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

• Citation: 964 F.2d 965
• Decision Date: 05 August 1992
• Docket Number: No. 91-16205,91-16205
• Parties: , 1992 Copr.L.Dec. P 26,919, 22 U.S.P.Q.2d 1857 LEWIS GALOOB TOYS, INC., Plaintiff-Appellee, v. NINTENDO OF AMERICA, INC., Defendant-Appellant. NINTENDO OF AMERICA, INC., Plaintiff-Appellant, v. LEWIS GALOOB TOYS, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 965

964 F.2d 965

60 USLW 2751, 1992 Copr.L.Dec. P 26,919,

22 U.S.P.Q.2d 1857

LEWIS GALOOB TOYS, INC., Plaintiff-Appellee, v. NINTENDO OF AMERICA, INC., Defendant-Appellant.

NINTENDO OF AMERICA, INC., Plaintiff-Appellant, v. LEWIS GALOOB TOYS, INC., Defendant-Appellee.

No. 91-16205.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 12, 1992.

Decided May 21, 1992.

As Amended Aug. 5, 1992.

Thomas G. Gallatin, Jr., Mudge Rose Guthrie Alexander & Ferdon, New York City, for defendant-appellant.

Jerome B. Falk, Jr., Howard, Rice, Nemerovski, Canady, Robertson & Falk, San Francisco, Cal., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of California.

Before FARRIS and RYMER, Circuit Judges, and KENYON, ^* District Judge.

FARRIS, Circuit Judge:

Nintendo of America appeals the district court's judgment following a bench trial (1) declaring that Lewis Galoob Toys' Game Genie does not violate any Nintendo copyrights and dissolving a temporary injunction and (2) denying Nintendo's request for a permanent injunction enjoining Galoob from marketing the Game Genie. Lewis Galoob Toys, Inc. v. Nintendo of America, Inc., 780 F.Supp. 1283 (N.D.Cal.1991). We have appellate jurisdiction pursuant to 15 U.S.C. § 1121 and 28 U.S.C. §§ 1291 and 1292(a)(1). We affirm.

FACTS

The Nintendo Entertainment System is a home video game system marketed by Nintendo. To use the system, the player inserts a cartridge containing a video game that Nintendo produces or licenses others to produce. By pressing buttons and manipulating a control pad, the player controls one of the game's characters and progresses through the game. The games are protected as audiovisual works under 17 U.S.C. § 102(a)(6).

The Game Genie is a device manufactured by Galoob that allows the player to alter up to three features of a Nintendo game. For example, the Game Genie can increase the number of lives of the player's character, increase the speed at which the character moves, and allow the character to float above obstacles. The player controls the changes made by the Game Genie by entering codes provided by the Game Genie Programming Manual and Code Book. The player also can experiment with variations of these codes.

The Game Genie functions by blocking the value for a single data byte sent by the game cartridge to the central processing unit in the Nintendo Entertainment System and replacing it with a new value. If that value controls the character's strength, for example, then the character can be made invincible by increasing the value sufficiently. The Game Genie is inserted between a game cartridge and the Nintendo Entertainment System. The Game Genie does not alter the data that is stored in the game cartridge. Its effects are temporary.

DISCUSSION

1. Derivative work

The Copyright Act of 1976 confers upon copyright holders the exclusive right to prepare and authorize others to prepare derivative works based on their copyrighted works. See 17 U.S.C. § 106(2). Nintendo argues that the district court erred in concluding that the audiovisual displays created by the Game Genie are not derivative works. The court's conclusions of law are reviewed de novo. See Rozay's Transfer v. Local Freight Drivers, Local 208, 850 F.2d 1321, 1326 (9th Cir.1988), cert. denied, 490 U.S. 1030, 109 S.Ct. 1768, 104 L.Ed.2d 203 (1989). Its findings of fact are reviewed for clear error. See id.

A derivative work must incorporate a protected work in some concrete or permanent "form." The Copyright Act defines a derivative work as follows:

A "derivative work" is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a "derivative work."

17 U.S.C. § 101 (emphasis added). The examples of derivative works provided by the Act all physically incorporate the underlying work or works. The Act's legislative history similarly indicates that "the infringing work must incorporate a portion of the copyrighted work in some form." 1976 U.S.Code Cong. & Admin.News 5659, 5675. See also Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 856 F.2d 1341, 1343-44 (9th Cir.1988) (discussing same), cert. denied, 489 U.S. 1018, 109 S.Ct. 1135, 103 L.Ed.2d 196 (1989).

