Sega Enterprises, Ltd. V. Accolade, Inc.
In this recent Ninth Circuit case the issues centered on compatibility between video games. Accolade copied a Sega video game to obtain compatibility with the Sega Genesis game system. Accolade decompiled the machine readable object code from a Sega game in order to achieve compatibility with the Sega system for games that it wished to independently create and market. Accolade then created a manual containing only the functional specifications of this decompiled code and not any of Sega’s actual code.
Accolade next created its own games for the Sega Genesis system using only the functional specifications. The first issue in the case was whether or not this intermediate copying by Accolade constituted copyright infringement or was it a fair use of the code. Another issue the court decided was whether a screen display of Sega’s trademark by the Accolade games was a Lanham Trademark Act violation. Sega included a trademark security system which was required on the game cartridge in order for the system to recognize the particular game. Accolade found this code during its reverse engineering of the Sega game and added it to their manual as a standard header to be included in all games. Thus, when Accolade games are inserted into the Sega Genesis system, the console reads this trademark security system initialization and the Sega trademark is flashed up on the screen. The district court ruled that this trademark security system code was not functional and Accolade could not use such a defense to the trademark infringement claim.
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The district court also ruled in favor of Sega on the copyright claim and issued an injunction against Accolade, also requiring the recall of all of Accolade’s infringing games. ‘ The Ninth Circuit then stayed the injunction and recall order, and decided to hear the case. As to the trademark issue, the appeals court ruled in Accolade’s favor stating that “when there is no other method of access to the computer that is known or readily available to rival cartridge manufacturers, the use of the initialization code by a rival does not violate the [Lanham] Act even though that use triggers a misleading trademark display. The appeals court also ruled in favor of Accolade on the copyright issue ruling that “when the person seeking the understanding has legitimate reason for doing so and when no other means of access to the unprotected elements exists, such disassembly is as a matter of law a fair use of the copyright work. ” Accolade raised four arguments in its defense, but fair use was the only one accepted by the court.
Analyzing the first fair use factor, “the purpose and character of the use,” the appeals court observed that the fact that Accolade copied for a commercial use weighs against a finding of fair use. But, because the copying by Accolade was only at an intermediate level the court decided that any “commercial ‘exploitation’ was indirect or derivative” and of “minimal significance. The court ruled that this first factor weighed in favor of Accolade. ‘ In its analysis of the second fair use factor, “the nature of the copyrighted work,”, the court notes that not all copyrighted works are entitled to the same degree of protection, and no protection extends to the functional or factual aspects of a work. “The court stated that “computer programs are, in essence, utilitarian articles they contain many logical, structural, and visual display elements that are dictated by the function to be performed, by considerations of efficiency, or by external factors such as compatibility requirements and industry demands. The court further notes that if Accolade was to understand the functional requirements of the Sega system, then disassembly of the object code was necessary. Because the Sega video games contain functional aspects which are unprotected by copyright law and cannot be understood without copying, they are afforded a lower degree of protection than other traditional literary works. ‘
The court then decided that the second factor also weighed in favor of Accolade. The court decided that the third fair use factor, the purpose and character of the use, weighed against Accolade because they copied and disassembled the entire game. ‘ The fact that Accolade did copy and disassemble the entire game did not preclude an ultimate finding of fair use however, because the ultimate, as opposed to the direct, use by Accolade was limited and therefore the court put very little weight on this third factor. Finally, the court decided that the fourth fair use factor, the effect on the potential market for the copyrighted work, weighed in favor of Accolade because any loss Sega would suffer would be a minor economic loss. The court put great weight on the fact that if competitors like Accolade were not able to develop their own games and make them compatible, then Sega would enjoy a monopoly of the market and such a monopoly would “run counter to the statutory purpose of promoting creative expression and cannot constitute a strong equitable asis for resisting the invocation of the fair use doctrine. ” The Sega court then put these four fair use factors together and decided that as a matter of law, Accolade was entitled to a fair use defense to its copying. In its summary of this issue, the court stated that under the Copyright Act, if a work is largely functional, it receives only weak protection. This result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art.