I. Background



Connectix Corporation created and sold a software program called “Virtual Game Station” (VGS), an emulator of the Sony PlayStation, which allowed users to play PlayStation games on their computers. Sony brought this lawsuit alleging trademark infringement and copyright infringement of BIOS, its software program which operates the PlayStation. Connectix’s VGS didn’t contain any of Sony’s copyrighted material, but Connectix did use that material during VGS production, when it reverse-engineered the PlayStation to discover how it worked.



Connectix reverse-engineered Sony BIOS by observing how the BIOS chip functioned and copying that functionality. The BIOS was downloaded into the RAM of the developers’ computers as they observed how it worked. Connectix did not use any of the copyrighted material from BIOS in the final version of the VGS. The court relied on prior case law and concluded that functional elements of a product aren’t copyrightable. Sega v. Accolade; 17 U.S.C. § 102 (b).



The district court granted an injunction keeping Connectix: “(1) from copying or using the Sony BIOS code in the development of the Virtual Game Station for Windows; and (2) from selling the Virtual Game Station for Macintosh or the Virtual Game Station for Windows... The district court also impounded all Connectix’s copies of the Sony BIOS and all copies of works based upon or incorporating Sony BIOS.”



Connectix appealed to the Ninth Circuit, admitting it copied Sony’s copyrighted BIOS software in developing the VGS but arguing that doing so was protected as a fair use. Connectix also contended that its VGS didn't tarnish Sony's PlayStation trademark.


A. Fair Use Analysis


According to 17 U.S.C. § 107, the factors for determining fair use are:



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 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.



The court relied on Sega v. Accolade, which held 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.” Since object code, which contains some uncopyrightable functional elements, is not readable by humans, reverse-engineering may be necessary to disassemble the code to find the source code and discover those elements. So even though intermediate copying may constitute copyright infringement, that copying may be protected by a fair use defense, based on the outcome of an analysis of the factors listed above.



1. Nature of the copyrighted work


The court granted BIOS a lower level of protection because it contained unprotectable aspects that could only be examined through copying. The court felt that its methods of observing and disassembly, including intermediate copying, were required to get to the unprotected functional aspects of the software. The court noted that Sega expressly allows disassembly and then refused to distinguish Connectix’s methods of reverse-engineering.


The court rejected Sony’s argument that Connectix could have just copied BIOS once and disassembled it from that copy, rather than copying it over and over again. The court said that Sega never specified that copying could only occur a certain number of times, but rather covered what could or couldn’t be copied. The court refused to “supervise the engineering solutions of software companies in minute detail” and added that what Sony proposed would be a less efficient path of reverse-engineering anyway. Copyright rules are created to prevent authors from wasting effort. The court noted that if Sony wanted to erect a barrier keeping others from the intermediate copying of BIOS and finding the functional aspects in BIOS, it should have applied for a patent, which it failed to do.


2. Amount and substantiality of the portion used


Although Connectix copied BIOS many times and disassembled parts of it, this factor weighs little when it is only intermediate copying and the copied parts aren’t used in the final product. Since the VGS didn’t contain any infringing material, this factor didn’t weigh against Connectix.


3. Purpose and character of the use


With this factor, the court looked at whether the alleged infringing product was transformative and provided something new or “merely supersede[d] the objects of the original creation.” The Ninth Circuit held that the district court was wrong to immediately hold a “presumption of unfairness” just because Connectix had a commercial purpose in copying BIOS. Because the commercial use of the copyrighted material was intermediate, and therefore indirect or derivative, and because the reverse-engineering still led to producing a product that was compatible with PlayStation games, the court found that the commercial purpose didn’t weigh against Connectix.


The court found that the VGS was transformative because it created a new platform for playing PlayStation games and because VGS was a completely separate product from the PlayStation, with new object code, “despite the similarities in function and screen output.” The VGS did more than just supplant the PlayStation; it allowed for playing on a computer and the software was expressed differently through unique object code. Because the court deemed the copying to be for a transformative, intermediate commercial use, this factor weighed in favor of Connectix.


4. Effect of the use on the potential market


Here the court considered “not only the extent of market harm caused by the particular actions of the alleged infringer, but also whether unrestricted and widespread conduct of the sort engaged in by the defendant . . . would result in a substantially adverse impact on the potential market for the original.” Transformative works don’t have as negative an impact on the potential market as a product that completely copies and supplants the original. While Sony likely lost some console sales because of the VGS, the court found the VGS to be a “legitimate competitor” and that Sony did not hold a monopoly for platforms that can play Sony games. The desire to promote creative expression and competition in the marketplace trumped Sony’s claim of unfair copying.


Based on its findings for these four factors, the court determined that Connectix’s copying of Sony’s BIOS during its reverse-engineering was an allowable fair use and so Connectix wasn’t liable for copyright infringement.


B. Tarnishment Analysis


Sony also claimed that Connectix’s sale of the VGS tarnished Sony’s PlayStation trademark under 15 U.S.C. Section 1125(c)(1). For that claim to succeed, Sony needed to show that: (1) the PlayStation mark was famous; (2) Connectix was making a commercial use of the mark; (3) Connectix’s use began after the mark became famous; and (4) Connectix’s use of the mark diluted the quality of the mark by diminishing the capacity of the mark to identify and distinguish goods and services. The court focused on the fourth factor.


The district court found that negative associations occurred because the VGS didn’t play PlayStation games as well as the PlayStation console and consumers got confused about the distinction between VGS and PlayStation. While this court recognized the difference in quality between the two game platforms, there was no reliable proof that consumers misattributed the lower quality VGS to Sony. The court also rejected Sony’s argument that Sony’s trademark was tarnished simply by being linked to the VGS. There was not enough evidence to show that the VGS was much lower quality or that consumers thought negatively of Sony because its games were being played on the VGS.


Click here to read the opinion online.