Updated information and resources about search engine and linking issues.

Ads for non-religious sites with views on abortion? No problem! Adverts for pornographic sites? Sure! But abortion and religion related content? No way! So Google refused to run a pro-life ad for The Christian Institute's website, christian.org.uk, ("UK abortion law - news and views on abortion from the Christian Institute"), because "abortion and religion-related content" is "inappropriate content" according to Google's policy.

Lawyers for the Institute say this is unlawful discrimination under the Equality Act 2006. They demand that Google change its policy or face legal action.

2. German Jewish Group Sues Google over YouTube
The Central Council of Jews in Germany filed a temporary injunction March 20, 2008, against Google in Hamburg District Court. The Jewish group demands that Google pull hate videos from its YouTube subsidiary. Among the offending videos was one in which a photo of the late president of the Central Council, Paul Spiegel, was burned against a background of swastikas. According to Business Week, Stephan Kramer, the general secretary of the Central Council of Jews explained the move: "The radical right-wing scene is using YouTube, massively, as a platform. We are accusing Google, with its YouTube video platform subsidiary of being an accomplice to inciting racial hatred and discrimination."

3. Self-Regulatory Principles on Behavioral Advertising

In December 2007, the Federal Trade Commission (FTC) released a set of proposed principles to guide the development of self-regulation in the area of online behavioral advertising. Behavioral advertising means the tracking of a consumer’s activities online – including the searches the consumer has conducted, the web pages visited, and the content viewed – in order to deliver advertising targeted to the individual consumer’s interests. One proposal is aimed at more transparency and consumer control:

"Every website where data is collected for behavioral advertising should provide a clear, concise, consumer-friendly, and prominent statement that

(1) data about consumers' activities online is being collected at the site for use in providing advertising about products and services tailored to individual consumers’ interests, and

(2) consumers can choose whether or not to have their information collected for such purpose. The website should also provide consumers with a clear, easy-to-use, and accessible method for exercising this option."

The guidelines are partly intended to adress concerns over the Google-DoubleClick deal. So far Google is not engaged in behavioral advertising, but declines to say whether the merger will facilitate respective plans.

Also see:

Alexis, Alexei, Behavioral Advertising - Search Engine Firms Expected to Face Continued Hill Scutiny, Electronic Commerce & Law Report 2008, 121-123

4. Sponsored Links decision in the U.K.

Google changes its trade mark policy in the UK and in Ireland: The use of trade marked terms to trigger ads will be allowed, starting May 5. This move brings the policy in line with the one in the US and Canada.

Google might have announced the change because of a recent High Court Ruling that cleared Yahoo of trademark infringement. Victor Wilson, owner of a London based catering business had sued Yahoo, after discovering that typing Mr Spicy, a name that he registered as a Community Trade Mark, triggered sponsored links for Sainsbury's supermarket. Yahoo asked for summary judgement, arguing that it had not used plaintiff's trademark, and got it:

"The trade mark in this case is not used by anyone other than the browser who enters the phrase "Mr Spicy" as a search query in the defendants' search engine. In particular, the trade mark is not used by the defendants. The response of the defendants to the use of the trade mark by the browser is not use of the trade mark by the defendants.

That is enough to decide the case in the defendants' favour. But the matter does not stop there. If, by some process of reasoning, one were to hold that the search engine's response to the words used by the browser was, itself, use by the defendants, in my judgment, it is not use of the mark "Mr Spicy". What, instead, is being used is the English word "spicy" as it appears in that phrase."

But please note: The advertiser had used the word "spicy" as keyword, not "Mr Spicy", so its still possible that buying a keyword that matches another firm's trade mark is unlawful in the UK.

Google's decision might be a dangerous one that leads to more lawsuits.

Also see:

5. First Google street view lawsuit in the USA: Boring v. Google

Google allegedly took pictures from what was labeled as “private property” for its Street View Feature. So, Aaron and Christine Boring filed suit in Allegheny County court on April 2, 2008. They are demanding $25,000 to make up for the "mental suffering" and the diminished value of their home. Google claims that this lawsuit is pointless since anyone can ask them to have pictures removed without legal action. You can watch some of the pictures of the property and the complaint here.

