Lewis Galoob Toys, Inc. v. Nintendo of America, Inc.

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Lewis Galoob Toys, Inc. v. Nintendo of America, Inc.
Seal of the United States Courts, Ninth Judicial Circuit.svg
Court United States Court of Appeals for the Ninth Circuit
Full case nameLewis Galoob Toys, Inc. v. Nintendo of America, Inc.
DecidedMay 21, 1992
Citation(s)964 F.2d 965
Case history
Prior action(s)780 F. Supp. 1283 (N.D. Cal. 1991) (granting judgment for Galoob following two-week bench trial)
Subsequent action(s)cert. denied, 507 U.S. 985, 113 S. Ct. 1582, 123 L. Ed. 2d 149 (1993)
Court membership
Judge(s) sitting Jerome Farris, Pamela Ann Rymer, and David V. Kenyon
Case opinions
manufacturer of product that allowed users to alter codes transmitted between video gaming console and game cartridge did not infringe console manufacturer’s exclusive right, under federal copyright law, to create derivative works

Lewis Galoob Toys, Inc. v. Nintendo of America, Inc. is a 1992 legal case where the United States Court of Appeals for the Ninth Circuit concluded that there was no copyright infringement made by the Game Genie, a video game accessory that could alter the output of games for the Nintendo Entertainment System. The court determined that Galoob's Game Genie did not violate Nintendo's exclusive right to make derivative works of their games, because the Game Genie did not create a new permanent work. The court also found that the alterations produced by the Game Genie qualified as non-commercial fair use, and none of the alterations were supplanting demand for Nintendo's games.

Contents

UK video game developer Codemasters created the Game Genie to capitalize on the success of the Nintendo Entertainment System, reverse engineering the hardware to produce a device that could attach to Nintendo game cartridges. Knowing that Nintendo did not authorize this, Galoob pre-emptively sued Nintendo in May 1990 to prevent them from blocking sales of the Game Genie, and Nintendo responded by suing for a preliminary injunction. Although the courts enjoined the Game Genie from being sold, Galoob ultimately succeeded when the case went to trial, also winning $15 million in damages. Nintendo tried to appeal the decision, but was unsuccessful.

The Game Genie sold millions of units, and the product line was extended with versions for other consoles. The case was cited in another copyright dispute from the same time, with Sega v. Accolade (1992) further establishing that reverse engineering is fair use. The case has also been cited for establishing the rights of users to modify copyrighted works for their own use. However, the holding was distinguished by courts in Micro Star v. FormGen Inc. (1998), finding copyright infringement when making permanent modifications and distributing them to the public.

Background

The Game Genie could be attached to a Nintendo game cartridge to intercept and transform its data. Game-Genie-NES.jpg
The Game Genie could be attached to a Nintendo game cartridge to intercept and transform its data.

The Nintendo Entertainment System (NES) is a Nintendo game console first released in Japan in 1983, followed by its North American debut in 1985. [1] By the early 1990s, the system had become so popular that the market for Nintendo cartridges was larger than that for all home computer software. [1] The console had over 500 games created by more than 60 companies, each with a legal license to produce compatible game cartridges. [2] By design, these cartridges were difficult for unauthorized third-parties to alter or reverse engineer. [3] Each cartridge was manufactured with read-only memory hardware, [2] including a 10NES chip that prevented unauthorized games from booting on the Nintendo system. [3] This was designed to discourage counterfeit games. [4]

In the late 1980s, a UK developer called Codemasters became interested in producing games for the NES. [4] At a Consumer Electronics Show in Las Vegas, Codemasters founder David Darling tried to approach Nintendo's representatives, but they would not engage without an official appointment. [4] Darling interpreted this as a "cold shoulder", and the company became determined to create an unauthorized development kit for the NES, starting by reverse engineering the console and cracking Nintendo's security measures. [4] This allowed Codemasters to port their game Treasure Island Dizzy (1989) to the NES, and also allowed them to engineer a knob on the cartridge that could adjust the number of lives for the player character. [5]

