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Tuesday, 3 August 2010

Pay up! Pay up! And play the game"

No, the IPKat didn't forget -- he has just been busy doing other things. But now he has got around to writing a few choice words on the surprisingly and pleasantly interesting case of Nintendo Company Ltd and another v Playables Ltd and Wai Dat Chan [2010] EWHC 1932 (Ch), decided on 28 July 2010 in the Chancery Division, England and Wales, by Mr Justice Floyd.

The claimants ('Nintendo') respectively (i) made and distributed the Nintendo DS games console (the console) and accompanying games and (ii) held the European distribution rights in the games. Her Majesty's Revenue and Customs Commissioners seized more than 165,000 game copiers, devices which fitted into the slots on Nintendo's games consoles. These devices contained either a built-in memory or a further slot of their own, with room to park a commercially available memory card on which copies of games could be stored. Clever little things, they also contained circuitry, software and data (including a copy of the Nintendo Logo Data File, or 'NLDF') which, Nintendo alleged, enabled them to circumvent its technical security measures which were supposed to prevent the loading and playing of unlawful copies of its games. The technical measures related to three features in particular: (i) the shape of the slot on the consoles, which corresponded to the shape of the game cards designed to fit it; (ii) the boot-up software which was permanently stored on the console and (iii) the use of shared key encryption technology and scrambling. It was these devices that Playables, a company under the control of one Wai Dat Chan, imported.

The facts are quite straightforward compared to the law. Nintendo first invoked s.296ZD(1) [This is not a joke: it really is called s.296ZD(1)] of the Copyright, Designs and Patents Act 1988:
"(1) This section applies where— (a) effective technological measures have been applied to a copyright work other than a computer program; and (b) a person ...
(C) manufactures, imports, distributes, sells or lets for hire, offers or exposes for sale or hire, advertises for sale or hire, or has in his possession for commercial purposes any device, product or component, or provides services which— (i) are promoted, advertised or marketed for the purpose of the circumvention of, or (ii) have only a limited commercially significant purpose or use other than to circumvent, or (iii) are primarily designed, produced, adapted or performed for the purpose of enabling or facilitating the circumvention of, those measures ...".
Nintendo also invoked the original s.296 of the same Act:
"(1) This section applies where— (a) a technical device has been applied to a computer program; and (b) a person (A) knowing or having reason to believe that it will be used to make infringing copies— (i) manufactures for sale or hire, imports, distributes, sells or lets for hire, offers or exposes for sale or hire, advertises for sale or hire or has in his possession for commercial purposes any means the sole intended purpose of which is to facilitate the unauthorised removal or circumvention of the technical device; or (ii) publishes information intended to enable or assist persons to remove or circumvent the technical device ....".
Said Nintendo, Playable's devices fit both these provisions and their application to its consoles was therefore unlawful under the Act. Not content with these allegations, Nintendo said that there was also ordinary, traditional copyright infringement by authorising the commission of infringing acts by others under s.16 of the Act and secondary infringement under s.24 by supplying the means by which others could make infringing copies of (i) the source code for the console's boot up software, (ii) the NLDF and (iii) Nintendo's Racetrack logo. In addition, Nintendo claimed that Wai Dat Chan, who controlled Playables, was jointly liable with the company since its activities were such that they could only have been carried out as a matter of corporate policy; Wai Dat Chan, as sole director and shareholder, was the man who made that policy.

Despite securing a partial settlement on their claims, Nintendo still wanted to obtain a judgment establishing their rights and applied for summary judgment. Both defendants resisted, saying that (i) they neither knew or had reason to believe that the devices would be used to make infringing copies and that (ii) the devices could in any event be put to lawful use. There was also an interesting little issue as to whether sections 296 and 296ZD applied to export sales, or if they only covered sales for local use.

Floyd J gave summary judgment against both parties, except where he didn't. Neither knowledge nor reason to believe were necessary ingredients of a successful claim under s.296ZD, it being a tort of strict liability. Even if the device could be used for a non-infringing purpose, there was liability so long as one of the conditions in s 296ZD(1)(b) of the Act was satisfied. Section 296 was a bit less straightforward: the fact that a device might be used for a purpose which did not involve infringement did not mean that the sole intended purpose was not the unauthorised circumvention of a technical device but here it was clear that (i) 'technical devices' had been applied to the copyright computer programs in the console and its game cards and that (ii) the devices had the sole intended purpose of circumventing Nintendo's technical measures.