6. Article 29 Data Protection Working Party Report: Opinion on data protection issues related to search engines

A report by the European Union's privacy panel, the Article 29 Data Protection Working Party, demands that search engines follow EU privacy regulations, even when the services are headquartered outside the European Union. They should delete personal data held about their users within six months.

Key findings of the report:

The Data Protection Directive (95/46/EC) generally applies to the processing of personal data by search engines, even when their headquarters are outside of the EEA.
Search engines may only process personal data for legitimate purposes and the amount of data has to be relevant and not excessive in respect of the various purposes to be achieved.
In view of the initial explanations given by search engine providers on the possible purposes for collecting personal data (e.g. Service improvements, system security, fraud prevention, personalised advertising), the Working Party does not see a basis for a retention period beyond 6 months.... In case search engine providers retain personal data longer than 6 months, they will have to demonstrate comprehensively that it is strictly necessary for the service.... If there is no legitimate ground for processing, or for use beyond the well-specified legitimate purposes, search engine providers must delete personal data. Instead of deletion, search engines may also anonymise data, but such anonymisation must be completely irreversible for the Data Protection Directive to no longer apply.
The Working Party finds that the correlation of personal data across services and platforms for authenticated users can only be legitimately done based on consent, after the users have been adequately informed.
Users of search engine services have the right to access, inspect and correct if necessary, according to Article 12 of the Data Protection Directive (95/46/EC), all their personal data, including their profiles and search history.
Cross-correlation of data originating from different services belonging to the search engine provider may only be performed if consent has been granted by the user for that specific service.

7. Important thumbnail decision in Germany

So far, German courts were split on the question, if copyright law allows the creation and display of thumbnail images by picture search engines.

There have been two major decisions, one by the District Court of Hamburg (Case No. 308 O 449/03, full text available at: http://www.linksandlaw.de/urteil73-thumbnails.htm) and the second by the District Court of Erfurt (Case No.: 3 O 1108/05, full text available at: http://www.linksandlaw.de/urteil171-bildersuche-thumbnails.htm).

The District Court of Erfurt argued that webmasters must brace themselves for other users to link to their works. The court stressed the fact that the thumbnails cannot be enhanced into high quality images and that the depiction of thumbnails is beneficial to the copyright holder, because visual search engines help users to locate them on the internet. Page owners had one easy way to prevent their pictures from appearing as thumbnails in search engine results, the court wrote. They can restrict access to the works on their site, e.g. by the use of a robots.txt file.

The plaintiff appealed the decision and the Thuringian Higher Regional Court (decision of February 27, 2008, Case No. 2 U 319/07 - full text in German) did not follow the reasoning of the District Court.

In accordance with prior cases the court found that the creation and display of thumbnail images is not allowed under the exemptions granted by the German Copyright Act. Google also failed to convince the court that the "implied consent" defense applies. In the eyes of the judges, the upload of a work on a web site is not enough to find that the copyright owner agrees to all search engine uses. So thumbnails used by picture search engines violate the German Copyright Act (I don't agree with this result, please see my article Green light for search engines to use thumbnail images?).

But then the court came up with a solution to dismiss the lawsuit. The plaintiff was engaged in search engine optimization. Under these circumstances, the court found that the plaintiff had attracted crawlers and was estopped from raising claims against search engines!

I don't think that it is a good idea to assume that the plaintiff abused her legal rights:

The plaintiff had used metatags (the decision only speaks of the keyword metatag - that is useless, if you want to optimize your pages for Google, but the plaintiff might have also used other metatags). Metatags don't "attract" crawlers. They are a way of telling search engines which keywords are relevant for a web site, but they don't influence how often a web page is visited. Metatags are used to increase the visibility of a web site within the (web) search results.
The court did not offer a solution what the plaintiff should have done, if she wanted her web site to appear in the web search results, but not in the picture search results. If she had optimized the pictures (which is very difficult to prove), than the reasoning of the court would have been correct, but only then.
In my view, it would have been better to consider the search engine optimization under the aspect of "implied consent". The use of the metatags shows that the copyright owner wanted his works to be found. So it would be consequent to assume, he impliedly consents to the necessary copyright uses by search engines.

