thing 000498 (Ishido, Hardball!, Mike Ditka Power Football, Onslaught, Star Control and Turrican)

In 1988 Sega, a Japanese corporation of video games, made the arcade punch, kick and jump game called Altered Beast. The game is set in Ancient Greece, and follows a centurion who is resurrected by Zeus to rescue his daughter Athena. In 1989 Sega released the home video game system called Genesis in the U.S.. The console allowed to play Altered Beast and many other games at home. Sega licensed its copyrighted computer code and its trademark to a number of computer game companies, who developed also other video game cartridges for the Genesis console. In March 1990 Sega explored methods of protecting its rights with a Trademark Security System in the Genesis III hardware update. Sega licensed a patent for use with the Genesis III system. When a game cartridge is inserted, the microprocessor contained in the Genesis III searches the game program for four bytes of data consisting of the letters “S-E-G-A”. If the Genesis III finds the initialization code in the right location, the game is rendered compatible and will operate on the console. In such case, the initialization code then displays a visual message for approximately three seconds which reads “Produced by or under license from Sega Enterprises Ltd”.

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In 1990 Accolade, a US developer of video game software, released under the trademark Ballistic a video game called Ishido. Ishido is a puzzle board game consisting of the placing of 72 stones onto a game board of 96 squares. The challenge of the game is to place stones adjacent to others that match either by color or symbol. Accolade developed the Ishido game for several computer systems, including cartridges compatible with the Genesis system. Accolade used a two-step process to render its video games compatible with Genesis. It first “reverse engineered” some of Sega’s video game programs in order to discover the requirements for compatibility with the console. That implies that the engineers “decompiled” the machine-readable “object code” by reading the electronic signals of 0 and 1 and transformed it into human-readable “source code”. Accolade’s engineers studied and annotated the code and then loaded the disassembled code back into a computer. The experimentation by modifying the program and studying the results allows to discover the interface specifications for the Genesis system. In the second stage, Accolade created its own games for the Genesis. In January, 1991, when the Genesis III was released at a consumer electronics show, Accolade’s Ishido game cartridges were no longer compatible. Accolade started an second reverse engineering process. In September 1991 Accolade adapted Ishido and it’s games Hardball!, Mike Ditka Power Football, Onslaught, Star Control and Turrican for the Genesis III system by Sega. All games contained the standard header file that included the trademark security system initialization code. The header file caused the display of the Sega Message.

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On October 31, 1991, Sega filed suit against Accolade alleging copyright and trademark infringement. Accolade filed a counterclaim against Sega for misuse of copyright and false designation of origin. On April 3, 1992, the court case Sega v. Accolade took place at the United States District Court of California. Judge Barbara Caulfield held:

Copyrights claims. [...] Accolade attempts to frame the issue in terms of the permissibility of reverse engineering. [Sega] does not contend that reverse engineering is itself improper. Rather, the issue is whether the means employed infringed [Sega]’s copyright. If the process of reverse engineering software entails the duplication of the copyrighted work and the recasting or transformation of the object code into a form more intelligible to humans, it may infringe upon the copyright owner’s exclusive rights.

The court rejects Accolade’s argument that [Sega] must establish substantial similarity between Accolades’ final product and [Sega]’s and that intermediate copies do not provide a basis for copyright infringement. [..] [C]opies are defined as “material objects ... in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device”.1 [...] Courts in this circuit that have addressed the issue have found intermediate copying to be actionable. [...] “[T]he fact that an allegedly infringing copy of a protected work may itself be only an inchoate representation of some final product to be marketed commercially does not in itself negate the possibility of infringement.” 2

A. Fair Use Doctrine [...] The criteria to be considered in determining whether a particular use is fair use include: 1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; 2. the nature of the copyrighted work; 3. the amount and substantially of the portion used in relation to the copyrighted work as a whole; and 4. the effect of the use upon the potential market for or value of the copyrighted work. [...] The copying at issue here was undertaken by Accolade for financial gain and was aimed at the creation of a competitive product which will adversely impact the value of the copyrighted work. Such commercial use is presumptively not “fair use”. [...] The court rejects the argument that Accolade was merely reading the game cartridges and that it could read the program only by transforming the object code into human readable form. [...] Legislative history also indicates that a fair use exception for intermediate copying of software was not intended by Congress.

Unlike the Copyright Act, the Semiconductor Act specifically provides that one may make intermediate copies of a protected mask work (i.e. a silicon chip) in the course of reverse engineering. [...] Accolade could have “peeled” the microchips [...] or programmed in a “clean room”, but instead chose to disassemble, reproduce and enhance [Sega]’s software.

