Before you circumvent, circumspect! Nintendo TPM triumphs in Italy

This Kat is from a bygone generation in which games and playing were rarely associated with anything electrical. Crossword puzzles, chess, bridge, football, tennis -- all of these were "contact sports" in the sense that some form of human contact (including asking a friend for advice when stuck for a cryptic crossword clue) was generally required. Special treats, like battery-operated cars, were only treats for as long as the batteries lasted -- which in his case was not usually very long.  He therefore marvels not only at the sophistication and excellent graphic quality of video games but also at the ability of people who are approximately one-tenth his age to master them so speedily and with to acquire such proficiency in beating him at them.

Be this as it may, here's a guest post from Katfriends Ray Black and Mary Guinness (Mishcon de Reya) which touches not only the profile of the lucrative game market today but also on the outcome of an exciting piece of Italian litigation involving game-related technology. This is what they tell us:

Nintendo wins Italian case against mod chip seller after CJEU’s ruling on security in its consoles and games

Nintendo has recently obtained a positive ruling from the Italian courts, in relation to PC Box's sale of mod chips and game copier devices that are capable of being used to circumvent the technological protection measures (TPMs) on Nintendo's DS and Wii Consoles and authentic video games.  This decision was keenly-awaited since it was the first interpretation of the CJEU's ruling in January 2014 in Case C-355-12 Nintendo v PC Box [on which see Katpost here and links to earlier comments; one R Black appeared for Nintendo in this reference ...] on the effectiveness of TPMs and enforceability of rights against those who seek to circumvent them. 

Background

Piracy is a major threat to the videogame industry, costing hundreds of millions of euros in lost sales every year.  One of the tools the video game industry can deploy to protect its games against the threat of piracy is to implement TPMs which prevent unauthorised copies predominantly downloaded from the internet by consumer from being played on a genuine video games console.  Article 6 of Directive 2001/29 (the InfoSoc Directive) gives rights holders the right to take action against the circumvention of any effective TPMs.

Nintendo had implemented a system of TPMs on its products to prevent the play of unauthorised copies of Nintendo video games developed by Nintendo and third parties (SEGA, Ubisoft etc.). PC Box were selling 'mod chips' and game copier devices which, once installed on the respective console, circumvented this protection system. Nintendo commenced proceedings under Article 102c of Law No 633 as amended by Legislative Decree No 68 which transposes the InfoSoc Directive into Italian law and gives rights holders the ability to take action against any person manufacturing and/or distributing equipment which circumvents TPMs. 

PC Box claimed that Nintendo were not entitled to challenge their circumvention of Nintendo's TPMs for a number of reasons. In particular:

·        Nintendo had not only implemented the TPM in the product protected as a copyright work (i.e. the game itself) but also in the games console. This meant that it not only prevented use of pirated video games but also prevented the use of any legitimate third party games from operating on Nintendo's consoles. On this basis the TPM went beyond merely preventing the use of unauthorised copies; and

·         The PC Box equipment had a legitimate commercial use, in that it enabled the use of 'homebrew' – applications from independent manufacturers created specifically to be used on Nintendo's consoles. 

The Italian Court sought a preliminary ruling from the CJEU on the interpretation of Article 6 of the InfoSoc Directive.    

The Law

Article 6 of the InfoSoc Directive states:

Obligations as to technological measures

1. Member States shall provide adequate legal protection against the circumvention of any effective technological measures, which the person concerned carries out in the knowledge, or with reasonable grounds to know, that he or she is pursuing that objective.

2. Member States shall provide adequate legal protection against the manufacture, import, distribution, sale, rental, advertisement for sale or rental, or possession for commercial purposes of devices, products or components or the provision of services which: 

(a) are promoted, advertised or marketed for the purpose of circumvention of, or

(b) have only a limited commercially significant purpose or use other than to circumvent, or 

(c) are primarily designed, produced, adapted or performed for the purpose of enabling or facilitating the circumvention of, any effective technological measures.

Article 6 must be read in the context of the recitals to the InfoSoc Directive, which state:

(47) Technological development will allow rightholders to make use of technological measures designed to prevent or restrict acts not authorised by the rightholders of any copyright, rights related to copyright or the sui generis right in databases. The danger, however, exists that illegal activities might be carried out in order to enable or facilitate the circumvention of the technical protection provided by these measures. In order to avoid fragmented legal approaches that could potentially hinder the functioning of the internal market, there is a need to provide for harmonised legal protection against circumvention of effective technological measures and against provision of devices and products or services to this effect.