For a more in depth analysis, see the comment in my German Links & Law Blog

8. In short (it's all about adwords and metatags in the USA ...)

AdWords

According to the 11th Circuit the use of trademarked terms in metatags constitutes trademark infringement. Judging from the statement that the description Google used in the search results included the trademarked term, the defendant probably used it in the description metatag.

New in Legal Resources

Euler, Ellen, Web-Harvesting vs. Urheberrecht, CR 2008, 64-68
Wiebe, Andreas, Suchmaschinenmonopole und Kartellrecht, Medien und Recht Int. 2007, 179-187
Ernst, Stefan, Suchmaschinenmarketing in der aktuellen deutschen Rechtsprechung, Medien und Recht Int. 2007, 195-200
Weichert, Thilo, Datenschutz bei Suchmaschinen, Medien und Recht Int. 2007, 188-194
Klein, Sheldon / Huffnagle, Henry, Split Decisions: The Issue of "Use" in the Context of Search Engine Keyword-Triggered Advertising, Intellectual Property & Technology Law Journal, Volume 19, Number 12, December 2007, 1-8

Update 55: March 21, 2008

1. EU Commission Clears Google's DoubleClick Bid

On March 11, 2008, European regulators cleared Google's proposed $3.1 billion acquisition of DoubleClick. The EU Commission’s in-depth investigation, opened in November 2007, "concluded that the transaction would be unlikely to have harmful effects on consumers, either in ad serving or in intermediation in online advertising markets. The Commission has therefore concluded that the transaction would not significantly impede effective competition within the European Economic Area (EEA) or a significant part of it." The Commission did not believe that the merged entity would have the ability to engage in strategies aimed at marginalising Google's competitors, mainly because of the presence of credible ad serving alternatives to which customers can switch, in particular companies such as Microsoft, Yahoo! and AOL.

2. Utah Trademark Protection Act Amended

Last year I mentioned a proposed law in Utah (Utah SB 236, the "Trademark Protection Act,") that inter alia effectively prohibits the use of trademarked terms as keyword advertising triggers. The Trademark Protection Act was heavily criticized for being unconstitutional, because it would hurt free speech, with citizens being unable to run ads in protest of certain company's business practices, for example. Comparative advertising would also be prohibited under the Act.
In March 2008, the Utah legislature finally amended the bill and removed the provisions of the law which prohibited this type of keyword advertising.

For more information on the bill, check out Eric Goldman's blog entries on" the Utah legislature, the Dr. Frankenstein of Internet regulation."

3. Google AdWords Lawsuits in the USA - Where do we stand at the beginning of 2008?

a. The Lanham Act

To prevail on a trademark infringement claim under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1)2, a plaintiff must establish that

(1) it has a valid mark that is entitled to protection under the Lanham Act; and that
(2) the defendant used the mark,
(3) in commerce,
(4) ‘in connection with the sale . . . or advertising of goods or services,’ 15 U.S.C. § 1114(1)(a),
(5), without the plaintiff's consent.”

The plaintiff must also show that the defendant's use of that mark “is likely to cause confusion . . . as to the affiliation, connection, or association of [the defendant] with [the plaintiff], or as to the origin, sponsorship, or approval of [the defendant's] goods, services, or commercial activities by [the plaintiff].” 15 U.S.C. § 1125(a)(1)(A).

b. "Use in Commerce"

Courts in the USA are split on the threshold question of whether the sale and purchase of another's trademark as a keyword constitutes a commercial use of the mark.

Courts in the Second Circuit have uniformly held that the use of a trademark in keywords, where the use is strictly internal and not communicated to the public, does not constitute a Lanham Act "use". See:

The district courts have adopted the reasoning of 1-800 Contacts Inc. v. WhenU.com, 414 F.3d 400 (2d Cir. 2005) (10 ECLR 678, 7/13/05). The court had held that the use of a trademarked term to trigger browser pop-up advertising was not an actionable use of the mark in commerce: "A company's internal utilization of a trademark in a way that does no communicate it to the public is analogous to a individual's private thoughts about a trademark. Such conduct simply does not violate the Lanham Act, which is concerned with the use of trademarks in connection with the sale of goods or services in a manner likely to lead to consumer confusion as to the source of such goods or services."

