. Compl. at 4 ¶ 13, 7

¶ 25. The majority does not dispute this point so I need not

belabor it. Maj. op. at 7857-58. 

Defendants here also have a right to stop or limit the

infringing activity, a right they have refused to exercise. As

the majority recognizes, “Perfect 10 . . . claims that Defendants’ rules and regulations permit them to require member

merchants to cease illegal activity—presumably including

copyright infringement—as a condition to their continuing

right to receive credit card payments from the relevant Defen11Amazon interprets the “stop or limit” language as requiring “a legal

right to stop or limit the allegedly infringing conduct, as well as the practical ability to do so.” Amazon, slip op. at 5786-87. 

PERFECT 10 v. VISA INTERNATIONAL 7875
dant entities.” Maj. op. at 7854.12 Assuming the truth of this

allegation,13 the cards have the authority, given to them by

contract, to force the Stolen Content Websites to remove

infringing images from their inventory as a condition for

using defendants’ payment systems. If the merchants comply,

their websites stop peddling stolen content and so infringement is stopped or limited. If they don’t comply, defendants

have the right—and under copyright law the duty—to kick the

pirates off their payment networks, forcing them to find other

means of getting paid or go out of business. In that case, too,

infringement is stopped or limited. The swap meet in

Fonovisa was held vicariously liable precisely because it did

not force the pirates to stop infringing or leave; there is no

reason to treat defendants here differently. 

That the pirates might find some other way of doing business is of no consequence; our cases make this perfectly clear.

It didn’t matter in Fonovisa that the infringers there could

have continued their illegal sales by mail order or by hawking

their unlawful merchandise on street corners. Nor did it matter

12Plaintiff’s allegation on this point, as on many others, is very specific:

When MasterCard or Visa learns of a merchant engaged in illegal, fraudulent, or otherwise improper business practices, their

own regulations require them to cause member banks to investigate and, depending on the nature of the misconduct, terminate

the merchants from the Visa and MasterCard systems. The rules

of both associations strictly prohibit members from servicing illegal businesses. 

First Am. Compl. at 6 ¶ 20. 

13In fact, there can be no doubt that it’s true. For example, the MasterCard Merchant Rules Manual provides that “[a] Payment Transaction may

not be effected for any of the following reasons: . . . to transfer gambling

winnings or funds related to chips, currency, or other value usable for

gambling that were purchased in connection with gambling; for any illegal

purpose or any other purpose deemed by MasterCard to be impermissible.” MasterCard International, Merchant Rules Manual § 2.1.11.3(6)

(2006) (emphasis added), available at http://www.mastercard.com/us/wce/

PDF/12999_MERC-Entire_Manual.pdf. 

7876 PERFECT 10 v. VISA INTERNATIONAL
in Napster or Grokster that the direct infringers might find

some other means of illegally sharing their protected content

with others. Indeed, there is no case involving secondary

infringement, going back to the dance hall cases of the last

century, where the secondary infringer’s refusal to do business with the direct infringer could have stopped infringement

altogether and forever. Yet, courts have presumed that removing the particular means of infringement challenged in each

case would make direct infringement more difficult and

thereby diminish the scale of infringing activity. 

Here, the Stolen Content Websites have chosen credit cards

as a form of payment, and for good reason. Credit cards are

ubiquitous and permit the transfer of funds electronically in a

matter of seconds. Consumers need not wait days or weeks

for a check to reach its destination and clear before gaining

access to the salacious pictures they crave. Consumers also

know that, if goods bought by credit card are not delivered,

the cards will likely reverse the transaction.14 Credit cards thus

act as informal escrow agents, effectively guaranteeing that

their merchants will deliver the goods. Blocking the ability to

accept credit cards would be a heavy blow to the Stolen Content Websites because cards are “overwhelmingly the primary

way by which customers pay to view Stolen Content Websites.” First Am. Compl. at 9 ¶ 35. Even if the pirates could

find an alternative way of plying their illegal trade, being

denied their preferred means of doing business would sharply

curtail their unlawful activities. 

