Most big Internet copyright suits don't involve contingency. But they do involve top tier, very expensive lawyers. There are some freedom of speech advocates who will occassionally provide a pro bono defense to a defendant, but in most cases, it comes down to the might of the parties. Thus, you are ultimately correct about actual practice. If a small time blogger, for example, suddenly starts receiving threatening letters from Time Warner, or Walt Disney attorneys, the small time blogger will usually give in to the demands. And if google wants to hyperlink to your images and pages, no small time blogger will be able to take them on. So typically, these things settle for the sake of financial certainty, as opposed to legal merit.