Merck & Co. v. Mediplan Health Consulting Inc., 431 F. Supp. 2d 425 (S.D.N.Y. 2006) (11 ECLR 375, 4/5/06): "In 1-800 Contacts, the Second Circuit emphasized that commercial use is not the equivalent of “use in commerce” for trademark purposes. It observed that, “while any number of activities may be ‘in commerce’ or create a likelihood of confusion, no such activity is actionable under the Lanham Act absent the ‘use’ of a trademark.” 414 F.3d at 412. Trademark use “ordinarily” involves placing a trademark on goods or services to indicate that the goods or services emanate from or are authorized by the owner of the mark. Id. at 408. Here, in the search engine context, defendants do not “place” the ZOCOR marks on goods, containers, displays, or associated documents, nor do they use the marks to indicate source or sponsorship. Rather, the marks are used only in the sense that a computer user’s search of the keyword “Zocor” will trigger the display of sponsored links to defendants' websites. This internal use of the keyword “Zocor” is not use of the mark in the trademark sense; rather, this use is more akin to the product placement marketing strategy employed in retail stores, where, for example, a drug store places its generic products alongside similar national brand products to capitalize on the latter's name recognition. See id. at 411. The sponsored link marketing strategy is the electronic equivalent of product placement in a retail store."

c. Likelihood of Confusion

Even if there is a use in commerce, the use also must be likely to cause confusion. Likelihood of confusion requires that “‘an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question, or “are likely to believe that the mark’s owner sponsored, endorsed, or otherwise approved of the defendant’s use of the mark,” Tommy Hilfiger Licensing, Inc. v. Nature Labs, LLC, 221 F. Supp. 2d 410, 414 (S.D.N.Y. 2002) (citing Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 204-05 (2d Cir. 1979)).

No likelihood of confusion:

Likelihood of confusion:

Edina Realty Inc. v. MLSonline.com, Civ. 04-4371, 2006, WL 737064 (D. Minn. March 20, 2006) (As evidence of confusion Edina Realty offered a handful of e-mails and phone calls received by MLSonline from consumers inquiring about Edina Realty: "It is unclear whether the phone calls and emails identified by plaintiff are evidence of actual consumer confusion caused by defendant’s use of plaintiff’s mark. A survey that could demonstrate actual confusion is unnecessary, however, because plaintiff need only show a likelihood of confusion. The Court determines that the phone calls and emails are sufficient to raise a genuine issue of material fact for the purposes of summary judgment.")

d. Pending lawsuits:

5. New in Legal Resources

Schrader, Paul / Rautenstrauch, Birthe, Urheberrechtliche Verwertung von Bildern durch Anzeige von Vorschaugrafiken (sog. thumbnails) bei Internetsuchmaschinen, UFITA 2007, 761-781
Stenz, Sirko, Die Meinungsmacht von Suchmaschinen und rechtliche Möglichkeiten der Regulierung, E-Book
McKenna, Mark P., "Trademark Use and the Problem of Source in Trademark Law" (January 18, 2008). Available at SSRN: http://ssrn.com/abstract=1088479
Wilbur, Kenneth C. and Zhu, Yi, "Click Fraud" . Available at SSRN: http://ssrn.com/abstract=1083835
Ott, Stephan, Die Entwicklung des Suchmaschinen- und Hyperlink-Rechts im Jahr 2007, WRP 2008, 393-413

Update 54: January 25, 2008

1. Hyperlinks pointing to pictures - Dangerous...

Imagine a case in which you consent to the posting of a picture of you on web site 1 but want a hyperlink to this site from web site 2 removed.

The U.S. District Court for the District of South Carolina held October 22, 2007 that the creation of a hyperlink pointing to a photo on a publicly accessible web site is not a misappropriation of the photo (BidZerk LLC v, Smith, D.S.C., No. 6:06109). Citing United States v. Gines-Perez, 214 F. Supp. 2d 205 (D. Puerto Rico 2002), the court said that "a claim of privacy is unavailable to someone who places information on an indisputably public medium, such as the Internet, without taking any measures to protect the information."

