In the online world, where intellectual property rights can be violated with the simple click of a mouse, innovation sometimes finds itself engaged in a game of chicken with the law. Recently, online-photo-search engine Ditto.com played just such a game, taking their fight to the Ninth Circuit Court of Appeals. The Ninth Circuit's holding protects Ditto.com's use of copyrighted photos as transformative fair use. But the holding also addresses inline linking and framing, warning that they can violate copyright even in the face of a fair use.
Kelly Donohue, Court Gives Thumbs-Up for Use of Thumbnail Pictures Online, 1 Duke Law & Technology Review 1-10 (2002)