The IPKat's favourite PC
Box ("public call box") ...

(48) Such legal protection should be provided in respect of technological measures that effectively restrict acts not authorised by the rightholders of any copyright, rights related to copyright or the sui generis right in databases without, however, preventing the normal operation of electronic equipment and its technological development. Such legal protection implies no obligation to design devices, products, components or services to correspond to technological measures, so long as such device, product, component or service does not otherwise fall under the prohibition of Article 6. Such legal protection should respect proportionality and should not prohibit those devices or activities which have a commercially significant purpose or use other than to circumvent the technical protection. In particular, this protection should not hinder research into cryptography.

(49) The legal protection of technological measures is without prejudice to the application of any national provisions which may prohibit the private possession of devices, products or components for the circumvention of technological measures.

... though other PC Boxes
are more functional

(50) Such a harmonised legal protection does not affect the specific provisions on protection provided for by Directive 91/250/EEC. In particular, it should not apply to the protection of technological measures used in connection with computer programs, which is exclusively addressed in that Directive. It should neither inhibit nor prevent the development or use of any means of circumventing a technological measure that is necessary to enable acts to be undertaken in accordance with the terms of Article 5(3) or Article 6 of Directive 91/250/EEC. Articles 5 and 6 of that Directive exclusively determine exceptions to the exclusive rights applicable to computer programs.

Preliminary ruling of the CJEU

In January 2014, the CJEU ruled that:

(1) a video game is not just a computer program but includes other creative elements and so falls under the scope of InfoSoc Directive and is not excluded from protection under that Directive by virtue of the Software Directive 2009/24.  

(2) Protection granted to TPMs under Article 6 of the Directive include measures which are incorporated partly in the video game itself and partly in the console, and which interact to allow a videogame to be played on the console.    

(3) In order to be entitled to protection under the InfoSoc Directive, the TPM must be proportionate and suitable for the achieving the objective of protecting copyright works.  They must not go beyond what is necessary to achieve that objective.  

(4) it is for the national court to determine whether the TPM are proportionate and this should involve the examination of:

(i) the actual use of the circumvention devices – to see how often they are in fact used to allow unauthorised copies of video games and how often they are used for purposes which do not infringe copyright; 

(ii) whether other measures or measures which are not installed in consoles could cause less interference with the activities of third parties, while still providing comparable level of protection of the rights holder's rights; and 

(iii) the relative costs of different types of TPMs, and the technological and practical aspects of their implementation.

The Italian decision

So what about the decision of the First Instance Tribunal of Milan [it’s No. 12508/2015, published on Nov. 6, 2015 - General Case Roll No. 11739/2009, in case you were wondering]?

Following the CJEU ruling, the Italian court first addressed the CJEU's finding that videogames were indeed more than just computer programs and ruled that Nintendo's video games fell within the scope of protection provided by the InfoSoc Directive.   

The Court then considered whether Nintendo's TPMs were in fact proportionate, taking into account the factors identified by the CJEU.  Nintendo had filed an expert report specifically dealing with the technical description of its TPMs, illustrating the advantages in terms of costs, ease of use and security.  The expert report also compared the TPMs with the known alternatives. With respect to the actual uses of the circumvention devices sold by PC Box, again Nintendo filed evidence. 

The Court made it clear that it was for the defendant (ie PC Box) to bear the burden of proof in establishing whether TPMs could have been deployed which could cause less interference while providing comparable protection was placed on the defendant; the same applied to proof of the actual uses of the circumvention devices.  Since, PC Box filed no evidence and raised no adequate arguments to counter these points, the Court accepted the evidence on its face value and concluded that PC Box breached the lawful TPMs installed on Nintendo's devices.   As well as orders for destruction of the PC Box equipment, the Court awarded significant damages to Nintendo together with reimbursement of its costs of the proceedings. 

No window for Box

While for many, after the CJEU decision, the Italian Court's judgment will not come as a surprise, some commentators had felt that the CJEU had left a window open for PC Box and similar suppliers of circumvention measures where there is legitimate non-infringing commercial use of their equipment. 

We now have our first indication of how national courts will be interpreting this decision and this is in line with previous decisions before the High Court, England and Wales (e.g. Nintendo v Playables [2010] EWHC 1932 (Ch) [noted by the IPKat here]).

Thanks for this update, says the IPKat!