The recent decision by the California Central District Court in Perfect 10 v. Google, currently under appeal, illustrates the difficulty courts have in applying decades old copyright law to the current technical environment.  In the Perfect 10 case, an on-line purveyor of images of nude models sued Google for its practice of using thumbnails acquired by its Googlebot Web crawler and including them on image search results pages. 

Much of the discussion in the case focused on whether Google's use of the thumbnail photos constituted "Fair Use" under US Copyright law.  Prior decisions in Field v. Google and Kelly v. Arriba Soft, went Google's way on fair use issues.  The Perfect 10 court, however, in part granted a preliminary injunction against Google. 

While at first blush, the thumbnail practice seems to be one which benefits users of the Web in general and does not create much potential harm to the copyright holder, Perfect 10 was able to establish some strong economic factors to the contrary.  In evaluating the effect of the use on the potential market for or value of the copyright work, the Perfect 10 court considered the fact that the display of thumbnails could circumvent a market for small photos to be displayed on cell phones, as was evidenced by a license between Perfect 10 and Fonestarz. 

The focus on this potential market effect shows that it is unlikely for the caselaw in this area to be settled in any long-lasting manner.  With the growing use of smartphones, PDA's and MP3 players, the potential for seemingly innocuous copyright uses to infringe a potential market grows significantly.