14Visa’s website, for example, explains that “Visa and its card issuers

and acquirers have in place an efficient dispute resolution process.” Visa

USA, Chargebacks & Dispute Resolution, http://www.usa.visa.com/

merchants/operations/chargebacks_dispute_resolution/index.html (last visited March 24, 2007). It also notes that “[c]hargebacks arise for many reasons, primary among which are customer disputes, fraud, processing

errors, authorization issues, and non-fulfillment of copy requests.” Id.

(emphasis added). 

PERFECT 10 v. VISA INTERNATIONAL 7877
The majority toils to resist this obvious conclusion but its

arguments are not persuasive. For example, it makes no difference that defendants control only the means of payment,

not the mechanics of transferring the material. Maj. op. at

7850, 7856, 7858. In a commercial environment, distribution

and payment are (to use a quaint anachronism) like love and

marriage—you can’t have one without the other. If cards

don’t process payment, pirates don’t deliver booty. The credit

cards, in fact, control distribution of the infringing material.

The majority also disparages defendants’ ability to control

the Stolen Content Websites as just “financial pressure”

which doesn’t give them an “absolute right to stop [the

infringing] activity—they cannot stop websites from reproducing, altering, or distributing infringing images.” Id. at

7855 (footnote omitted).15 But we have never required an “absolute right to stop [the infringing] activity” as a predicate for

vicarious liability; it’s enough if defendants have the “practical ability” to do so. Amazon, slip op. at 5794, 5796. While

proclaiming its fidelity to Amazon, maj. op. at 7841, 7852, the

15The majority tries to take back in a footnote what it says in text by

claiming that an “absolute right to stop” is not “a prerequisite” to vicarious

liability, but that its absence is “evidence that [defendants], much like

Google, lack the right and ability to control those [infringing] activities.”

Maj. op. at 7855 n.16. Alas, it won’t work. If not having an “absolute right

to stop” is merely “evidence” that defendants lack sufficient control for

vicarious infringement, then this can be offset by other evidence that they

do have such control. Conflicts in the evidence must be resolved after discovery and trial, not on a motion to dismiss. 

“Practical ability,” the standard announced in Amazon, is a capacious

concept, far broader than “absolute right to stop.” Even if the majority

were right that defendants lack the “absolute right to stop” the infringements, plaintiff would be entitled to show that defendants have the “practical ability” to do so. If the majority means what it says in its footnote, then

what it says in text is beside the point. In fact, there can be no doubt that

the majority means what it says in text, because it upholds dismissal of the

complaint on the ground that defendants lack the “absolute right to stop”

the infringers; the footnote is merely an unpersuasive attempt to sweep the

conflict with Amazon under the rug. 

7878 PERFECT 10 v. VISA INTERNATIONAL
majority jettisons Amazon’s “practical ability” standard and

substitutes its own “absolute right to stop” standard. Id. at

7855.16

It’s perfectly clear that the cards do have the “practical ability” to force websites that display their logos and use their

payment systems to remove unlawful merchandise. As the

majority admits, “Defendants can . . . refuse to process credit

card payments to the offending merchant within their payment

network, or they can threaten to do so if the merchant does

not comply with a request to alter content.” Maj. op. at 7855

(disparaging “only” omitted). Commercial websites are

dependent on credit cards as a form of payment, and the

Stolen Content Websites are uniquely so, as virtually all of

their illicit sales are paid for by card. First Am. Compl. at 9

¶ 35. A threat by credit card companies to withdraw use of

their payment systems couldn’t be ignored. After all, how

many consumers would be willing to send a check or money

order to a far-off jurisdiction in the hope that days or weeks

later they will be allowed to download some saucy pictures?

If the Stolen Content Websites cannot get paid for their

unlawful products, or if payment is made more difficult or

cumbersome, this will dramatically affect their operations.

Some may lose customers who are unwilling to use alternative forms of payment;17 others may go out of business; still

others may remove the infringing content from their websites.

Even the majority admits that “fear of losing access to credit

card payment processing services would be a sufficient incentive for at least some website operators to comply with a

content-based suggestion from Defendants.” Maj. op. at 7854-

55.18 As a consequence, infringing activity would be

“stop[ped] or limit[ed].” See Amazon, slip op. at 5794. 