A very reasonable decision, don't you agree! Well same scenario, other country, other court. The Higher Regional Court in Munich held that a link in a satirical news article about a "controversial" lawyer leading to a web site with pictures of him showing him stripped to the waist wearing paintball battle attire, constitutes an invasion of the personal privacy of the lawyer concerned. The court dismissed the argument that the lawyer had consented to the original publication on the web site. The link had rendered the published images out of context.

The decision has been criticized from several German legal experts for threatening the "right to link". Following the reasoning of the Higher Regional Court you better ask for consent before you link to pictures of persons. They might not like the context you are placing them in....

2. AdWords Lawsuits in Europe - Where do we stand at the beginning of 2008

Did you completly loose track what is going on with AdWords related cases worldwide? Me too! No Links & Law update without reports about new lawsuits. My "AdWords Lawsuit Worldwide" section had its last complete update in 2005 and is no longer up to date. In the following weeks I'll try to revamp this section. With this update I want to summarize the current situation in several European countries:

Despite several lower and higher regional court decisions in Germany there is no legal certainty yet. The German Federal Court of Justice (BGH) is expected to issue a decision on AdWords in 2008, hopefully bringing the many year long discussion to an end. In 2006, the BGH has held that the use of a trademark as a metatag constitutes trademark infringement. Even if the trademark itself is not displayed there can be a trademark use. Following the Meta-Tag decision, German courts mainly argue if metatags and keyword should be treated equal. Finding and reasoning differ. In my opinion there is no trademark infringement, if the advertisement is labelled as such and the trademark itself is not displayed in the ad (see Ott, MMR 2007, 123 f.).

Austria

In 2007 the Supreme Court of Austria held that the use of a trademark as a keyword infringes the rights of its owner, if the ad appears above the search results (advertisers can't choose between above and on the right side of the search results...) using the trademark as header (it is unclear if this citation of the trademark had an impact on the decision...). The decision has also been criticised for confounding arguments from trademark and unfair competition law. The court had reasoned that users could get the wrong impression that the advertiser is closely related to the owner of the trademark.

You can find the decision (in German) at http://www.linksandlaw.de/urteil175-haftung-adwords-oesterreich.htm.

United Kingdom

Following the reasoning in the Reed Executive plc v. Reed Business Information decision (for more information see Update 37) it is unlikely that keyword advertising constitutes trademark infringement or the common law tort of passing off (Please note: There is no unfair competition law in the UK).

France

1. Advertisers in France should not use trademark protected terms as keywords. The Court of Nanterre, the Court of Paris, the Court of Appeal of Versailles - all have found that advertisers committed a trademark infringement. Only the Court of Strasbourg (decision of July 20, 2007, Atrya vs. Google and K par K/Techni Feneres) has stressed the initial function of a trademark to distinguish a product or a service and to associate it to a specific origin and found no trademark infringement. Nethertheless the court deemed the use of the trademark to be unfair competition (parasitism based on the profiting of the well known brand of a competitor). So far no French court held the use of trademark protected keywords to be legal!

2. As for the liability of search engines, courts in France differ on the reasoning. According to the Court of Nanterre Google is an active trademark infringer. The mere fact of suggesting the infringement by using the mark as proposed keyword is enough. The court of Paris in contrary underlines that Google does not use the trademark for identical or similar products / services in a commercial manner. So there is no trademark infringement. But nethertheless Google's conduct was not deemed legal. Google's liability was based on the common civil principle of fault (Section 1382 of the Civil Code) due to the lack of preliminary control to check whether chosen keywords do infringe third party rights. The Court of Strasbourg, (decision of July 20, 2007, Atrya vs. Google and K par K/Techni Feneres) took into account technical measures implemented by Google (a filter and links to check third parties' rights) and excluded Google's liability on all grounds. This is the most recent decision from France and the first to exclude a search engine from liability in an Adword related lawsuit! It remains to be seen if other courts adopt the approach of the Court of Strasbourg.

