The Electronic Frontier Foundation thinks the Ninth Circuit Court of Appeals handed Internet innovators and users of all stripes a huge victory in a case involving a company called Perfect 10 versus Google:

The decision covers a wide-range of online copyright issues from in-line linking to fair use to the DMCA safe harbors and post-Grokster liability. Perfect 10 had sued Google for copyright infringement, claiming that its "Image Search" tool illegally reproduced and displayed P10 photos when it returned thumbnail results and framed third-party websites in response to search terms. It also claimed that Google was liable for contributing to Internet user infringement when users would look at pictures online that they had found via Google Image search.

Law blogger Eric Goldman is less sure of the sweeping nature of the ruling, saying:

It overturns the most pernicious part of the district court opinion holding that Google was directly infringing for displaying thumbnails in its image search. On the other hand, it opens up the possibility of new secondary liability by the search engines. However, on balance, this opinion is much better for the search engines than the lower court opinion, so it's a mild win for them.