The defendants were sunk, but still had some reason to smile: s.296 was not infringed when the circumvention took place outside the jurisdiction. This was because the "infringing copies" which a defendant must know would be made had to involve an act of infringement of United Kingdom copyright. Summary judgment therefore had to be refused in respect of the sales of the devices which were for export. Section 296ZD had no such problems though, since it applied to dealings in the United Kingdom in devices capable of circumvention, wherever they might ultimately end up; indeed, since it was concerned with whether devices were capable of circumvention rather than actually did any circumventing, it didn't matter whether the circumvention was one which didn't take place in the UK or didn't take place elsewhere.

Says the IPKat, in a single European market the notion that the sale or distribution of such devices might ever escape liability on the basis that they are for export only doesn't look quite right, does it? Says Merpel, judging by the amount of money that can be made from game copiers, has Ninendo considered either licensing their manufacture, after the first surge of sales of a new game has subsided, or even making and selling its own?

"It's all in the game" here
"Only a game?" -- arguably the finest footballing autobiography ever written -- here
Play up! Play up! And play the game" here


Anonymous said...

My daughter will hopefully now stop whinging that she hasn't been allowed one of these chips...

Andrew Robinson said...

Nintendo has quite a veil of secrecy surrounding their agreements with third party developers, but I suspect that manufacturing their own devices would leave them open to compensation claims from those developers. I've spoken to a lot of politicians about the negative value to society of much loved games disappearing from sale along with the hardware needed to play them after a few years, and my impression is that there is increasing political will to 'do something' about copyright restrictions in cases where there is no legitimate way of obtaining working games. If copyright reform does come by chipping away at the life+70 rule, then out-of-print games are a prime candidate for early change.

Anonymous said...

Says Merpel, judging by the amount of money that can be made from game copiers, has Ninendo considered either licensing their manufacture, after the first surge of sales of a new game has subsided, or even making and selling its own?

The problem is that these devices enable the copying and playback of all Nintendo DS titles. Permitting the sale of these devices would in effect undermine their efforts to sell all games - past, present, and future.

However, perhaps it would make sense for Nintendo to market such a device for game systems for which games are no longer produced.

Anonymous said...

"However, perhaps it would make sense for Nintendo to market such a device for game systems for which games are no longer produced."

No, the problem then for Nintendo would be a reduction in demand for new game systems for which new games are still being produced.

Steph said...

However, perhaps it would make sense for Nintendo to market such a device for game systems for which games are no longer produced.

This has been done by Nintendo since about the time their Wii console came out, and is called the "Virtual Console". The functionality/service extends not only to 'extinct' Nintendo hardware (NES, SNES, N64) but further to 'extinct' hardware of Sega and NEC.

Nintendo even markets, quite successfully I understand, a specific 'retro' controller for use with such 'old games of old systems' downloaded to and played on their Wii.

I am unsure whether a similar service/functionality is available to their portable consoles, although they are online-enabled and their hardware should be able to support most Virtual Console titles.

I do not believe there is any commercial or corporate sense for Nintendo to market R4-like devices.

Nintendo's corporate policy to develop and maintain proprietary software formats (in hardware terms: e.g. sticking to game cartridges when competitors were switching to optical media, then using distinct/specific optical media relative to conventional CD/DVDs, etc.) is three decades old at least, and for certain aspects of which the company has been rapped on the knuckles by the EU itself several times already.

Nintendo has long been considering the question of game copiers and revenue associated with same, as
this particular case simply slots within a decades-old list (litany?) of similar cases opposing Nintendo to manufacturers and suppliers of functionally-comparable devices (for use by 'professional' infringers and/or end users), in very many jurisdictions, in connection with its earlier consoles.

Manifestly, Nintendo must still be making more profit with their traditional model (breakeven console, high added-value software in proprietary format), litigation included.

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