Copyright Clause Confusing? Crazy!

I noticed this on Shutterfly (though many, many, many sites have a similar warning):

Since most countries (including the U.S.) have a policy that copyright is in effect once a work is established in a medium, all of the pictures that anyone will typically upload are covered under copyright. Based on this, the warning above effectively results in just about all uploaders being in violation of Shutteryfly’s terms. The ramifications could be stunning. The warning should be more like “Uploading materials you don’t have the legal right to…”