3. According to the Cour d'Appel de Paris, French courts have no jurisdiction if the incriminated ads lead only to websites owned by companies established outside France and appear only on google.co.uk, google.de and google.ca, but not on google.fr. (decision of June 6, 2007, Google Inc. and Google France v. Axa et al, CRI 2007, 155 ff.).

According to the Amsterdam Court of Appeal (Portakabin v. Primakabin, Decision of December 14, 2006) advertisers are allowed to use a trademark as keyword, at least when

- the link in the ad leads directly to the subpage on which the branded products are offered for sale, and not to the homepage.

New in Legal Resources

Tene, Omer, "What Google Knows: Privacy and Internet Search Engines" (October 2007). Available at SSRN: http://ssrn.com/abstract=1021490
Allgrove, Ben, The search engine's dilemma: implied licence to crawl and cache?, Journal of Intellectual Property & Practice, 2007, Vol.2, No. 7, pages 437-438
Givan, Sarah, Using Trademarks as Location Tools on the Internet: Use in Commerce?, The ICFAI Journal of Cyber Law, May 2006, 61-79
Van Asbroeck, Benoit / Cock, Maud, Belgian newspapers v Google News: 2-0, Journal of Intellectual Property & Practice, 2007, Vol.2, No. 7, pages 463-466
Turner, Mark / Callaghan, Dominic, You Can Look But Don't Touch! The Impact of the Google v Copiepresse Decision On the Future of the Internet, E.I.P.R. 2008, 34-38

Update 53: December 12, 2007

1. Spain: Complaints over mixing search results and ads

The Australian Competition and Consumer Commission (ACCC) accuses Google of inadequately distinguishing between its sponsored links and the normal "organic" search results (see Update 51). The case will be heard in the Federal Court June 23, 2008.

Same problem in Spain: The Federation of Consumers in Action (FACUA) filed complaints with several government ministries (the National Consumer Institute, the Spanish Office of Patents and Trademarks, the Ministry of Health and Consumer Affairs ministry of the region of Madrid) against Yahoo and Google claiming that the ads aren't adequately distinguishable from the search results. The group also criticizes the use of trademark protected terms as keywords. According to the group, one third of telecommunications companies, two thirds of travel agencies and 20 percent of the banking entities studied used the names of their competitors to advertise on Google.

November 19, 2007: Australia sets date for Google keyword case, ZDNet:
"The Australian Federal Court has set a hearing date for the Australian Competition and Consumer Commission's allegations against Google of misleading and deceptive conduct."

2. Austrian study: Google is creating dangerous monopolies and has to be stopped!

According to an Austrian university study (187-pages PDF) Google is creating unacceptable monopolies that will allow it to control information flows and invade privacy.

Two of the conclusions of the study are:

4. Search Engine Law Article: Green light for search engines to use thumbnail images?

The times, in which search engines have only provided a search for text-based websites have long passed. Market leader Google e.g. provides a sophisticated mix of features, enabling its users to search for videos, blogs, products, scientific articles and pictures. Especially the last service has lead to several lawsuits in the USA and in Germany. Users will only embrace a visual search engine, if they get a good first impression of the pictures within the search results. As it is not possible to effectively describe a visual image with plain text to the benefit of a user, thumbnail images come into play. In a process called crawling search engines automatically index pictures. They download a copy of each image they find on the internet to its servers and convert it into a small low resolution version of the full file, the so called thumbnail. In response to a search engine user's textual query, the search engine then produces a display of relevant thumbnail images.

Some content owners call this behavior a violation of their copyright. Search engines should not be permitted to display their content without their explicit permission. If this view prevails and courts stop the use of thumbnails, visual search engines would loose all of their attractivity to users and would practically become useless. So when considering the legality of thumbnails keep in mind this question puts the whole business model of visual search engines at stake.

