Midway Mfg. Co. v. Dirkschneider

• Decision Date: 15 July 1981
• Docket Number: Civ. No. 81-0-243.
• Citation: 543 F. Supp. 466
• Court: U.S. District Court — District of Nebraska
• Parties: MIDWAY MFG. CO., an Illinois corporation, Plaintiff, v. Dale DIRKSCHNEIDER and Harold Peterson, individually and d/b/a A-1 Machines, a Nebraska proprietorship; Gerrit Kraayenbrink, individually and d/b/a Soo Valley Dist. Co.; and Venture Line, Inc., an Arizona corporation, Defendants.

543 F. Supp. 466

MIDWAY MFG. CO., an Illinois corporation, Plaintiff, v. Dale DIRKSCHNEIDER and Harold Peterson, individually and d/b/a A-1 Machines, a Nebraska proprietorship; Gerrit Kraayenbrink, individually and d/b/a Soo Valley Dist. Co.; and Venture Line, Inc., an Arizona corporation, Defendants.

Civ. No. 81-0-243.

United States District Court, D. Nebraska.

July 15, 1981.

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Lindsey Miller Lerman, Omaha, Neb., David A. Gerber, Los Angeles, Cal., Eric C. Cohen, Chicago, Ill., for plaintiff.

Mark Hunter, Omaha, Neb., for defendants Dale Dirkschneider and Harold Peterson, individually and doing business as A-1 Machines.

Dennis Thomte, Omaha, Neb., for defendants Gerrit Kraayenbrink, individually and doing business as Soo Valley Distributing Company, and Venture Line, Inc.

MEMORANDUM

URBOM, Chief Judge.

The plaintiff, Midway Manufacturing Co., is a manufacturer of coin-operated electronic video games. Midway has obtained copyright registrations on many of these games, including Galaxian, Pac-Man, and Rally-X. The plaintiff alleges that the defendants¹ are engaged in the manufacture, distribution, and sale of video games which are virtually identical to the plaintiff's Galaxian, Pac-Man and Rally-X games. The plaintiff contends that the conduct of the defendants infringes the plaintiff's copyrights, violates the Lanham Act, and violates the Nebraska Deceptive Trade Practices Act. For relief, the plaintiff seeks damages and an injunction prohibiting future infringement.

On April 30, 1981, Judge Robert V. Denney issued an ex parte temporary restraining order Filing # 17. He also issued an order directing the United States Marshal to impound any allegedly infringing articles in the possession of the defendants Filing # 9. On May 18, 1981, a hearing was held before Judge Denney on the plaintiff's request for a preliminary injunction Filing # 1. Upon Judge Denney's hospitalization and death the case has been reassigned to me, and the parties have agreed to my resolving the matter of preliminary relief on the basis of the record already made, but requested oral arguments. Such arguments were held on July 3, 1981, and the issue of preliminary relief is now ready for resolution. The following discussion constitutes this court's findings of fact and conclusions of law on the plaintiff's request for preliminary relief.

I. Findings of Fact.

1. The plaintiff, Midway Manufacturing Co., is an Illinois corporation having its principal place of business at Franklin Park, Illinois. The plaintiff is a designer and manufacturer of coin-operated electronic video games. In the United States, Midway sells its video games to regional distributors who sell the video games to operators. The operators place the machines in arcades and other places for public use. Tr. 80, 91.

2. Venture Line, Inc. Venture Line is an Arizona corporation. Its primary business is the manufacturing of printed circuit boards for coin-operated electronic video games. These printed circuit boards are sold to businesses which manufacture audiovisual games using Venture Line's circuit boards. Venture Line does not manufacture any video games. Ex. # 25, pp. 15, 73-74, 162-62.²

3. Defendant Gerrit Kraayenbrink is the president of Soo Valley Vending, Inc. Soo Valley Vending. This corporation has a place of business at 440 Sixth Street, Northwest, Sioux Center, Iowa. Soo Valley Vending was incorporated six or seven years ago and has been in the business of operating coin-operated electronic video games since its formation. Ex. # 26, pp. 6, 8-10, 11.

4. In the latter half of 1980, Soo Valley Vending began to assemble and distribute coin-operated video games under the name Soo Valley Distributing Co. Soo Valley Distributing. In April of 1981, Soo Valley Distributing was incorporated. The capitalization of this new corporation was based in part on a payment of $39,000.00 from Soo Valley Vending. This payment did not give rise to any indebtedness on the part of Soo Valley Distributing to Soo Valley Vending. Ex. # 26, pp. 16-18, 19-20, 21-22, 110-14.

5. Soo Valley Distributing is in the business of assembling and distributing coin-operated video games. The printed circuit boards which are incorporated in these games are purchased from a number of sources including Venture Line. The assembled games are either sold to distributors or are placed on routes operated by Soo Valley Vending. Ex. # 26, pp. 6, 8-10, 59, 79-80.