These discoveries led them to develop the Game Genie, a device that attached to NES game cartridges to modify each game. [4] The device functioned by intercepting data from a Nintendo game cartridge, and replacing it with new data based on player input, before projecting the final result onto a TV screen. [3] [6] In most cases, players could use the device to make an NES game easier to win. [4] For example, a player could give themself unlimited lives, or make themselves invincible, or start at a later level. [3] However, the device also allowed more creative modifications, such as changing the player character into another sprite, or even accessing unused or unfinished parts of the game. [4]

After securing distribution in Canada through Camerica, Codemasters also presented the Game Genie to Galoob, an American toy manufacturer. [4] When Lewis Galoob's son first encountered the device, he became fascinated by the Game Genie's ability to make Mario jump higher. [5] Galoob agreed to distribute the Game Genie in North America, and Codemasters acquired every NES game available, so that they could discover and document the various "codes" that would alter the game's output. [4] The Game Genie was announced in May 1990, [7] and was set to launch in July 1990. [8]

Knowing that Nintendo would be unhappy with the Game Genie, Codemasters and Galoob initiated a lawsuit on May 17, 1990, against Nintendo in the United States District Court for the Northern District of California, seeking a declaratory judgment that the Game Genie did not violate Nintendo's copyrights. [9] Galoob also asked the court for an injunction to stop Nintendo from interfering with the Game Genie's sales. [4]

Nintendo responded with a counterclaim against Galoob, [9] asking for an injunction of their own to prohibit sales of the Game Genie. [4] Nintendo argued that the Game Genie violated their intellectual property, infringing on their exclusive right to make derivative works of their copyrighted games. [3] Nintendo also alleged that Galoob contributed to infringement by encouraging their customers to make unauthorized derivative works using the Game Genie. [6] Nintendo's reasoning relied heavily on the decision in Midway Manufacturing Co. v. Artic International (1983), where the court stopped Artic from selling hardware that could speed up the arcade game, Galaxian. [3] In Midway, the judge concluded that Artic's speed-up kit incorporated copyrighted material from the game, and supplanted demand for Midway's game. [10] By contrast, although the Game Genie altered the game's output and player experience, it did not alter the original cartridge in any way. [3]

Injunction and decision

The Richard H. Chambers United States Court of Appeals, which houses the United States Court of Appeals for the Ninth Circuit Court of Appeals.jpg
The Richard H. Chambers United States Court of Appeals, which houses the United States Court of Appeals for the Ninth Circuit

On July 2, 1990, District Judge Robert Howard Schnacke granted Nintendo a preliminary injunction, preventing Galoob from selling the Game Genie until the dispute was fully resolved. [9] [11] 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. [7] Galoob appealed the injunction, but the Ninth Circuit Court of Appeals affirmed the lower court's decision on February 7, 1991, [9] and the dispute would proceed to trial in April. [8]

A similar lawsuit launched by Nintendo in November 1990 against Camerica in Canada seeking an interlocutory injunction was dismissed by the Federal Court of Canada's Trial Division in February 1991. [12] The court's Appeal Division upheld the decision on May 24, 1991. [13]

On July 12, 1991, District Judge Fern M. Smith ruled that Galoob had not violated Nintendo's copyrights. [8] [9] In her ruling, Smith compared usage of the Game Genie to "skipping portions of a book" or fast-forwarding through a purchased movie. [9] She also compared use of the Game Genie to altering a copyrighted board game for personal use; Nintendo conceded that this would be allowed under copyright. [11] In determining that use of the Game Genie was non-infringing, Smith wrote that "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." [9] She also ruled in the alternative, that it would still fall under fair use and was not infringing. [14] The decision lifted the injunction on Galoob that had been in place for just over a year. [8] In December 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. [7] Partly using extrapolated sales data from Canada, the court found that because Galoob's losses actually exceeded $15 million, it was entitled to the entire amount, plus legal fees. [4] [7]