This article outlines the key findings of courts in the USA and in Germany. From a legal point of view there is no doubt that in both countries two exclusive copyright holder's rights are concerned in the thumbnail scenario: The right of reproduction (Section 107 of the U.S. Copyright Act and § 16 of the German Copyright Act - Search engines make copies of the images they crawl) and the right to publicly display (Section 107 of the U.S. Copyright Act) / to make available a work (§ 19 a of the German Copyright Act - Search engines show the thumbnails to their users). So the main question is whether a search engine can rely on one of the exemptions to the copyright holder's exclusive rights. While there is a fair use defense in the U.S. law (and in other common law countries; Great Britain and Canada e.g. have a fair dealing exemption), most European countries have a catalog of "public interest" exemptions, that are to be interpreted narrowly. In Germany it is well established that the creation of thumbnails by search engines is not privileged by the exemptions laid down in § 44 a ff. of the German Copyright Act. Search engines in Germany can only rely on one last argument, an implied consent by the copyright holder to the creation of the thumbnails.

So the decisive questions are: Is the creation of a thumbnail fair use? And in non common law countries: Does a copyright holder, who publishes his work on the internet, impliedly consent to the creation, storage and display of thumbnails by search engines? We will discover that these questions are connected. Arguments used to justify fair use will also be of importance when discussing implied consent.

a. USA

Section 107 of the U.S. Copyright Act provides that fair use of a copyrighted work "for purposes such as criticism, comment, news reporting, ... or research" is not a violation of the Copyright Act. In order to determine what constitutes fair use in a particular case, a court has to consider four nonexclusive factors:

(1) the purpose and character of the use including whether it is commercial;

(2) the nature of the work;

(3) the amount and substantiality of the portion used relative to the work as whole;

(4) the effect of the use upon the potential market for or value of the work.

No single factor is determinative.

In two cases (Kelly v. Arriba Soft Corp., 280 F.3d 934 (9th Cir. 2002), full text also available at: http://www.linksandlaw.com/decisions-106.htm and Perfect 10 v. Google, full text also available at: http://www.linksandlaw.com/news-update50-perfect-ten-appeal.htm) the Ninth Circuit held that seach engines' reproduction of images for use as thumbnails is fair use under the Copyright Act.

First factor: Thumbnails create a different purpose for the images. They are not used in an aesthetic manner. Instead they help index and improve access to images on the Internet and thus provide a new and transformative use of the images. The use does not stifle artistic creativity or in any way supplant the originals. Thumbnails are of poorer quality. They lack the resolution of regular-sized images. Any enlargement would result in a loss of clarity of the image. Due to the highly transformative use, the commercial nature of search engines doesn't warrant another result, no matter of the precise business model (ads on the result pages in the Arriba case, AdSense on the linked-to-sites in the Google case).

Second factor: Even if the images are creative in nature, the second factor only slightly weighs in favor of the copyright holder, because they have already been published on a web site. The court noted that published works are more likely to qualify as fair use because the first appearance of the artist's expression has already occurred.

Third factor: Although search engines copy the entirety of each image, this is the amount necessary in order for its users to recognize the image and to achieve the objective of providing an effective image search. So this factor favors neither side.

Fourth factor: The use of thumbnail images does not harm the copyright holders ability to sell or license them. There will be no negative consequences for the market for full-size images. Much to the contrary: By showing the thumbnails on its result pages when users enter terms related to a copyright holder's image, a search engine would guide users to their website rather than away from it.

According to a California court (Perfect 10 v. Google, Inc., 416 F. Supp. 2d 828 (C.D.Cal. 2006), full text at: http://www.linksandlaw.com/decision-163-perfect-10-pictures-google.pdf) this factor weighs in favor of a copyright holder, if there is also a market for smaller sized images. In this case the plaintiff asserted that the reduced size images had commercial value, because he sells them for display on cell phones. The Ninth Circuit did not agree: “The district court did not make a finding that Google users have downloaded thumbnail images for cell phone use. This potential harm to Perfect 10’s market remains hypothetical.”

So to conclude, the use of thumbnails is regarded as fair use in the USA.

b. Germany

There have been two major decisions on thumbnails in Germany, one by the District Court of Hamburg (Case No. 308 O 449/03, full text available at: http://www.linksandlaw.de/urteil73-thumbnails.htm) and the second by the District Court of Erfurt (Case No.: 3 O 1108/05, full text available at: http://www.linksandlaw.de/urteil171-bildersuche-thumbnails.htm).