Our analysis is not controlled by the Copyright Act's definition of "fixed." The Act defines copies as "material objects, other than phonorecords, in which a work is fixed by any method." 17 U.S.C. § 101 (emphasis added). The Act's definition of "derivative work," in contrast, lacks any such reference to fixation. See id. Further, we have held in a copyright infringement action that "[i]t makes no difference that the derivation may not satisfy certain requirements for statutory copyright registration itself." Lone Ranger Television v. Program Radio Corp., 740 F.2d 718, 722 (9th Cir.1984). See also Paul Goldstein, Derivative Rights and Derivative Works in Copyright, 30 J. Copyright Soc'y U.S.A. 209, 231 n. 75 (1983) ("the Act does not require that the derivative work be protectable for its preparation to infringe"). Cf. Kalem Co. v. Harper Bros., 222 U.S. 55, 61, 32 S.Ct. 20, 21, 56 L.Ed. 92 (1911) (finding the movie "Ben Hur" infringed copyright in the book Ben Hur even though Copyright Act did not yet include movies as protectable works). A derivative work must be fixed to be protected under the Act, see 17 U.S.C. § 102(a), but not to infringe.

The argument that a derivative work must be fixed because "[a] 'derivative work' is a work," 17 U.S.C. § 101, and "[a] work is 'created' when it is fixed in a copy or phonorecord for the first time," id., relies on a misapplication of the Copyright Act's definition of "created":

A work is 'created' when it is fixed in a copy or phonorecord for the first time; where a work is prepared over a period of time, the portion of it that has been fixed at any particular time constitutes the work as of that time, and where the work has been prepared in different versions, each version constitutes a separate work.

Id. The definition clarifies the time at which a work is created. If the provision were a definition of "work," it would not use that term in such a casual manner. The Act does not contain a definition of "work." Rather, it contains specific definitions: "audiovisual works," "literary works," and "pictorial, graphic and sculptural works," for example. The definition of "derivative work" does not require fixation.

The district court's finding that no independent work is created, see Galoob, 780 F.Supp. at 1291, is supported by the record. The Game Genie merely enhances the audiovisual displays (or underlying data bytes) that originate in Nintendo game cartridges. The altered displays do not incorporate a portion of a copyrighted work in some concrete or permanent form. Nintendo argues that the Game Genie's displays are as fixed in the hardware and software used to create them as Nintendo's original displays. Nintendo's argument ignores the fact that the Game Genie cannot produce an audiovisual display; the underlying display must be produced by a Nintendo Entertainment System and game cartridge. Even if we were to rely on the Copyright Act's definition of "fixed," we would similarly conclude that the resulting display is not "embodied," see 17 U.S.C. § 101, in the Game Genie. It cannot be a derivative work.

Mirage Editions is illustrative. Albuquerque A.R.T. transferred artworks from a commemorative book to individual ceramic tiles. See Mirage Editions, 856 F.2d at 1342. We held that "[b]y borrowing and mounting the preexisting, copyrighted individual art images without the consent of the copyright proprietors ... [Albuquerque A.R.T.] has prepared a derivative work and infringed the subject copyrights." Id. at 1343. The ceramic tiles physically incorporated the copyrighted works in a form that could be sold. Perhaps more importantly, sales of the tiles supplanted purchasers' demand for the underlying works. Our holding in Mirage Editions would have been much different if Albuquerque A.R.T. had distributed lenses that merely enabled users to view several artworks simultaneously.

Nintendo asserted at oral argument that the existence of a $150 million market for the Game Genie indicates that its audiovisual display must be fixed. We understand Nintendo's argument; consumers clearly would not purchase the Game Genie if its display was not "sufficiently permanent or stable to permit it to be perceived ... for a period of more than transitory duration." 17 U.S.C. § 101. But, Nintendo's reliance on the Act's definition of "fixed" is misplaced. Nintendo's argument also proves too much; the existence of a market does not, and cannot, determine conclusively whether a work is an infringing derivative work. For example, although there is a market for kaleidoscopes, it does not necessarily follow that kaleidoscopes create unlawful derivative works when pointed at protected artwork. The same can be said of countless other products that enhance, but do not replace, copyrighted works.

Nintendo also argues that our analysis should focus exclusively on the audiovisual displays created by the Game Genie, i.e., that we should compare the altered displays to Nintendo's original displays. Nintendo emphasizes that " '[a]udiovisual works' are works that consist of a series of related images ... regardless of the nature of the material objects ... in which the works are embodied." 17 U.S.C. § 101 (emphasis added). The Copyright Act's definition of "audiovisual works" is inapposite; the only question before us is whether the audiovisual displays created by the...