Nintendo appealed the verdict to the Ninth Circuit Court of Appeals, but the appellate court affirmed the lower court's decision on May 21, 1992. [15] The appeals court ruled that the changes created by the Game Genie were not "fixed" in any permanent way, and thus no derivative work was created. [16] A derivative work must incorporate a protected work in some concrete or permanent form, which is not the case for the audiovisual images produced by the Game Genie. [6] The court also considered the doctrine of fair use, emphasizing the fourth factor of the fair use test where the court analyzes the effect of the alleged infringement on the value of the original work. [15] The court stated that even if the Game Genie did allow players to create a derivative work, those players were doing this as a nonprofit activity, and Nintendo failed to show any economic harm from use of the Game Genie. [16] The Game Genie did not supplant demand for Nintendo's games, as consumers would need to purchase the original game in order to use the add-on. [6] The court concluded that Galoob had not directly infringed Nintendo's copyright, nor contributed to any infringing activity from Game Genie users. [16] After the verdict, Nintendo tried to appeal the $15 million award in damages, but on February 17, 1994, the Ninth Circuit affirmed the district court's decision once again. [7]

Impact and legacy

Codemasters became confident that the Game Genie did not infringe copyright, and began selling a version for the Sega Genesis, after threatening Sega with a lawsuit. Game-Genie-Genesis.jpg
Codemasters became confident that the Game Genie did not infringe copyright, and began selling a version for the Sega Genesis, after threatening Sega with a lawsuit.

After the dispute, Codemasters became confident of the commercial potential of the Game Genie, as well as its legality. [4] Sega also came to an agreement with Codemasters to sell an official Game Genie device for the Sega Genesis, but only after Codemasters privately issued an ultimatum and promised to "open [the] floodgates" through a lawsuit, according to Codemasters developer Richard Alpin. [4]

The Game Genie was considered non-infringing for two major reasons: that it did not create a new permanent work, and that Nintendo did not prove they experienced any present or potential market harm. [16] [17] In the Handbook of Intellectual Property Claims and Remedies, the author Patrick J. Flinn argued that Nintendo failed to take into account a fair use analysis, and that there was no real evidence that the Game Genie hurt their business. [18]

Galoob v Nintendo signaled a change in the legality of third party game products of all kinds. [19] In the same year, the case was cited in Sega v. Accolade (1992), which held that there was no copyright infringement when Accolade reverse engineered the Sega Genesis to publish third party games without Sega's authorization. [20] The Hastings Communication and Entertainment Law Journal reacted to both cases, comparing the court's interpretations of both derivative works and fair use, and concluded that courts were shifting to allow more interoperability between technologies. [6] The Journal of Intellectual Property Law compared both the Sega and Galoob cases to the earlier fair use case in Sony Corp. of America v. Universal City Studios (1984), concluding that a new technology shouldn't trigger copyright liability as long as it doesn't undermine a copyright owner's ability to earn a fair return for their works. [11] The Golden Gate University Law Review praised the Galoob court for following fair use doctrine and refining the definition of a derivative work, allowing new innovations without jeopardizing the incentive to innovate. [2] The Galoob decision continues to influence legal discussions of fair use of copyrighted video game content, such as how to apply the principle of permanency to a live stream or Let's Play. [21]

By deterring companies from being overly litigious, the case was essential to the future of video game modding in the United States and globally. [3] Soon after the court decided Galoob, video game mods became more widespread, particularly with the popularity of Doom and the permissive attitude of its developer, Id Software. [22] As third parties began to sell compilations of user-created levels, Micro Star created Nuke-It, a compilation of 300 custom made levels for Duke Nukem 3D , [23] provoking a copyright dispute with the game's developers. [22] In the ensuing lawsuit Micro Star v. FormGen (1998), Judge Alex Kozinski distinguished the infringement of Micro Star's compilation from the non-infringing Game Genie, [24] because the Nuke-It compilation was a permanent derivative work, and it was misappropriating profits from a potential Duke Nukem sequel. [25] The Santa Clara High Technology Law Journal compared the Micro Star and Galoob cases, arguing that it is not inherently copyright infringement to modify a game, unless that modification is saved as a copy and distributed to the public. [24] Since modern mods are distributed to the public in a permanent form, the William & Mary Business Law Review called the Galoob decision a "Pyrrhic victory" for modders. [26]

The question of whether a modification creates a new derivative work arose outside of the game industry in 2001, when television networks and studios sued SONICblue over the commercial-skipping feature of their digital video service, ReplayTV. [27] However, SONICblue filed for bankruptcy, and its new ownership agreed to remove the commercial-skipping feature before courts could decide how Galoob applied. [27] This issue also arose with the proliferation of "clean" edits of films, particularly a 2003 dispute involving ClearPlay technology that performed this filtering in real-time. [24] The dispute became moot with the passage of the Family Entertainment and Copyright Act of 2005, which expressly permitted digital filtering, without changing the application of copyright law to cut-and-splice film edits. [28]

