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Case #18: Sega Enterprises vs. Accolade, Inc.

No. 04-480
June 27, 2005

Topic: Procedure – Copyrightability of Object Codes

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(s)

Whether 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 that there is a legitimate
reason for seeking to do so

Ruling

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.
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.