16The conflict with Amazon is clearly drawn in footnote 17, where the

majority explicitly disavows “practical ability” as the standard for vicarious infringement. Maj. op. at 7856 n.17. The majority is free to disagree

with the standard adopted by our caselaw, but it is not free to reject it. 

17Those customers may take their patronage to plaintiff’s website. 

18The majority disparages this as mere “financial pressure,” but I am

aware of no prior case holding that the legal right to exercise “financial

PERFECT 10 v. VISA INTERNATIONAL 7879
The majority also reads the complaint for less than it’s

worth by “understand[ing]” plaintiff to allege “that the ‘Stolen

Content Websites’ could not continue to exist as websites

offering images for sale online should defendants withdraw

their services, not [to allege] that the websites would completely vanish or that infringement by these sites in all its

forms would necessarily cease.” Maj. op. at 7856-57 n.18. But

plaintiff expressly alleges what the majority “understand[s]”

it not to allege, namely that the sites “cannot exist” without

defendants, First Am. Compl. at 2 ¶ 7, and that “the Stolen

Content Websites would be eradicated” if they could not use

credit cards, id. at 9-10 ¶ 35. It is hornbook law that we must

construe complaints liberally on a motion to dismiss. See Glus

v. Brooklyn Eastern Dist. Terminal, 359 U.S. 231, 235

(1959); Conley v. Gibson, 355 U.S. 41, 47-48 (1957). A liberal construction means reading ambiguous provisions in a

way that would save the complaint from dismissal, and sometimes even reading between the lines to give plaintiff the benefit of every reasonable inference. I have never heard of

reading a complaint liberally by ignoring allegations that are

clearly present. 

But let’s say the majority “understand[s]” plaintiff’s allegations correctly: So what? To sustain a vicarious infringement

claim, plaintiff need not allege that the Stolen Content Webpressure” over infringing activity is insufficient to support a finding of

vicarious infringement. This is a dangerous precedent. We live in a commercial world and economic incentives are often the strongest possible

motivators—far stronger than the often empty threat of litigation. As this

case demonstrates, litigation can be costly and protracted, and its results

uncertain. By contrast, the threat of stopping an essential service can be

implemented at once, without hiring an army of lawyers or persuading

judges and juries of the rightness of one’s cause. In an economy marked

by competition, financial pressure which raises costs or diminishes patronage can be a powerful weapon. By holding that the legal right to exercise

financial pressure is an insufficient basis for establishing vicarious

infringement, my colleagues take a hasty and unwise step in the development of the law. 

7880 PERFECT 10 v. VISA INTERNATIONAL
sites “would completely vanish or that infringement by these

sites in all its forms would necessarily cease.” Maj. op. at

7856-57 n.18. The standard is “stop or limit” the infringing

conduct. Amazon, slip op. at 5787 (emphasis added) (quoting

Grokster, 545 U.S. at 930). And my colleagues admit that

plaintiff has alleged that “at least some website operators

[would] comply with a content-based suggestion from Defendants.” Maj. op. at 7854-55. Q.E.D. 

To resolve this case, however, we need not adopt a rule

holding all credit cards responsible for all infringing Internet

sales because plaintiff has alleged far more than the ordinary

credit card/merchant relationship. According to plaintiff,

defendants have adopted special rules and practices that apply

only to the Stolen Content Websites, and that are designed to

make it easier for these websites to ply their illegal trade. First

Am. Compl. at 9-11 ¶¶ 33-37. Plaintiff claims that the credit

cards have singled out the Stolen Content Websites for preferential treatment because of the unusual and substantial profits

they make on such transactions. Read fully and fairly, the

complaint alleges that defendants are not merely passive providers of services available on equal terms to legal and illegal

businesses alike; they are actually in cahoots with the pirates

to prop up their illegal businesses and share their ill-gotten

gains. If this is not vicarious infringement, nothing is. 

