Sega Enterprises Ltd. v. Accolade, Inc.

Citation. Sega Enters. v. Accolade, Inc., 977 F.2d 1510, 1992 U.S. App. LEXIS 26645, 24 U.S.P.Q.2D (BNA) 1561, Copy. L. Rep. (CCH) P27,001, 92 Cal. Daily Op. Service 8612, 2 Daily Journal DAR 14275 (9th Cir. Cal. Oct. 20, 1992)

Brief Fact Summary. Accolade, Inc. (Defendant) copied and then disassembled Sega Enterprises Ltd.’s (Sega’s) (Plaintiff) video game programs in order to discover the requirements for compatibility with Plaintiff’s console.

Synopsis of Rule of Law. Disassembly of a copyrighted object code is a fair use of the material if it is the only way to access uncopyrighted elements of the code and there is a legitimate reason for seeking to do so.

Facts. Sega Enterprises Ltd. (Sega) (Plaintiff) and Accolade, Inc. (Defendant) made and marketed video game cartridges. In order to make its own games compatible with Sega’s (Plaintiff) console, Accolade (Defendant) “reverse engineered” Sega’s (Plaintiff) video game programs to discover the requirements for compatibility with the console. In order to do this, it first copied Plaintiff’s copyright code in its entirety and then disassembled it to see how it worked. Defendant then created its own games for use with Plaintiff’s console, but did not copy Plaintiff’s programs or use any of its codes. Plaintiff sued for copyright infringement. The district court granted Plaintiff’s motion for a preliminary injunction to prevent Defendant from further disassembly of Plaintiff’s object codes. Defendant appealed.

Issue. Is disassembly of a copyrighted object code a fair use of the material if it is the only way to access uncopyrighted elements of the code and there is a legitimate reason for seeking to do so?

Held. (Reinhardt, J.) Yes. Disassembly of a copyrighted object code is a fair use of the material if it is the only way to access uncopyrighted elements of the code and there is a legitimate reason for seeking to do so. Section 107 of the Copyright Act of 1976 lists four factors to be considered in determining whether a certain use is a fair one: (1) the purpose and character of the use; (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 market for the copyrighted work. First, Accolade (Defendant) only sought to become a legitimate competitor in the field of Sega (Plaintiff) compatible video games. It therefore had a legitimate, non-exploitative purpose for copying Plaintiff’s code. Second, Plaintiff’s video game programs must be afforded a lower degree of protection than more traditional literary works as they contain unprotected aspects that cannot be examined without copying. Third, the fact that Defendant disassembled entire programs written by Sega (Plaintiff) should receive little weight. Fourth, Accolade’s (Defendant) copying may have affected the market, but not significantly, as customers tend to buy many video games, not just one. Accordingly, Defendant has the better case on the fair use issue. Affirmed in part, reversed in part, and remanded.

Discussion. An issue similar to reverse engineering was raised in Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995). In that case, Southeastern copied Triad’s software into Triad’s computer as part of an attempt to service the computer. The Ninth Circuit concluded that such copying was not fair use because it was neither creative nor transformative and did not provide the marketplace with new creative works. Instead, the copies made by Southeastern undoubtedly lowered the value of Triad’s copyright.