B. Section 117. Section 117 allows an owner of a program to make a copy where the copy is an “essential step in the utilization of the computer program in conjunction with a machine and ... it is used in no other manner”. This narrow exception to the copyright act allows an owner of a program to load it into his computer for use, which involves making a copy in the machine memory. Section 117 also permits archival copies to be made by an owner. Accolade did not copy [Sega]’s copyrighted game programs for the exclusive purpose of using those programs; nor did Accolade make copies for archival purposes. Rather, Accolade made copies for the purpose of manufacturing compatible games.

C. Copyright Misuse. Accolade’s copyright misuse defense is based upon antitrust tying allegations, which the court ordered stricken from Accolade’s counterclaim. No antitrust violation is alleged, nor is there proof of fraud or other clear violation of a legal duty.

Trademark infringement claim. Both Accolade and [Sega] admit that the false Sega Message which is prompted when Accolade’s games are played on the Genesis III console has created the strong likelihood of confusion by consumers. [...] Accolade argues that it thought the code might be “functional”. The functionality doctrine allows the use of a trademark by another when there is no other alternative. [...] However, the evidence indicates otherwise. Accolade could have created a game cartridge which either did not have the Trademark Security System code, or engineered the game program in such a way that the false Sega Message would not be displayed on the screen, both at minimal additional expense.

The district court held that Sega established likelihood of success on merits of its copyright and trademark infringement claims, and that they were entitled to preliminarily forbid Accolade from developing or selling any video game programs that were compatible on the Genesis system.

Accolade appealed the decision. On October 20, 1992, the court case Sega v. Accolade took place at the United States Court of Appeals. Judge Reinhardt held:

[1.] Copyright. [...] First, [Accolade] maintains that intermediate copying does not infringe the exclusive rights granted to copyright owners in section 106 of the Copyright Act unless the end product of the copying is substantially similar to the copyrighted work. Second, [Accolade] argues that disassembly of object code in order to gain an understanding of the ideas and functional concepts embodied in the code is lawful under section 102(b) of the Act, which exempts ideas and functional concepts from copyright protection. Third, [Accolade] suggests that disassembly is authorized by section 117 of the Act, which entitles the lawful owner of a copy of a computer program to load the program into a computer. Finally, Accolade contends that disassembly of object code in order to gain an understanding of the ideas and functional concepts embodied in the code is a fair use that is privileged by section 107 of the Act.

A. Intermediate Copying. [...] In order to constitute a “copy” for purposes of the Act, the allegedly infringing work must be fixed in some tangible form. [...] The computer file generated by the disassembly program, the printouts of the disassembled code, and the computer files containing Accolade’s modifications of the code that were generated during the reverse engineering process all satisfy that requirement. The intermediate copying done by Accolade therefore falls squarely within the category of acts that are prohibited by the statute. [...] In light of the unambiguous language of the Act, we decline to depart from the rule.

B. The Idea/Expression Distinction. [...] Accolade’s argument regarding access to ideas is, in essence, an argument that “object code” is not eligible for the full range of copyright protection. [...] As recommended by the National Commission on New Technological Uses of Copyrighted Works (CONTU), the 1980 amendments to the Copyright Act unambiguously extended copyright protection to computer programs. 3 [...] Nor does the Act require that a work be directly accessible to humans in order to be eligible for copyright protection. [...] The statutory language, read together with the CONTU report, leads inexorably to the conclusion that the copyright in a computer program extends to the object code version of the program.

C. Section 117 [...] was enacted on the recommendation of CONTU, which noted that “[b]ecause the placement of any copyrighted work into a computer is the preparation of a copy [since the program is loaded into the computer’s memory], the law should provide that persons in rightful possession of copies of programs be able to use them freely without fear of exposure to copyright liability”. 4 [...] We think it is clear that Accolade’s use went far beyond that contemplated by CONTU and authorized by section 117. Section 117 does not purport to protect a user who disassembles “object code”, converts it from assembly into source code, and makes printouts and photocopies of the refined source code version.

D. Fair Use [...] Because, in the case before us, disassembly is the only means of gaining access to those unprotected aspects of the program, and because Accolade has a legitimate interest in gaining such access (in order to determine how to make its cartridges compatible with the Genesis console), we agree with Accolade. Where there is good reason for studying or examining the unprotected aspects of a copyrighted computer program, disassembly for purposes of such study or examination constitutes a fair use.

