Lewis Galoob Toys, Inc. v. Nintendo of America, Inc.
964 F.2d 965 (9th Cir. 1992).
Lewis Galoob Toys developed a device called the Game Genie, which allowed the player of a Nintendo Entertainment System game to alter up to three features of the game, such as a game character’s speed or strength, or the character’s number of lives. The Game Genie, which is inserted between a game cartridge and the Nintendo system, functions by replacing the value for a single data byte sent by the game cartridge to the Nintendo system. The Game Genie’s effects are temporary, having no affect on the data that is stored on the game cartridge.
Nintendo brought suit against Galoob, alleging contributory infringement because the marketing, advertising, promoting, and selling the Game Genie contributed to the creation of infringing derivative works. The district court concluded that (1) “the audiovisual displays created by the Game Genie are not derivative works” and (2), even if the displays were derivative works, “the displays are a fair use.” Nintendo appealed. II. Analysis 1. Derivative Works
The Ninth Circuit first looked at whether the audiovisual displays created by the Game Genie constituted derivative works. The court began by emphasizing that “a derivative work must incorporate a portion of a protect work in some concrete or permanent form.” The court determined that the derivative work does not have to be “fixed,” as required for copyright protection, but an independent work must be created. The Ninth Circuit agreed with the district court that no independent work is created by the Game Genie. In making this determination the court made a distinction between products that “enhance” copyrighted works and products that “replace” copyrighted works. In this case, the Game Genie “enhances” the Nintendo game, but it does not “replace” the Nintendo game. The Game Genie, by itself, cannot produce an audiovisual display. Additionally, the court distinguished this case between two prior cases. In Mirage Editions, Inc., v. Albuquerque A.R.T. Co., 856 F.3d 1341 (9th Cir. 1988), the Ninth Circuit held that ceramic tiles displaying art work taken from a commemorative book constituted derivative works. The ceramic tiles physically incorporated a protected work in a form that could be sold. In addition, the court distinguished Mirage by noting that “sales of the tiles supplanted purchasers’ demand for the underlying work.” In Midway Manufacturing Co. v. Artic International, Inc., 704 F.2d 1009 (7th Cir. 1983), Artic sold computer chips that could be inserted into a Midway’s arcade game to speed up the rate of play. The Seventh Circuit held that the speeded-up version of Midway’s game constituted a derivative work. The Artic chip “substantially copied and replaced” the original Midway chip. The court also distinguished Midway by noting that the purchasers of the Artic chip benefited financially by selling an altered game to the public. Therefore, because the Game Genie “does not contain or produce a Nintendo game’s output in some concrete or permanent form, nor . . . supplant demand for Nintendo game cartridges, the court held that the audiovisual displays created by the Game Genie do not constitute a derivative work. 2. Fair Use
The district court held that even if the audiovisual displays created by the Game Genie did constitute a derivative work, Galoob was not liable because the displays are fair use. The Ninth Circuit first made clear that “a party cannot authorize another party to infringe a copyright unless the authorized conduct would itself be unlawful.” Thus, if the use of the Game Genie is a fair use, Galoob cannot be liable for infringement. The court recognized that the users of the Game Genie are engaged in a non-profit activity, and thus their use is presumptively fair. Nintendo was unable to overcome this presumption. First, relying on Sony Corp. of Am. v. Universal Studios, Inc., 464 U.S. 417 (1984), the court recognized that “a party who distributes a copyrighted work cannot dictate how that work is to be enjoyed.” Thus, once users have paid for the Nintendo game, the Game Genie may be used to make the experience of Nintendo game play more enjoyable. Focusing on the fourth fair use factor in 17 U.S.C. § 107(4), the court also concluded that Nintendo failed to show harm to the existing and future markets for its copyrighted games. Because the Game Genie is used for a noncommercial purpose, the future harm may not be presumed. The court relied on testimony of Galoob’s expert witness that there would be very little market interest for “junior or expert versions of existing Nintendo games” because the original version “already has been designed to appeal to the largest number of consumers,” and the consumer would feel “cheated or robbed” buying a new game that does not include new material. Additionally, Nintendo admitted to having no plans to market such games. Therefore, the court held that a consumer’s use of the Game Genie in conjunction with a Nintendo game was a fair use.