The majority claims that Amazon employs “reasoning

closely analogous” to its own, maj. op. at 7852, but it is mistaken. Amazon addressed two questions of vicarious infringement, one involving third-party websites whose images are

picked up by Google’s search engine, the other involving

websites that participate in its AdSense program. As to the

first, Google could not be vicariously liable because “Perfect

10 ha[d] not shown that Google has contracts with third-party

websites that empower Google to stop or limit them from

reproducing, displaying, and distributing infringing copies of

Perfect 10’s images on the Internet.” Slip op. at 5795.19 In the

19Amazon also relied on the district court’s finding that Google “lacks

the practical ability to police the third-party websites’ infringing conduct”

PERFECT 10 v. VISA INTERNATIONAL 7881
absence of such a contractual relationship, there could be no

vicarious infringement, because Google lacked “the legal

right to stop or limit the direct infringement of third-party

websites.” Id. at 5794. Why the majority believes this is in

any way analogous, or even remotely instructive, to our situation, where the credit cards do have contracts giving them a

right to control what merchants sell on their websites, is a

mystery. 

Google’s relationship with websites that participate in its

AdSense program presents a somewhat closer analogy

because Google did have contracts that would have allowed

it to kick websites out of AdSense for displaying infringing

images. But that’s as far as the similarity goes: AdSense is an

advertising program; Google pays participating merchants to

host third-party ads on their websites. This is the cyberspace

analogue of renting out space on your land for a billboard.

The ads have no effect on the operation of the host websites;

users can download infringing content whether or not ads are

present. Being excluded from AdSense would thus mean

some loss of revenue, but would have no effect on the operation of the business itself. It is therefore far from certain that

merchants would be induced to modify their businesses to

avoid being excluded from AdSense.20

because the technical means for doing so suggested by plaintiff “were not

workable.” Id. at 5796 (citing district court’s opinion, 416 F. Supp. 2d at

857-58 & n.25). There is not, and cannot be, such a finding here as the

case is presented on a 12(b)(6) motion. 

20Anecdotal evidence suggests that the AdSense program produces

vastly less revenue for most program members than what they earn

through their businesses. One poll found that 45% of AdSense members

surveyed earned less than $30 per month from the program, and only a

small percentage earned a substantial amount. Darren Rowse, AdSense

Earnings for November—Poll Results, Problogger (Dec. 19, 2005), http://

www.problogger.net/archives/2005/12/19/adsense-earnings-for-novemberpoll-results/. 

7882 PERFECT 10 v. VISA INTERNATIONAL
Because plaintiff had not presented proof that any thirdparty websites would stop infringing if they were threatened

with exclusion from AdSense, Amazon concluded that plaintiff there had not met its burden for a preliminary injunction.

Our case is presented on a motion to dismiss and plaintiff here

need only make allegations. And plaintiff alleges that the

infringing websites could not continue doing business at all

without the use of credit cards. Amazon’s reasoning on this

point gives the majority no help. 

The majority’s attempt to distinguish Napster is equally

thin. My colleagues argue that “[t]he Napster program’s

involvement with . . . the infringement was much more intimate and directly intertwined with it than Defendants’ payment systems are.” Maj. op. at 7853-54. But I don’t see how

much more “directly intertwined” you can get in a purchase

transaction than carrying the payment from buyer to seller. If

this were a drug deal, for example, we would never say that

the guy entrusted with delivery of the purchase money is less

involved in the transaction than the guy who helps find the

seller. Both would be held equally culpable. 

Thus, the majority’s insistence that defendants “cannot

themselves block access to the Internet, to any particular websites, or to search engines enabling the location of such websites,” maj. op. at 7853, is beside the point. Physical control

over the infringing activity is one way to stop infringers, but

it’s certainly not the only way. Withdrawing crucial services,

such as financial support, can be just as effective, and sometimes more effective, than technical measures that can often

be circumvented.21

21Providing financial support has long been held to be a basis for vicarious infringement, where that financial support carries with it the contractual right to approve the infringing activity. See Davis v. E.I. DuPont de

Nemours & Co., 240 F. Supp. 612 (S.D.N.Y. 1965). In Davis, DuPont

sponsored a dramatization of “Ethan Frome,” which was alleged to

infringe several copyrights. DuPont was held vicariously liable, even

though it did not own the studio or the broadcast facilities, and could not

have prevented airing of the show with another sponsor. 

