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Perfect 10 had claimed that Google was damaging its business by freely distributing the pictures it was trying to sell. Perfect 10 publishes a magazine that sells for $7.99 per issue and at the subscription-based perfect10.com web site costing $25.50 per month. In its defence, Google had claimed that displaying thumbnail versions of the images constituted 'fair use'.

Perfect 10 had argued that the thumbnails damaged a portion of its business that offers images as wallpaper on mobile phones. Its lawyers pointed to a deal with British company Fonestarz Media which has sold 6,000 images from the Perfect 10 library.

It

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also claimed that Google had made money out of its AdSense program by allowing other sites to steal the images, reproduce them and then run Google ads alongside.. It had also claimed that Google had helped other copyright infringers by making it easier for them to find and download the pictures and cited the Supreme Court Grokster ruling as a precedent.

In a partial victory for Google, U.S. District Court Judge A. Howard Matz ruled that it was perfectly legal for the search engine to link to the original version of the pictures. Nevertheless, the ruling could make the Google Images area of the search engine unusable if other companies use the Perfect 10 as a precedent and claim copyright infringement.

The judge has now ordered that both parties come to an agreement which satisfies both parts of the judgement. Google has already said that if the parties fail to come to an agreement and the judge issues an injunction it will appeal.

The ruling will be followed closely by the other major search engines including Yahoo! and MSN who both offer similar libraries of images. Perfect 10 has already announced its intention to sue Amazon for copyright infringement on its A9 search engine.