
The court found that Google's use of the images was 'fair use' under existing law.
"We conclude that Perfect 10 is unlikely to be able to overcome Google's fair use defence and, accordingly, we vacate the preliminary injunction regarding Google's use of thumbnail images," Judge Ikuta wrote for a three-judge panel.
"We conclude that the significantly transformative nature of Google's search engine, particularly in light of its public benefit, outweighs Google's superseding and commercial uses of the thumbnails in this case."
However, Google's 'view full sized image' function may be unlawful, the court found, advising that a lower court should rule on this.
Perfect 10, which charges US$25.50 (A$31) for access to its site, first complained to Google in 2001 and filed a case against the company in 2004. A year later it filed a similar case against Amazon.
The Motion Picture Association of America and a number of photographic agencies made legal filings in support of Perfect 10.