PERFECT 10 v. VISA INTERNATIONAL 7883
Finally, the majority dismisses the Supreme Court’s opinion in Grokster by suggesting that the Court could not have

meant what it said because the standard it announced (and

which we adopted in Amazon) would sweep in too many

goods and services that contribute to infringing activity. See

maj. op. at 7857 (listing hardware manufacturers, software

engineers, technical support companies and utilities). The

majority misreads the Court’s opinion. Providing a crucial

service to an infringer may give someone the practical ability

to stop infringement, but that’s only half of what it takes to

be a vicarious infringer. The other half is a right, found in

contract, to control the infringer’s actions. See Amazon, slip

op. at 5795 (requiring “contracts with [direct infringers] that

empower [defendant] to stop or limit them from reproducing,

displaying, and distributing infringing copies”). Those third

parties the majority worries about could not be held vicariously liable because they lack the legal right to stop the

infringement. So far as I know, utilities are provided by public

franchise, not by contract, and a utility has no right to stop

providing electricity or phone service because it learns that its

electrons are being put to illegal use.22 Computer manufacturers don’t usually retain the right to reclaim computers they

have sold because they are being used unlawfully. Ditto for

software producers and repairmen. Having no contract that

authorizes them to stop providing services on account of illegality, these actors do not meet the first prong of the test for

vicarious infringement. See p. 7845 n.10 supra.

23

22See, e.g., Rules and General Orders of the Vermont Public Service

Board § 3.302, available at http://www.state.vt.us/psb/rules/Official

AdoptedRules/RulesComplete.pdf (last visited May 14, 2007) (“[N]o utility shall disconnect residential service of gas, electric, or water unless payment of a valid bill or charge is delinquent.”); State of New Hampshire,

Consumer Rights and Responsibilities, at 5 (1996), available at http://

services.unitil.com/content/info/consumer_rights.html. 

23The majority is also mistaken when it suggests that parties would be

held vicariously liable for infringement simply becaause, in a market

economy, they are free not to deal with one another. Maj. op. at 7856 n.17.

7884 PERFECT 10 v. VISA INTERNATIONAL
Trademark Infringement

For precisely the same reasons, I disagree with the majority

when it claims that defendants do not contributorily infringe

on Perfect 10’s trademark because they lack “[d]irect control

and monitoring of the instrumentality used by a third party to

infringe the plaintiff’s mark.” Maj. op. at 7859 (internal quotation marks omitted). The Lanham Act forbids “use in commerce . . . of a registered mark in connection with the sale,

offering for sale, distribution, or advertising of any goods or

services on or in connection with which such use is likely to

cause confusion.” 15 U.S.C. § 1114(1)(a). Plaintiff alleges

that the Stolen Content Websites sell images marked with

Perfect 10’s trademark. First Am. Compl. at 17 ¶ 65. Without

defendants’ payment systems, the infringers would find it

much harder to peddle their infringing goods. Plaintiff thus

pled facts sufficient to state a claim for contributory trademark infringement. 

The cases on which the majority relies are not to the contrary. Inwood Laboratories, Inc. v. Ives Laboratories, Inc.,

456 U.S. 844 (1982), involved a manufacturer and says nothing of consequence bearing on our situation. Lockheed Martin

Corp. v. Network Solutions, Inc., 194 F.3d 980, 984 (9th Cir.

Our cases have been very clear that more is required for vicarious

infringement; defendant must have a formal contractual or principal-agent

relationship with the infringer. It is that contract or relationship that forms

the predicate for vicarious liability, and plaintiff must point to some term

in the contract or formal relationship that gives defendant a right to stop

the infringing activity. See, e.g., Aimster, 334 F.3d at 654; Fonovisa, 76

F.3d at 262; Amazon, slip. op. at 5794-95. Responding to a service call,

in the absence of a contract which provides that the service may be discontinued in the event of illegal conduct, cannot form the basis of vicarious

liability and thus the fact that the technician is free to leave can’t render

him vicariously liable. The requirement that plaintiffs point to a relationship explicitly spelled out in a contract or other legal arrangement is an

important limitation on who may be held to answer for vicarious infringement. It should not be casually discarded. 