The copyright cases of Midway, Galoob, and Micro Star continue to guide the law around game modifications, that a permanent modification is likely copyright infringement, where an impermanent modification is not. [26] The Galoob precedent has led courts to permit the use of third-party software to manipulate and cheat at other games. [29] This was later addressed in the Digital Millennium Copyright Act (1998), which limited people from creating technology that is "primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access" to a protected work. [29]

Related Research Articles

Game Genie is a line of video game cheat cartridges originally designed by Codemasters, sold by Camerica and Galoob. The first device in the series was released in 1990 for the Nintendo Entertainment System, with subsequent devices released for the Super NES, Game Boy, Genesis, and Game Gear. All Game Genie devices temporarily modify game data, allowing the player to do things unintended by developers such as, depending on the game, cheating, manipulating various aspects of games, and accessing unused assets and functions. Five million units of the original Game Genie products were sold worldwide, and most video game console emulators for the platforms it was on feature Game Genie code support. Emulators that have Game Genie support also allow a near-unlimited number of codes to be entered whereas the actual products have an upper and lower limit, between three and six codes.

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<span class="mw-page-title-main">Codemasters</span> British video game developer

The Codemasters Software Company Limited is a British video game developer based in Southam, England, which is a subsidiary of American corporation Electronic Arts and managed under its EA Sports division. Founded by brothers Richard and David Darling in October 1986, Codemasters is one of the oldest British game studios, and in 2005 was named the best independent video game developer by magazine Develop. It formerly also published third-party games.

<span class="mw-page-title-main">Camerica</span> Canadian video game publisher

Camerica was a Canadian video game company founded in 1988. It released various unlicensed video games and accessories for the Nintendo Entertainment System, such as the Game Genie, and was the North American publisher for British developer Codemasters.

<span class="mw-page-title-main">Datel</span> British video game accessories manufacturer; makers of Action Replay

Datel is a UK-based electronics and game console peripherals manufacturer. The company is best known for producing a wide range of hardware and peripherals for home computers in the 1980s, for example replacement keyboards for the ZX Spectrum, the PlusD disk interface and the Action Replay series of video game cheating devices.

<span class="mw-page-title-main">Galoob</span> American toy company

Lewis Galoob Toys, Inc., was a toy company headquartered in South San Francisco, California. They are best known for creating Micro Machines, which accounted for 50% of its sales in 1989, and distributing the Game Genie in the United States.

<i>Stern Electronics, Inc. v. Kaufman</i> American legal case

Stern Electronics Inc. v. Kaufman, 669 F.2d 852, is a legal case in which the United States Court of Appeals Second Circuit held that Omni Video Games violated the copyright and trademark of Scramble, an arcade game marketed by Stern Electronics. The lawsuit was due to a trend of "knock-off" video games in the early 1980s, leading to one of the earliest findings of copyright infringement for a video game, and the first federal appellate court to recognize a video game as a copyrighted audiovisual work.

Micro Machines is a series of video games featuring toy cars, developed by Codemasters and published on multiple platforms. The series is based on the Micro Machines toy line of miniature vehicles.

<i>Midway Manufacturing Co. v. Artic International, Inc.</i> U.S. Court of Appeals case

Midway Manufacturing Co. v. Artic International, Inc., 704 F.2d 1009, was a legal case where the United States Court of Appeals for the Seventh Circuit found that Artic violated Midway's copyright in their arcade games Pac-Man and Galaxian. The lawsuit was part of a trend of "knock-off" video games in the early 1980s, with courts recognizing that a video game can qualify for protection as a copyrighted audiovisual work.

Cheating in video games involves a video game player using various methods to create an advantage beyond normal gameplay, usually in order to make the game easier. Cheats may be activated from within the game itself, or created by third-party software or hardware. They can also be realized by exploiting software bugs; this may or may not be considered cheating based on whether the bug is considered common knowledge.

