Google does not have to police its users for evidence of repeat infringement and is not liable if it does not know of the infringement, according to an appeals court ruling (PDF) today in Perfect10 v. Google.
The ruling rejected all but one of Perfect10's appeals in its lawsuit against Google over copyrighted images that appear in Google's search. However, the court remanded back to the district court the question of whether Perfect10, in notifying Google of repeat copyright offenders, effectively raised a "red flag" that Google would have to heed.
Under the so-called "red flag" test of the DMCA, a service provider such as Google loses immunity from its users' infringing activities if it fails to take action when it is aware of the actual infringement.
What Perfect10 is effectively arguing is that Google employees would have to be really stupid not to realize that the same Web sites were repeatedly using copyrighted images. Especially since Perfect10 kept reminding Google.
This is an important point, and the decision on this matter will have implications on copyright issues beyond just this case. If the district court rules that repeat notices from a third party do constitute knowledge of infringement, then Google will ipso facto be guilty of violating the DMCA safe harbor provisions.
Update: There's a piece in the Washington Post about this now.