PERFECT 10 v. VISA INTERNATIONAL 7885
1999), turned on the fact that the defendant there, a registrar

of Internet domain names, lacked sufficient control “over the

third party’s means of infringement,” because it lacked “control and monitoring of the instrumentality used by a third

party to infringe the plaintiff’s marks.” Id. By contrast, credit

cards are directly involved in every infringing transaction; not

only do they process the payment for virtually every sale of

pirated images by the Stolen Content Websites, they control

whether such transactions will go forward. This is more than

enough to establish the “control and monitoring” that Lockheed Martin requires for contributory trademark infringement.

As to vicarious trademark infringement, the majority claims

that there is neither a symbiotic partnership between the direct

infringers and defendants, nor authority to bind one another

in transactions with third parties. Maj. op. at 7860 (citing

Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc.,

955 F.2d 1143 (7th Cir. 1992)). But plaintiff alleges that the

Stolen Content Websites cannot operate without the use of

credit cards, First Am. Compl. at 2 ¶ 7, while defendants

make huge profits by processing these illegal transactions. See

also p. 7881 supra. If this is not symbiosis, what is? Likewise,

while “the websites’ contracts with the consumers . . . bind

the websites to provide the infringing images,” maj. op. at

7861 (emphasis removed), it is defendants’ actions that bind

the websites to that contract. Only after the credit cards

approve and process the payment does the obligation to

deliver the stolen content come into existence. The majority

thus errs in absolving defendants of vicarious trademark

infringement.

State Law Claims

The majority disposes of the state law claims on the same

theory as the copyright claims, namely, that defendants are

not directly involved in the infringing activity. Maj. op. at

7861-62. But defendants are involved, because they provide

the means to pay for the infringing content and thus make

7886 PERFECT 10 v. VISA INTERNATIONAL
“massive quantities” of infringement possible. First Am.

Compl. at 18 ¶ 73. 

The case on which the majority relies, Emery v. Visa International Service Association, 95 Cal. App. 4th 952 (2002), is

not on point because, in that case, plaintiff sued only Visa, not

the merchant banks that had a direct relationship with the

alleged wrongdoer or the consumers. Id. at 956, 962. Plaintiff

there also based his theory of liability on advertising letters

bearing the credit card logo. Emery held that plaintiff hadn’t

proven Visa could police the use of its logo in letters peddling

an illegal lottery sent by merchants directly to consumers. By

contrast, plaintiff here alleges that defendants are knowing

participants in thousands of transactions that amount to unfair

trade practices and infringe on the right of publicity of the

women depicted in the stolen images. I see nothing in Emery

that would preclude plaintiff’s state law claims, as alleged in

the complaint. 

* * *

It would certainly be much easier for us if plaintiff were

suing the Stolen Content Websites rather than the credit cards.

No doubt, they would if they could.24 But direct infringers are

sometimes too ubiquitous, too small or too difficult to find.

That’s why we have cases such as Fonovisa, Napster, Aimster, Grokster and Amazon. Here, plaintiff alleges that many

direct infringers have no physical presence in the United

States. They operate from far-off jurisdictions, where lawsuits

are difficult to bring and remedies impossible to enforce

because the infringers can easily move their operations to

servers in other remote jurisdictions. 

24In fact, Perfect 10 has brought suit against some direct infringers. See

Perfect 10, Inc. v. CCBill, LLC, 481 F.3d 751 (9th Cir. 2007) (reversing

summary judgment on direct infringement claim); Perfect 10, Inc. v. Talisman Commc’ns Inc., No. CV99-10450, 2000 WL 364813 (C.D. Cal.

Mar. 27, 2000). 

