Under license from UK company Codemasters, Galoob manufactured an add-on product for the Nintendo Entertainment System called Game Genie, which allowed users to modify video games by entering in certain codes; for example, a code might make the player's character invincible by negating the programming that updates the character's health amount. Nintendo, which sold a video game system and video games that could be modified by Game Genie, sued Galoob for copyright infringement, alleging that modifying a game with the Game Genie created a derivative work, violating Nintendo's copyright in their video games.
Lawsuit
The court battle began in May 1990, when Galoob filed a complaint against Nintendo in U.S. District Court, seeking a declaratory judgment that the Game Genie did not violate Nintendo's copyrights, as well as an injunction preventing Nintendo from modifying their NES game system to make it incompatible with the Game Genie. Nintendo responded by filing a complaint against Galoob, seeking an injunction preventing Galoob from selling the Game Genie. A similar court case had previously been decided in favor of the copyright holder. Nintendo relied heavily on this case as precedent for its legal arguments. In July 1990, the court granted Nintendo a preliminary injunction, preventing Galoob from selling the Game Genie until the court matter was resolved. It also ordered Nintendo to post a bond, in order to ensure Galoob be compensated for sales lost during the injunction, should Galoob win the case. Galoob appealed the injunction to the Ninth Circuit Court of Appeals, but lost. After over a year of legal wrangling, the trial concluded in July 1991, with District Judge Fern M. Smith ruling in favor of Galoob, declaring that the Game Genie did not violate Nintendo's copyrights. In her ruling, Smith compared usage of the Game Genie to "skipping portions of a book" or fast-forwarding through a purchased movie; thus the altered game content did not constitute the creation of a derivative work as Nintendo had argued. Smith wrote that "Having paid Nintendo a fair return, the consumer may experiment with the product and create new variations of play, for personal enjoyment, without creating a derivative work." Nintendo appealed the verdict to the Ninth Circuit Court of Appeals, but lost as the Ninth Circuit affirmed the lower court's decision. In December 1991, a hearing was held to determine how much of the $15 million bond would be awarded to Galoob to compensate for losses during the approximately one-year period they were prohibited from selling the Game Genie. The court found that, because Galoob's losses actually exceeded $15 million, Galoob was entitled to the entire amount, plus legal fees. Nintendo appealed this decision to the Ninth Circuit, but lost again.
Legacy
The Ninth Circuit referred to the Galoob ruling in Micro Star v. FormGen Inc., a case involving user-created levels for the video gameDuke Nukem 3D. In that case, Judge Alex Kozinski concluded that the fair use analysis in Galoob v. Nintendo is dicta, and ruled in favor of the copyright holder. A 2002 case involving the ClearPlay technology raised a similar issue in the context of home viewing of DVDs. At no point was a copy of the DVD made; rather, offensive parts of the movie were automatically skipped. Hollywood studios and the Directors Guild of America sued ClearPlay alleging copyright infringement and trademark infringement. The case, however, was rendered irrelevant by the passage of the Family Entertainment and Copyright Act of 2005, a law that because of its narrow applicability did not abrogate Midway or affirm Galoob. SonicBlue was sued over the commercial-skipping feature of ReplayTV on similar grounds. "Your contract when you get the show is you're going to watch the spots . … Any time you skip a commercial … you're actually stealing the programming," asserts Turner Broadcasting CEO Jamie Kellner. He admits that "there's a certain amount of tolerance" for going to the bathroom during commercials. SonicBlue went bankrupt before the court reached a decision on the merits of the case.