The District Court of Hamburg ruled against Google's German news service when it found that thumbnail images, that were displayed beside excerpts from various news stories, were protected under German copyright law and could not be reproduced without permission. The Court did know that thumbnails were regarded as fair use in the Kelly v. Arriba case and discussed the differences between the systems in the USA and in Germany. But without a fair use defense in Germany, the court found, that it could not consider several arguments that were relevant in the US cases, e.g. the purpose of the thumbnails or the great benefit of a visual search engine for the public. The court did not discuss the possibility of an implied consent by the copyright holder. In his opinion the defendant could have merely provided a textual link stating "See image here". So the court issued a preliminary injunction against Google, ordering the search engine market leader to refrain from copying pictures or making available thumbnails of the plaintiff’s works. Should Google not comply with the injunction, the court will impose a fine with a maximum of 250.000 Euros.

The District Court of Erfurt had to decide on the legality of Google’s picture search engine and reached another result, arguing that webmasters must brace themselves for other users to link to their works. Many arguments from the fair use discussion appear in the decision. The court stressed the fact that the thumbnails cannot be enhanced into high quality images and that the depiction of thumbnails is beneficial to the copyright holder, because visual search engines help users to locate them on the internet. Page owners had one easy way to prevent their pictures from appearing as thumbnails in search engine results, the court wrote. They can restrict access to the works on their site, e.g. by the use of a robots.txt file.

In my opinion the Erfurt court decision is more compelling, although the reasoning that a copyright owner sacrifices some intellectual property rights by making his work available on the internet, is troubling. The interests of users and copyright holders are clearly balanced by the exemptions granted by the German Copyright Act. It is against the law to introduce a fair use defense through the backdoor "implied consent". But implied consent can still be assumed under narrow prerequisites that also take into account the way the internet functions. The decisive factors should be the following:

The copyright owner has not made a clear statement against the use of his pictures as thumbnails, e.g. by the use of a robots.txt file (Please note the difference to a fair use defense: Even if the copyright owner dissents, it is still fair use!)
The use of the copyrighted work is also in the interest of the copyright owner.
The use is limited to what is absolutely necessary.
The copyright owner can not reasonably be asked for his explicit consent due to the high number of persons regarded.

Especially the last argument is of great importance. It is impossible for search engines to ask every webmaster for his consent. Google e.g. claims to crawl more than 8 billion web sites. So applying the test to thumbnails leads to the result that their use in visual search engines should be legally permissible in Germany as long as the copyright owner refrains from excluding search engines from his web site completely or explicitly tells them to exclude his works from the picture search results. Thumbnails in another context like in news search engines which use pictures to illustrate articles, would not be covered by the implied consent defense, because news search engines only use a few sources for their service and it is reasonable to negotiate licensing agreements. The thumbnails are also not absolutely necessary for a news search service, they are a mere attachment.

c. Conclusion

While it is pretty much established in the USA that the creation of thumbnails is fair use, the situation is far more uncertain in Germany. Differing court opinions don't give visual search engines the clear guidance that they need to conduct their business. They depend on the very weak "implied consent" defense. This argument completely fails when an image has been put on a web site without the copyright holder's permission. Than there is no longer a basis for an implied consent. There already have been some authors (e.g. Nimmer, CRI 2006, 65, 69) that proposed a European fair use exemption that would avoid rigid application of copyright law when it would stifle the creativity it is designed to foster. Given that several features are provided by search engines with an overwhelming legal uncertainty (not only thumbnails, but the same can be said about caching for example), this might not be a bad idea. Our picture from "search engine law" is far from being complete. It's merely a thumbnail...

Lawyers representing the NMPA (National Music Publishers' Association), the leading trade association representing U.S. music publishers, have met with Google to discuss the problem of AdWord advertising on copyright-infringing lyric websites. They want to stop copyright infringers from making money. According to US Today, Google said in a statement: "We take copyrights very seriously. In accordance with our policy, we disable ads on websites in our content network when we are made aware that they appear next to copyrighted content. Copyright holders who find their copyrighted material appearing next to Google ads can find more information about the Digital Millennium Copyright Act (DMCA) take-down requests on our AdSense website. Hundreds of thousands of website publishers responsibly abide by our policies and we're committed to preventing those who don't from using our program."