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A Short History of the Fair Use Defense in the Software Industry

Closeup of different computer scriptLast month, the Supreme Court released its much-anticipated decision in Google v. Oracle. The Court ruled that Google’s copying of 11,500 lines of declaring code from Java SE, for use in Google’s Android platform, was fair use.

While we examine the Supreme Court’s decision in another post, let’s first take a look at the history of the fair use defense in the software industry.

The relevant history starts in September 1992 with the Federal Circuit case Atari Games Corp. v. Nintendo of America Inc., where Atari was held liable for infringing Nintendo’s copyright in its game cartridge authentication software. Nintendo’s game console utilized a copyrighted software program that relied on code messages sent from the game cartridge to the game console in order to determine whether the cartridge was authorized or not. This system allowed Nintendo to prevent rival game manufacturers from producing cartridges that were compatible with its console. After several unsuccessful reverse-engineering attempts, Atari applied to the Copyright Office for a copy of the 10NES program by alleging that Atari was a defendant in an infringement action and needed a copy for the litigation. No such lawsuit existed. After obtaining the 10NES code, Atari developed “the Rabbit program” and was able to make cartridges that could run on the Nintendo console. The district court assumed that reverse engineering was copyright infringement. The Federal Circuit disagreed and stated that “Atari could lawfully deprocess Nintendo’s 10NES chips to learn their unprotected ideas and process” because “[a]n individual cannot even observe, let alone understand, the object code … without reverse engineering.”  However, it clarified that any copying beyond that necessary to understand the 10NES program would be copyright infringement. Ultimately , the Court found that Nintendo demonstrated a likelihood of success on its copyright infringement claims because Atari was making copies of Nintendo’s source code that Atari falsely procured from the Copyright Office.

Shortly after Atari, the Ninth Circuit decided Sega Enters. Ltd. v. Accolade, Inc. finding no infringement. Similar to Nintendo, Sega utilized a software “lock and key” mechanism on its gaming console and associated game cartridges. Accolade reverse-engineered the code so that its game cartridges would be compatible with Sega’s console. The Ninth Circuit found that this was fair use—giving the most weight to fair use factors one and four (the purpose and character of the use and the effect of the use upon the potential market). For the first factor, even though Defendant’s purpose was commercial, its direct copying was only for an intermediate stage, because its end goal was to produce its own original games, which is a nonexploitative purpose. For the fourth factor, the court acknowledged that plaintiff may lose some sales from the defendant’s competition, but found there was no direct competition between the parties’ sales of the “lock and key” software components. Regarding reverse engineering, the Ninth Circuit concluded 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.”

In 1998, the Ninth Circuit again had the opportunity to look at fair use in the software context when it decided Micro Star v. FormGen Inc. FormGen owned the rights to the game Duke Nukem 3D. The game included a “build editor” that enabled players to create their own levels. FormGen encouraged players to post the level they created on the internet where other players could download them. Micro Star downloaded 300 user-created levels and sold them commercially as the “Nuke It” expansion pack. The Ninth Circuit found this was not fair use under the four-part test for fair use. First, Micro Star’s use of FormGen’s protected expression, the D/N-3D story was made purely for financial gain. Second, the world of Duke Nukem is a fictional or fantasy creation where the fair use defense is much less likely to succeed when compared to factual works such as telephone listings. Third, both the quantity and importance of the material Micro Star used were substantial. Fourth by selling Nuke It, Micro Star “impinged on [FormGen’s] ability to market new versions of the story” of Duke Nukem.

Lastly in 2000, the Ninth Circuit decided Sony Computer Entm’t, Inc. v. Connectix Corp. and found no infringement. Connectix reverse-engineered Sony’s PlayStation console to create a “Virtual Game Station” that allowed computers owners to play PlayStation games on their computer. During the course of reverse-engineering Sony’s Console, Connectix repeatedly copied Sony’s copyrighted BIOS. The Ninth Circuit found that Connectix’s use of Sony’s BIOS every time they booted up one of their computers was fair use. Several considerations led to this outcome. First, because Sony did not make the information about its BIOS publicly available, Connectix needed to engage in reverse engineering to access its functional elements. Second, intermediate copying was necessary to accomplish that task. Third, the copying did not cease being “necessary” even though the copying iterated repeatedly in an emulated environment. Fourth and most importantly, the financial loss to Sony accrued not to its copyrighted works, but to the hardware used to access those works—“Sony understandably seeks control over the market for devices that play games Sony produces or licenses. The copyright law, however, does not confer such a monopoly.”


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