Sega Enterprises Ltd. v. Accolade, Inc.

785 F. Supp. 1392, 92 Daily Journal DAR 5502, 23 U.S.P.Q. 2d (BNA) 1440, 1992 U.S. Dist. LEXIS 4028, 1992 WL 65417
CourtDistrict Court, N.D. California
DecidedApril 3, 1992
DocketC-91-3871 BAC
StatusPublished
Cited by3 cases

This text of 785 F. Supp. 1392 (Sega Enterprises Ltd. v. Accolade, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sega Enterprises Ltd. v. Accolade, Inc., 785 F. Supp. 1392, 92 Daily Journal DAR 5502, 23 U.S.P.Q. 2d (BNA) 1440, 1992 U.S. Dist. LEXIS 4028, 1992 WL 65417 (N.D. Cal. 1992).

Opinion

ORDER GRANTING PRELIMINARY INJUNCTION

CAULFIELD, District Judge.

This matter comes before the court on plaintiff’s motion for preliminary injunction and defendant/counterclaimant’s cross-motion for preliminary injunction. Oral argument was heard on March 13, 1992. After careful consideration of the parties’ oral and written arguments, and documents and declarations filed in support thereof, the court hereby GRANTS plaintiff’s motion for preliminary injunction and DENIES defendant/counterclaimant’s motion for preliminary injunction.

BACKGROUND

Sega Enterprises, Ltd. (“SEL”) and its wholly owned subsidiary, Sega of America (“SOA”), develop and market video entertainment systems, including the Genesis console and video game cartridges. Accolade, Inc. (“Accolade”), founded in 1984, manufactures computer entertainment software, including game cartridges compatible with the Genesis console.

A computer program consists of a series of instructions that cause a computer to perform certain operations. Computer programs are generally written in one of several special languages (e.g. BASIC, FORTRAN), which can be understood by a trained programmer. The “source code” is translated into a computer readable language called “object code,” a series of l’s and 0’s, which is difficult for humans to decipher. The object code is then imprinted onto a silicon chip.

Reverse engineering, as the name implies, involves going backwards from a finished product and determining how the pro *1395 gram works. One method of reverse engineering involves the use of disassemblers, which allow someone to convert object code into a form more easily read by humans. In 1989, Accolade “reverse engineered” the video display microprocessor in the Genesis console by disassembling the code in SEL’s game cartridges so that it could develop and market Genesis-compatible video games. In June 1990, Accolade announced that it was releasing a new game for the Genesis console, “Ishido,” and began shipping in December 1990.

At about the same time, SEL developed a system to protect its trademark rights in response to counterfeiters in the United States and abroad. In March 1990, SEL licensed a patented process for the trademark security system (“TMSS”) by which the console’s operating system “reads” a game program for specific computer code. If the game program contains the TMSS initialization code, it prompts a visual display on the monitor which reads “PRODUCED BY OR UNDER LICENSE FROM SEGA ENTERPRISES LTD” (the “Sega Message”).

Although the new Genesis consoles with the TMSS (“Genesis III”) were not released in the United States until September 1991, Accolade learned of the Genesis III in January of 1991 when it was displayed at the Consumer Electronics Show (“C.E.S.”). It was also demonstrated at the C.E.S. that the Ishido game did not operate on the Genesis III. In response, Accolade disassembled and copied more SEL programs looking for the common code that could be part of the TMSS and which it thought might be functional. Accolade then copied that code and included it in its video game programs, which now prompt the Sega Message when played on the Genesis III console. Accolade admits that the Sega Message as displayed on its games is a false message since the games displaying the message are not produced under license from SEL.

SEL filed this suit against Accolade on October 31, 1991 alleging copyright infringement, trademark infringement, and unfair competition. Accolade filed a counterclaim against SEL and SOA alleging false designation of origin and unfair competition. Accolade’s claims are centered on allegations that SEL and SOA falsely attributed the source of Accolade’s products to themselves, thereby injuring Accolade’s reputation as an independent producer of video game products.

PRELIMINARY INJUNCTION STANDARD

SEL has moved the court for an order enjoining Accolade from:

1. Disassembling, translating, converting or adapting the copyrighted object code in SEL’s game programs in any manner whatsoever;
2. Using, modifying, enhancing or embellishing SEL’s disassembled code in any manner whatsoever;
3. Developing, manufacturing, shipping, distributing or selling any Genesis-compatible video game programs that were derived from, based upon or otherwise created — in whole or in part — by means which included the dis-assembly, translation, transformation or enhancement of the copyrighted object code in SEL’s game programs;
4. Manufacturing, shipping, distributing or selling any Genesis-compatible video game program which prompts the message “PRODUCED BY OR UNDER LICENCE FOR SEGA ENTERPRISES LTD.” when inserted in a Genesis console.

Accolade in turn moves that the court enjoin SEL and SOA from manufacturing or distributing the Genesis III console.

The Ninth Circuit has held that in order to obtain a preliminary injunction, the mov-ant must demonstrate “either a likelihood of success on the merits and the possibility of irreparable injury, or that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor.” Johnson Controls, Inc. v. Phoenix Control Systems, Inc., 886 F.2d 1173, 1174 (9th Cir.1989), and cases cited.

SEL’S COPYRIGHT CLAIMS

Section 501(a) of the Copyright Act defines copyright infringement as follows: “Anyone who violates any of the exclusive *1396 rights of the copyright owner as provided by sections 106 throughout 118 ... is an infringer of the copyright.” Such rights include the exclusive right to 1) reproduce and to authorize others to reproduce the copyrighted work, and 2) to prepare and to authorize others to prepare derivative works based upon the copyrighted work. 17 U.S.C. § 106. “Derivative works” are defined to include translations and any form in which a work may be recast, transformed or adapted. 17 U.S.C. § 101.

SEL claims that Accolade has infringed its copyrights, because its Genesis-compatible games are based upon illegal reproductions and adaptations of SEL’s copyrighted works. The alleged illegal copying was accomplished as follows according to deposition testimony of Accolade’s engineers: 1) the object code in SEL’s copyrighted game programs was disassembled and translated into assembly language; 2) Accolade made intermediate copies of this derivative material and “embellished” it; and 3) Accolade wrote game programs based upon the allegedly illegal reproduction.

Accolade attempts to frame the issue in terms of the permissibility of reverse engineering. SEL does not contend that reverse engineering is itself improper. Rather, the issue is whether the means employed infringed SEL’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. See SAS Institute, Inc. v.

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785 F. Supp. 1392, 92 Daily Journal DAR 5502, 23 U.S.P.Q. 2d (BNA) 1440, 1992 U.S. Dist. LEXIS 4028, 1992 WL 65417, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sega-enterprises-ltd-v-accolade-inc-cand-1992.