Sony Computer Entertainment, Inc. v. Connectix Corp.

Citations: 203 F.3d 596; 2000 WL 144399Docket: No. 99-15852

Court: Court of Appeals for the Ninth Circuit; February 9, 2000; Federal Appellate Court

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The case involves a copyright infringement claim brought by Sony Computer Entertainment, Inc. against Connectix Corporation regarding the Virtual Game Station software, which allows users to emulate the Sony PlayStation on regular computers. Sony holds the copyright for the PlayStation's BIOS, the essential software operating the console, but has not claimed any patents in this case. Connectix's Virtual Game Station does not include any of Sony's copyrighted material; however, during its development, Connectix reverse-engineered Sony's BIOS, resulting in intermediate copies that Sony argued constituted copyright infringement.

The district court ruled in favor of Sony, granting a preliminary injunction against Connectix based on the finding that Connectix's copying did not qualify as fair use under 17 U.S.C. 107. The injunction prohibited Connectix from selling the Virtual Game Station and using Sony's BIOS code. On appeal, the court reversed the injunction, determining that the intermediate copies made by Connectix during reverse engineering were protected fair use, essential for the functionality of the non-infringing Virtual Game Station. 

Additionally, the district court had found that Connectix's actions were likely to tarnish Sony's PlayStation trademark under 15 U.S.C. 1125, but this ruling was also reversed. The case emphasizes the balance between copyright protection and public access to functional aspects of software through reverse engineering.

Reverse engineering copyrighted software involves both protected and unprotected elements, as established in Sega Enters. Ltd. v. Accolade, Inc. Under 17 U.S.C. § 102(b), copyright does not cover ideas or methods inherent in the software. To ensure compatibility with copyrighted products, software engineers may need to reverse engineer them, which can be achieved through various methods: (1) reading documentation, (2) observing the program in use, (3) static examination of the code, and (4) dynamic examination during execution. Method (1) is often ineffective due to inaccurate manuals, particularly for proprietary products like Sony's PlayStation. Methods (2), (3), and (4) require loading the program onto a computer, copying it into random access memory (RAM). Observation of functional elements can sometimes occur through the visual representation of software operations, such as with word processors or video games. However, more complex systems, like the Sony BIOS, necessitate running the software in an emulated environment, using tools like debuggers to monitor interactions between the BIOS and other programs.

Copying the Sony BIOS from a PlayStation console was essential for Connectix to develop the Virtual Game Station emulator for Macintosh, as they needed to emulate both the hardware and firmware of the PlayStation. Connectix engineers extracted the BIOS from the console, copied it into their computers' RAM, and monitored its interactions with the hardware emulation software. This process required multiple copies of the BIOS each time the computer was booted up. 

Connectix employed two disassembly methods: static disassembly (method 3) involved copying and disassembling portions of the program, while dynamic disassembly (method 4) allowed for real-time observation of the program's instructions as it ran, necessitating additional copying into RAM. The engineers also utilized the Sony BIOS to debug their emulation software, making repeated copies and disassembling sections of the BIOS.

Additionally, Connectix developed the Virtual Game Station for Windows, making daily RAM copies of the Sony BIOS to create Windows-specific systems. Although they had their own BIOS, they used the Sony version for its CD-ROM code. An engineer, Aaron Giles, initially disassembled a downloaded copy of the BIOS for testing a disassembler program, but this version, being in Japanese, was ultimately abandoned and not used in the emulator's development.

Connectix sought technical assistance from Sony while developing the Virtual Game Station, but Sony declined. Connectix completed the product for Macintosh in late 1998 and announced it as a PlayStation emulator at the MacWorld Expo on January 5, 1999. On January 27, 1999, Sony filed a complaint against Connectix for copyright infringement and sought a preliminary injunction, which the district court granted. The injunction prohibited Connectix from using Sony's BIOS code in their Virtual Game Station for Windows and from selling either version of the product. The court also impounded Connectix's copies of the BIOS. Connectix appealed the injunction, arguing that their use of Sony's copyrighted BIOS was fair use under 17 U.S.C. § 107 and challenging the district court's finding regarding potential harm to the PlayStation trademark. The court analyzed fair use in the context of software, noting that while object code is copyrightable, it contains unprotected ideas and functions that may require copying to access. The court referenced prior case law, specifically Sega Enterprises Ltd. v. Accolade, Inc., establishing that disassembly of software to access unprotected elements can constitute fair use if there's a legitimate purpose. The court concluded that Connectix's copying of Sony's BIOS for this reason was a fair use under the law.