6. The relationship between Soo Valley Vending and Soo Valley Distributing has remained close. In addition to operating out of the same building, the corporations share corporate officers and shareholders. Defendant Kraayenbrink is the president of Soo Valley Distributing. Kraayenbrink, his son, Henry, and Harlan Bootsma each own equal shares in both Soo Valley Vending and Soo Valley Distributing, and all three are officers and directors of Soo Valley Distributing and Soo Valley Vending. Ex. 26, pp. 6, 7-8, 11-12, 14-15, 18-19.

7. Defendants Dale Dirkschneider and Harold Peterson are residents of the State of Nebraska and partners in a partnership operated under the name "A-1 Machines." A-1 Machines has a place of business at 620 South Saddle Creek, Omaha, Nebraska. The business of A-1 Machines includes the operation and distribution of coin-operated electronic video games. A-1 Machines purchases some of the video games it operates and distributes from Soo Valley Distributing. Ex. # 27, pp. 2-4, 5, 9-10; Ex. # 28, p. 2.

8. The audiovisual games involved here consist of a cabinet containing electronic circuitry and a television picture tube which serves as a screen upon which the visual images of the game are shown. The electronic circuitry is in the form of printed circuit boards and other electronic components which cause the images of each game to be seen on the screen and generate the sounds of each game. The printed circuit board for each game is loaded with electronic components. These components include computer chips, called ROMs, PROMs and EPROMs by those in the trade.³ The PROMs store the information which produces the games' images and sounds. This information includes the field on which the game is played, the design of the playing symbols or images seen on the screen, their interactions with one another, and the accompanying musical and sound effects. A game may be copied by electronically copying the PROMs. Tr. 55-56; Ex. # 17, ¶ 2; Ex. # 25, pp. 29-30, 81; Ex. # 26, pp. 25-31.

9. Prior to the insertion of a coin, the video games operate in a repeating attract mode which summarizes each game for prospective players. When a coin is deposited and the start button is depressed, the game shifts into the play mode. In the play mode, some of the playing symbols or images on the screen are responsive to operation of the player control panel, and others move in a predetermined sequence and interact with the player-controlled images in a preset manner. Ex. # 17, ¶ 3; Ex. # 26, p. 36.

10. The market for audiovisual games is very unpredictable. A game's commercial popularity often terminates abruptly after a short period of time. The average game generally would lose its appeal within a year of being introduced on the market. Ex. # 17, ¶ 12.

11. The elements of the Galaxian video game appear on a background star pattern consisting of twinkling colored lights that roll from the top of the screen to the bottom. The game involves a missile-firing rocket ship operated by the player, plus a formation of enemy aliens. The aliens are arranged in a convoy of five horizontal rows. There are four denominations or ranks of aliens, with the highest ranking nearest the player's ship. Each rank has a distinguishing color. The highest ranking alien is shaped like a rocket ship, but the other ranks have flapping wings. Individual aliens unpredictably invert and swoop down to bomb the player's ship. Sometimes the alien attack consists of miniformations involving the alien flagship or chief, as well as flying alien escorts. Whenever a ship is destroyed, a bright explosion appears on the screen, with appropriate sound effects. The player's score is measured by the number and rank of aliens destroyed. Ex. # 17, ¶ 5; Ex. # 18.

12. The Galaxian video game was created by Namco in 1979, and was first published by Namco on September 15, 1979, in Japan. Midway became aware of Galaxian at a private showing at Namco's offices in Tokyo on October 17, 1979. Because of the game's unique features, Midway decided to acquire rights in the game. Tr. 82-83; Exs. # 11, # 12; Ex. # 17, ¶ 5.

13. In an assignment dated February 2, 1980, Namco assigned all United States rights in Galaxian to Midway. The consideration for this assignment was the payment of substantial advances and royalties. The amount of payments made through March of 1981 has amounted to approximately 3.5 million dollars Tr. 83-84; Ex. # 10.

14. Since February, 1980, the plaintiff has sold in excess of forty thousand Galaxian video games. Each Galaxian video game has a notice of Midway's claim of copyright, the name of the game, and Midway's name. The notice is affixed near the screen of the video game. Tr. 99-100, 107; Ex. # 17, ¶ 11; Ex. # 18.

15. The plaintiff made video tape recordings of the audiovisual presentation of the Galaxian play and attract modes. The video tapes were made in Franklin Park, Illinois. The video tapes and applications to register the copyright on the Galaxian audiovisual work were submitted by Midway to the Copyright Office. A certificate of copyright registration, No. PA59-977, effective March 6, 1980, was issued for the audiovisual work found in the Galaxian's play mode. A second certificate of registration, No. PA68-323, effective May 23, 1980, was issued for the audiovisual work found in the Galaxian's attract mode. Tr. 94-95; Ex. # 11;...