Section 107 lists the factors to be considered in determining whether a particular use is a fair one. Those factors include: (1) whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. [...] In determining that Accolade’s disassembly of Sega’s object code did not constitute a fair use, the district court treated the first and fourth statutory factors as dispositive, and ignored the second factor entirely. Given the nature and characteristics of Accolade’s direct use of the copied works, the ultimate use to which Accolade put the functional information it obtained, and the nature of the market for home video entertainment systems, we conclude that neither the first nor the fourth factor weighs in Sega’s favor.

(a) [The first statutory factor the commercial nature] [...] [A]lthough Accolade’s ultimate purpose was the release of Genesis-compatible games for sale, its direct purpose in copying Sega’s code, and thus its direct use of the copyrighted material, was simply to study the functional requirements for Genesis compatibility so that it could modify existing games and make them usable with the Genesis console. [...] On these facts, we conclude that Accolade copied Sega’s code for a legitimate, essentially non-exploitative purpose, and that the commercial aspect of its use can best be described as of minimal significance.

(b) [The fourth statutory factor, the effect] [...] There is no basis for assuming that Accolade’s Ishido has significantly affected the market for Sega’s Altered Beast, since a consumer might easily purchase both. [...] Thus, we conclude that the fourth statutory factor weighs in Accolade’s, not Sega’s, favor, notwithstanding the minor economic loss Sega may suffer.

(c) [...] The second statutory factor, the nature of the copyrighted work, reflects the fact that not all copyrighted works are entitled to the same level of protection. [...] Computer programs [...] are typically distributed for public use in object code form, embedded in a silicon chip or on a floppy disk. For that reason, humans often cannot gain access to the unprotected ideas and functional concepts contained in object code without disassembling that code-i.e., making copies. [...] However, computer programs are, in essence, utilitarian articles - articles that accomplish tasks. [...] In some circumstances, even the exact set of commands used by the programmer is deemed functional rather than creative for purposes of copyright. [...] Because of the hybrid nature of computer programs, there is no settled standard for identifying what is protected expression and what is unprotected idea in a case involving the alleged infringement of a copyright in computer software. [...] [T]he computer program at issue in the case before us, a video game program, contains at least two such subroutines - the subroutine that allows the user to interact with the video game and the subroutine that allows the game cartridge to interact with the console. [...] First, the record clearly establishes that humans cannot read object code. [...] [T]ranslation of a program from object code into source code cannot be accomplished without making copies of the code. [...] Second, the record provides no support for a conclusion that a viable alternative to disassembly exists. [C]hip peeling yields only a physical diagram of the object code embedded in a ROM chip. It does not obviate the need to translate object code into source code. [...] [T]he use of a clean room would not have avoided the need for disassembly because disassembly was necessary in order to discover the functional specifications for a Genesis-compatible game. [...] In summary, the record clearly establishes that disassembly of the object code in Sega’s video game cartridges was necessary in order to understand the functional requirements for Genesis compatibility.

(d) As to the third statutory factor [proportions], Accolade disassembled entire programs written by Sega. Accordingly, the third factor weighs against Accolade.

In summary [...] the first, second, and fourth statutory fair use factors weigh in favor of Accolade, while only the third weighs in favor of Sega, and even then only slightly. [...] We conclude that where disassembly is the only way to gain access to the ideas and functional elements embodied in a copyrighted computer program and where there is a legitimate reason for seeking such access, disassembly is a fair use of the copyrighted work, as a matter of law.

2. Trademark Issue. [...] Because the TMSS has the effect of regulating access to the Genesis III console, and because there is no indication in the record of any public or industry awareness of any feasible alternate method of gaining access to the Genesis III, we hold that Sega is primarily responsible for any resultant confusion. Thus, it has not demonstrated a likelihood of success on the merits of its [Trademark] Act claims. [...] Accolade had no desire to cause the Sega Message to appear or otherwise to create any appearance of association between itself and Sega; in fact, it had precisely the opposite wish. It used the TMSS initialization code only because it wanted to gain access for its products to the Genesis III, and was aware of no other method for doing so.

The court reversed the first decision and held that the use of copyrighted computer work to gain understanding of unprotected functional elements was fair use of copyrighted work, and that the use of initialization code by Accolade that triggered screen display of Sega’s trademark to gain access to competitor console did not constitute trademark infringement.

  1. 17 U.S.C. § 101.

  2. Walker v. University Books, Inc., 9th Cir., 1979

  3. National Commission on New Technological Uses of Copyrighted Works, Final Report 1 (1979)

  4. CONTU Report at 13