Intermediate copying can qualify as copyright infringement even if the copied end product lacks copyrighted material, but such copying may be protected under fair use if deemed 'necessary' to access the software's functional elements. The Copyright Act protects expression, not ideas or functional aspects of software, presenting unique challenges for computer programs, which are utilitarian and contain elements dictated by their functions and efficiency. This fair use doctrine aims to maintain public access to the ideas and functional elements within copyrighted software, supporting the overarching goal of the Copyright Act to foster artistic creativity for public benefit.

Regarding the statutory fair use factors, particularly the nature of the copyrighted work, it is recognized that some works have a closer relation to copyright protection. The Sony BIOS is positioned further from this core due to its unprotected aspects, warranting a lower degree of protection than traditional literary works. Connectix's copying of the Sony BIOS was found to be 'necessary' for fair use, as the BIOS contains unprotected functional elements that Connectix could not access without copying. Given the limited public information about the Sony BIOS and its internal operation—lacking any display to convey its functionality—Connectix's reverse engineering, which involved copying the BIOS onto a computer, was deemed necessary to access these functional elements.

Connectix utilized reverse engineering methods, specifically observation and partial disassembly, which involved making intermediate copies of copyrighted material. These methods do not negate fair use protection, as Sega had previously sanctioned disassembly. The court found no inherent reason to prefer one reverse engineering method over the other in copyright law, as both require copying both protected and unprotected elements of a program. Connectix demonstrated that it observed the Sony BIOS in an emulated environment and later disassembled portions to understand its functional aspects. The court concluded that this intermediate copying was necessary for accessing functional elements, contrary to the district court's view that Connectix exceeded the scope of fair use by using the BIOS code to develop its software. The district court's reasoning was deemed unpersuasive, as Sega allowed for similar practices of copying and experimenting with disassembled code. The court rejected Sony's argument that Connectix's repeated observation of the BIOS resulted in unnecessary copies, clarifying that the necessity referenced in Sega pertains to the method used rather than the frequency of its application.

Sony's proposed interpretation of fair use is criticized for being inadequate, as it would lead to unnecessary limitations on software engineers' ability to create efficient engineering solutions. The copying of the Sony BIOS into RAM by Connectix engineers resulted in multiple intermediate copies, which could be reduced if engineers kept their computers on longer, but the law should not hinge on such distinctions. Implementing Sony's suggestion would impose an artificial barrier to public access to ideas within copyrighted software, as Congress has denied copyright protection for such ideas. Sony has not met the higher standards required for patent protection.

Regarding the statutory factors for fair use, the second factor—amount and substantiality—leans against Connectix due to its copying of the entire Sony BIOS, although this factor carries less weight in cases where the final product does not contain infringing material. The first factor—purpose and character of the use—examines whether Connectix’s Virtual Game Station offers something new or transformative compared to the original. The district court incorrectly applied a presumption of unfairness based on Connectix's commercial purpose, which the Supreme Court has since rejected. Instead, this commercial aspect is merely a factor to consider against fair use, rather than a presumption of unfairness.

Connectix's Virtual Game Station (VGS) is deemed modestly transformative as it creates a new platform for playing Sony PlayStation games on personal computers, allowing gameplay in environments where a PlayStation console and television are unavailable. While the VGS shares similarities with the PlayStation in function and output, it constitutes a distinct product. The software's expressive nature is evident in both the organization of its object code and its visual representation. Sony does not claim copyright infringement regarding the object code in the VGS. Connectix's development of new object code is recognized as transformative, despite functional similarities. 

The analysis considers the commercial nature of Connectix's use, which is characterized as intermediate and derivative. Connectix's reverse engineering of the Sony BIOS for compatibility with PlayStation games serves a legitimate purpose under fair use criteria. The first factor of fair use favors Connectix, contradicting the district court's ruling that the VGS merely supplants the PlayStation. The district court's error lies in overlooking the expressive aspects of the VGS software. Additionally, comparisons to previous cases, such as Infinity Broadcast Corp. v. Kirkwood, highlight that mere format changes do not equate to transformation, thus supporting the conclusion that Connectix's actions align with fair use principles.

The fourth fair use factor, concerning the effect of the use on the potential market, favors Connectix. This factor assesses both the direct market harm from the alleged infringer's actions and the broader implications of unrestricted use that could adversely affect the original's market. A transformative work, like Connectix's Virtual Game Station, is less likely to negatively impact the original's market compared to a work that merely replaces another. Although the district court noted that Connectix's product could lead to lost sales for Sony, it concluded that the Virtual Game Station is a legitimate competitor rather than a mere substitute, which does not inherently negate fair use. Sony's desire to control the market for its gaming devices does not grant it a monopoly under copyright law. Ultimately, the analysis of the four statutory fair use factors shows that three favor Connectix, while only one favors Sony, which holds little weight. No additional factors were identified that would alter this conclusion. As a result, Connectix's intermediate copying of Sony's BIOS during reverse engineering qualifies as fair use under 17 U.S.C. § 107. Sony has failed to demonstrate a likelihood of success on its copyright infringement claim, leading to the reversal of the district court's preliminary injunction against Connectix.

