Cases regarding Copyright - Part 1

Sega v. Accolade 

   Sega Enterprises Ltd. v. Accolade, Inc., (http://bulk.resource.org/courts.gov/c/F2/977/977.F2d.1510.92-15655.html) is a significant case in American intellectual property law. The case involved several overlapping issues, including the scope of copyright, permissible uses for trademarks, and the scope of fair use for computer code.

  In the late 1980s, Sega became concerned about software and hardware piracy in Southeast Asia, and particularly in Taiwan. Taiwan was not a signatory of the Berne Convention on copyright, limiting Sega's legal options. However, Taiwan did allow prosecution for trademark infringement. As a result, the Sega Genesis III incorporated a technical protection mechanism intended to facilitate trademark suits against companies producing pirate Genesis games. When a game cartridge was inserted, the console would check for the presence of the string "SEGA" at a particular point in the memory contained in the cartridge. If the string was present, the console would display the message: "PRODUCED BY OR UNDER LICENSE FROM SEGA ENTERPRISES LTD." If not, the game wouldn't run.

  Accolade, a video game developer, was a legal but unlicensed third-party vendor of Genesis-compatible games. Prior to the release of the Genesis III, they had reverse-engineered a number of Sega games and noted the presence of the 'SEGA' string. Accolade engineers suspected it would at some point be used as an authorization technique and had incorporated the same string into their own games at the appropriate location.

  On October 31, 1991, Sega filed suit in the United States District Court for the Northern District of California. Sega raised two primary issues: first, that causing the console to display the Sega message was falsely using the Sega trademark and second, that Accolade's reverse engineering had infringed Sega's copyright. On April 3, 1992, the district court ruled that Sega was likely to prevail at trial, and issued a preliminary injunction on behalf of Sega, prohibiting future sales by Accolade of Genesis-compatible games incorporating the Sega message or using the results of the reverse engineering. Accolade appealed to the Ninth Circuit, which overruled the district court.

Lewis Galoob Toys, Inc. v. Nintendo of America, Inc. (Ninth Circuit Court of Appeals, 1992)

  Lewis Galoob Toys, Inc. v. Nintendo of America, Inc. (http://scholar.google.com/scholar_case?case=14167398686354689030&hl=en&as_sdt=2&as_vis=1&oi=scholarr) was a court case which established the rights of users to modify copyrighted works for their own use.

   Under license from UK company Codemasters, Galoob manufactured an add-on product called Game Genie, which allowed users to modify video games by entering in certain codes; for example, a code might make the player invincible by negating the programming that updates the player's health amount. Nintendo, which sold a video game system and video games that could be modified by Game Genie, sued Galoob for copyright infringement, alleging that Game Genie made a derivative work, violating Nintendo's copyright in their video games.

   An earlier case on similar facts (Midway Manufacturing Co. v. Artic International, Inc.) favored the original copyright holder. Nintendo relied heavily on this case as precedent for its legal arguments.

   The court battle began in May of 1990, when Galoob filed a complaint against Nintendo in U.S. District Court, seeking a declaratory judgement that the Game Genie did not violate Nintendo's copyrights, as well as an injunction preventing Nintendo from modifying their NES game system to make it incompatible with the Game Genie. Nintendo responded by filing a complaint against Galoob, seeking an injunction preventing Galoob from selling the Game Genie.

   In July of 1990, the court granted Nintendo a preliminary injunction, preventing Galoob from selling the Game Genie until the court matter was resolved. It also ordered Nintendo to post a bond (initially $100,000, later increased to $15 million), in order to ensure Galoob be compensated for sales lost during the injunction, should Galoob win the case. Galoob appealed the injunction to the Ninth Circuit Court of Appeals, but lost.

    After over a year of legal wrangling, the trial concluded in July of 1991, with District Judge Fern M. Smith ruling in favor of Galoob, declaring that the Game Genie did not violate Nintendo's copyrights. Smith compared usage of the Game Genie to "skipping portions of a book" or fast-forwarding through a purchased movie; thus the altered game content did not constitute the creation of a derivative work as Nintendo had argued. Smith wrote, in part, "Having paid Nintendo a fair return, the consumer may experiment with the product and create new variations of play, for personal enjoyment, without creating a derivative work." Nintendo appealed the ruling to the Ninth Circuit Court of Appeals, but lost as the Ninth Circuit affirmed the lower court's decision.

   In December of 1991, a hearing was held to determine how much of the $15 million bond would be awarded to Galoob to compensate for losses during the approximately one-year period they were prohibited from selling the Game Genie. The court found that because Galoob's losses actually exceeded $15 million, that Galoob was entitled to the entire amount, plus legal fees. Nintendo appealed this decision to the Ninth Circuit, but lost again. (http://openjurist.org/16/f3d/1032/nintendo-of-america-inc-v-lewis-galoob-toys-inc).