PERFECT 10 v. VISA INTERNATIONAL 7887
The weak link in the pirates’ nefarious scheme is their need

to get paid; for this they must use the services of legitimate

financial institutions. If plaintiff’s allegations are to be

believed, the financial institutions (defendants here) collect

billions for sellers of stolen merchandise; in a very real sense,

they profit from making piracy possible. I can see no reason

they should not be held responsible. 

The majority’s refrain that imposing liability on defendants

here would violate “the public policy of the United States,”

maj. op. at 7839, 7844, is equally off base. While the majority

correctly identifies that policy as facilitating the development

of electronic commerce, id. at 7837 n.2, that solicitude does

not extend to commerce in illegal merchandise. I am aware of

no policy of the United States to encourage electronic commerce in stolen goods, illegal drugs or child pornography.

When it comes to traffic in material that violates the Copyright Act, the policy of the United States is embedded in the

FBI warning we see at the start of every lawfully purchased

or rented video: Infringers are to be stopped and prosecuted.

Preventing financial intermediaries from servicing such shady

transactions is entirely consistent with that policy. If Congress

believes that this places too heavy a burden on credit cards,

it can grant the cards immunity (along with corresponding

responsibilities), as it did for ISPs in passing the DMCA.25

The majority’s solicitude for “credit cards . . . as the primary engine of electronic commerce,” and for preserving “the

vibrant and competitive free market that presently exists for

the Internet,” maj. op. at 7837, is understandable but misguided. It does not serve the interests of a free market, or a

25The majority finds it “anomalous” to hold credit cards liable without

DMCA-compliant notice, while ISPs are immune unless they receive such

a notice. Maj. op. at 7839 n.4. But there is no anomaly in treating parties

that are covered by the statute differently from those that are not. Plaintiff

here did give ample notice to the credit cards, see p. 7889 infra, and

should not have its claim dismissed for failing to allege compliance with

a statute that does not apply to them. 

7888 PERFECT 10 v. VISA INTERNATIONAL
free society, to abet marauders who pilfer the property of lawabiding, tax-paying rights holders, and who turn consumers

into recipients of stolen property. Requiring defendants to

abide by their own rules, which “strictly prohibit members

from servicing illegal businesses,” First Am. Compl. at 6

¶ 20, will hardly impair the operation of a “vibrant and competitive free market,” any more than did the recent law prohibiting the use of credit cards for Internet gambling. See 31

U.S.C. § 5364. 

Nor does plaintiff seek to hold the credit cards responsible

for illegal activities of which they are unaware. Plaintiff

claims that it has repeatedly written to defendants, “putting

them on notice of more than 240 specifically identified Celebrity Porn Websites with obvious stolen content that they were

supporting.” First Am. Compl. at 19 ¶ 75. Plaintiff has also

sent defendants “[d]eclarations from celebrities [such as Britney Spears, Christina Aguilera, Anna Kournikova and Yasmine Bleeth] stating that they have not authorized the use of

their name, likeness, or identity on pornographic websites and

that they do not want their images and names so used . . . .”

Id. at 19 ¶ 77. Credit cards already have the tools to police the

activities of their merchants, which is why we don’t see credit

card sales of illegal drugs or child pornography. According to

plaintiff, “defendants inspect websites and business premises,

and obtain and review merchants’ bank statements, tax

returns, credit reports, and a merchant’s other financial information . . . .” Id. at 7 ¶ 26. Plaintiff is not asking for a huge

change in the way credit cards do business; they ask only that

defendants abide by their own rules and stop doing business

with crooks. Granting plaintiff the relief it seeks would not,

I am confident, be the end of Capitalism as we know it. 

This is an easy case, squarely controlled by our precedent

in all material respects. Fairly applying our cases to the facts

alleged by Perfect 10, we should reverse the district court and

give plaintiff an opportunity to prove its case through discovery and trial. In straining to escape the strictures of our

PERFECT 10 v. VISA INTERNATIONAL 7889
caselaw, the majority draws a series of ephemeral distinctions

that are neither required nor permitted; the opinion will prove

to be no end of trouble.

7890 PERFECT 10 v. VISA INTERNATIONAL