Connectix's sale of the Virtual Game Station was found by the district court to tarnish Sony’s 'PlayStation' mark under 15 U.S.C. § 1125(c)(1). However, the court's preliminary injunction was solely based on Sony's copyright claim and did not cite the tarnishment finding. Despite the possibility of affirming on any supported ground, the appellate court declined to do so regarding tarnishment, noting that Sony failed to demonstrate a likelihood of success on all required elements of the claim. To establish tarnishment, Sony must show: (1) the PlayStation mark is famous, (2) Connectix is making a commercial use of the mark, (3) Connectix's use began after the mark became famous, and (4) Connectix's use dilutes the mark by diminishing its capacity to identify goods and services. Connectix did not dispute the first and third elements but contested the fourth. Under this element, Sony needed to prove that negative associations would arise from Connectix's use. The district court found that consumers confused the Virtual Game Station with the PlayStation, leading to negative associations. However, the appellate court determined that the evidence relied upon, including unverified online reviews and focus group studies, did not adequately support the finding of consumer misattribution or confusion. Consequently, the appellate court rejected the district court's conclusion that the Virtual Game Station tarnishes the Sony PlayStation mark.

Sony's argument that the performance differences between its PlayStation and Connectix's Virtual Game Station constitute trademark tarnishment is unpersuasive. Tarnishment occurs when a trademark is associated with inferior products, which may degrade its value. In this case, despite assuming tarnishment could apply, the evidence does not demonstrate that Sony's mark suffered negative associations due to Connectix's product. Studies indicated mixed results regarding the Virtual Game Station's performance, with some users preferring PlayStation while others found the Virtual Game Station acceptable for certain games. Internet reviews varied, with some praising the Virtual Game Station and others being critical. This evidence is insufficient to establish that the Virtual Game Station tarnished Sony's mark, leading to the conclusion that Sony's claim for injunctive relief is unfounded.

Additionally, Connectix's reverse engineering of Sony's BIOS from a purchased PlayStation is protected as fair use. Even if Connectix's additional copies infringed Sony's copyright, this does not warrant injunctive relief. Consequently, the district court's injunction is reversed, and the finding of tarnishment is also reversed. The case is remanded for further proceedings. Notably, under 17 U.S.C. § 117(a)(1), making a copy of a software program is not considered infringement if it is essential for the program's use, although the court did not need to address this issue due to the fair use ruling.

Object code, which is binary and only readable by computers, contrasts with source code that is understandable by software engineers. Programmers typically write software in source code before converting it into object code. The determination of fair use involves four factors: the purpose of use (commercial vs. nonprofit), the nature of the copyrighted work, the amount used compared to the whole, and the effect on the market value of the work, as outlined in 17 U.S.C. § 107. Connectix attempted to access Sony BIOS functionality by using a logic analyzer, which allowed limited observation of signals but did not produce intermediate copies. There is no evidence supporting the district court's conclusion that Connectix's work was not original or that it did not create original code. Connectix engineers acknowledged using the Sony BIOS for developing their own hardware emulation software but maintained they were writing their own code despite using and analyzing the Sony BIOS. Sony failed to prove that Connectix's final product contained infringing material. Connectix engineers recognized alternative engineering solutions, with one admitting that using the Sony BIOS was more efficient for bug fixing than developing a new BIOS from scratch. Sony's reliance on RAM copies to argue against Connectix's practices was rejected, and the court found previous cases cited by Sony not applicable to this fair use analysis. Finally, the court did not agree with Sony's interpretation of commercial use presuming unfairness, as it contradicted established legal precedents.

Acuff-Rose rejected the notion of a "hard evidentiary presumption" that gives undue weight to the commercial nature of use, determining that the Court of Appeals made an error in this regard. In contrast to Micro Star, which involved non-transformative use, the current case presents a transformative scenario. The court dismissed Sony's claim that downloading its BIOS constituted infringement warranting an injunction, noting that the downloaded BIOS had minimal impact on the development of the Virtual Game Station. It concluded that the Virtual Game Station did not infringe on any copyright and recognized a legitimate public interest in Connectix’s software, which outweighed the minor concerns related to the BIOS download. The court emphasized that imposing an injunction is discretionary and determined that damages would sufficiently protect Sony's interests without necessitating an injunction against Connectix's use of the BIOS, referencing Acuff-Rose’s factors for evaluating injunctions related to fair use.