Supremes Uphold Ruling Shielding Web Companies

In a case with far-reaching implications, the U.S. Supreme Court Monday turned down adult publisher Perfect 10's appeal of a decision holding that credit card companies were immune from liability for users' violations of state intellectual property laws.

The Court let stand a ruling by the 9th Circuit which held that the federal Communications Decency Act shielded Web companies for users' violations of laws in California and other states. If that expansive opinion is followed by other federal courts, Web companies will be shielded from liability in a wide array of lawsuits stemming from state intellectual property laws, says Eric Goldman, an assistant professor at Santa Clara University School of Law and director of the High Tech Law Institute.

"This leaves on the books a very important 9th circuit ruling," Goldman says. "It wipes out a bunch of claims."

Perfect 10, which sells images of models to paid subscribers, sued credit card company CC Bill and Web hosting company CWIE for enabling piracy by doing business with sites that sold pirated images. Perfect 10's theory was that CC Bill and CWIE violated trademark law in California and other states by providing services to the infringing companies.

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CC Bill and CWIE claimed immunity under the federal Communications Decency Act, which gives Web companies immunity from liability for information published by other content providers. That statute contains an exception for intellectual property claims, but the 9th Circuit held that the exception applies only to federal claims and not those brought under state law.

If other courts follow the 9th Circuit ruling, many state intellectual property laws could effectively be gutted, including Utah's recent Trademark Protection Act. Enacted earlier this year, that law attempts to ban marketers from bidding to appear as sponsored links when people conduct searches for the names of rival companies. Although that law was quietly passed in March, it hasn't yet gone into effect.

Perfect 10 also sued Amazon and Google for copyright infringement because their search engines allegedly displayed pirated Perfect 10 images and/or links to infringing sites when users searched for Perfect 10 photos. That case is still pending in federal court in California.

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