<span class="mw-page-title-main">Video game console emulator</span> Program that reproduces video game consoles behavior

A video game console emulator is a type of emulator that allows a computing device to emulate a video game console's hardware and play its games on the emulating platform. More often than not, emulators carry additional features that surpass limitations of the original hardware, such as broader controller compatibility, timescale control, easier access to memory modifications, and unlocking of gameplay features. Emulators are also a useful tool in the development process of homebrew demos and the creation of new games for older, discontinued, or rare consoles.

<span class="mw-page-title-main">Derivative work</span> Concept in copyright law

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<span class="mw-page-title-main">Digital Millennium Copyright Act</span> United States copyright law

The Digital Millennium Copyright Act (DMCA) is a 1998 United States copyright law that implements two 1996 treaties of the World Intellectual Property Organization (WIPO). It criminalizes production and dissemination of technology, devices, or services intended to circumvent measures that control access to copyrighted works. It also criminalizes the act of circumventing an access control, whether or not there is actual infringement of copyright itself. In addition, the DMCA heightens the penalties for copyright infringement on the Internet. Passed on October 12, 1998, by a unanimous vote in the United States Senate and signed into law by President Bill Clinton on October 28, 1998, the DMCA amended Title 17 of the United States Code to extend the reach of copyright, while limiting the liability of the providers of online services for copyright infringement by their users.

<i>Sega v. Accolade</i> 1992 American court case

Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, is a case in which the United States Court of Appeals for the Ninth Circuit applied American intellectual property law to the reverse engineering of computer software. Stemming from the publishing of several Sega Genesis games by video game publisher Accolade, which had disassembled Genesis software in order to publish games without being licensed by Sega, the case involved several overlapping issues, including the scope of copyright, permissible uses for trademarks, and the scope of the fair use doctrine for computer code.

<i>Micro Star v. FormGen Inc.</i> 1998 American court case on copyright

Micro Star v. FormGen Inc. 154 F.3d 1107 is a legal case applying copyright law to video games, stopping the sales of a compilation of user-generated levels that infringed the copyright of Duke Nukem 3D. Micro Star downloaded the Duke Nukem 3D levels and re-packaged them as Nuke It, after seeing their popularity on the internet. Micro Star filed suit in the United States District Court for the Southern District of California, asking for declaratory judgment that they had not infringed any copyright. Game publisher FormGen counter-sued, claiming that Micro Star created a derivative work based on Duke Nukem 3D and infringed their copyright.

<span class="mw-page-title-main">CIC (Nintendo)</span> Security lockout chip used in Nintendo game consoles

The Checking Integrated Circuit (CIC) is a lockout chip designed by Nintendo for the Nintendo Entertainment System (NES) video game console in 1985; the chip is part of a system known as 10NES, in which a key is used by the lock to both check if the game is authentic, and if the game is the same region as the console.

<i>Sony Computer Entertainment, Inc. v. Connectix Corp.</i> Decision by the Ninth Circuit Court of Appeals

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<i>Atari Games Corp. v. Nintendo of America Inc.</i> Legal dispute between Atari and Nintendo

Atari Games Corp. v. Nintendo of America Inc., 975 F.2d 832, is a U.S. legal case in which Atari Games engaged in copyright infringement by copying Nintendo's lock-out system, the 10NES. The 10NES was designed to prevent Nintendo's video game console, the Nintendo Entertainment System (NES), from playing unauthorized game cartridges. Atari, after unsuccessful attempts to reverse engineer the lock-out system, obtained an unauthorized copy of the source code from the United States Copyright Office and used it to create its 10NES replica, the Rabbit. Atari then sued Nintendo for unfair competition and copyright misuse, and Nintendo responded that Atari had engaged in unfair competition, copyright infringement, and patent infringement.

<i>Micro Machines</i> (video game) 1991 video game

Micro Machines is a racing game developed by Codemasters and originally published by Camerica for the Nintendo Entertainment System in 1991. Themed around Galoob's Micro Machines toys, players race in miniaturised toy vehicles around various environments. The game is the first installment in the Micro Machines video game series.

The protection of intellectual property (IP) of video games through copyright, patents, and trademarks, shares similar issues with the copyrightability of software as a relatively new area of IP law. The video game industry itself is built on the nature of reusing game concepts from prior games to create new gameplay styles but bounded by illegally direct cloning of existing games, and has made defining intellectual property protections difficult since it is not a fixed medium.

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