Page:Lewis Galoob Toys v. Nintendo of America.pdf/5

 stable to permit it to be perceived … for a period of more than transitory duration.” 17 U.S.C. § 101. But, Nintendo’s reliance on the Act’s definition of “fixed” is misplaced. Nintendo’s argument also proves too much; the existence of a market does not, and cannot, determine conclusively whether a work is an infringing derivative work. For example, although there is a market for kaleidoscopes, it does not necessarily follow that kaleidoscopes create unlawful derivative works when pointed at protected artwork. The same can be said of countless other products that enhance, but do not replace, copyrighted works.

Nintendo also argues that our analysis should focus exclusively on the audiovisual displays created by the Game Genie, i.e., that we should compare the altered displays to Nintendo’s original displays. Nintendo emphasizes that “ ‘[a]udiovisual works’ are works that consist of a series of related images … regardless of the nature of the material objects … in which the works are embodied.” 17 U.S.C. § 101 (emphasis added). The Copyright Act’s definition of “audiovisual works” is inapposite; the only question before us is whether the audiovisual displays created by the Game Genie are “derivative works.” The Act does not similarly provide that a work can be a derivative work regardless of the nature of the material objects in which the work is embodied. A derivative work must incorporate a protected work in some concrete or permanent form. We cannot ignore the actual source of the Game Genie’s display.

Nintendo relies heavily on ''Midway Mfg. Co. v. Artic Int’l, Inc., 104 F.2d 1009 (7th Cir.), cert. denied'', 464 U.S. 823, 104 S.Ct. 90, 78 L.Ed.2d 98 (1988). Midway can be distinguished. The defendant in Midway, Artic International, marketed a computer chip that could be inserted in Galaxian video games to speed up the rate of play. The Seventh Circuit held that the speeded-up version of Galaxian was a derivative work. Id. at 1013–14. Artic’s chip substantially copied and replaced the chip that was originally distributed by Midway. Purchasers of Artic’s chip also benefited economically by offering the altered game for use by the general public. The Game Genie does not physically incorporate a portion of a copyrighted work, nor does it supplant demand for a component of that work. The court in Midway acknowledged that the Copyright Act’s definition of “derivative work” “must be stretched to accommodate speeded-up video games.” Id. at 1014. Stretching that definition further would chill innovation and fail to protect “society’s competing interest in the free flow of ideas, information, and commerce.” Sony Corp. of America v. Universal Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 782, 78 L.Ed.2d 574 (1984).

In holding that the audiovisual displays created by the Game Genie are not derivative works, we recognize that technology often advances by improvement rather than replacement. See Christian H. Nadan, Note, A Proposal to Recognize Component Works: How a Teddy Bears on the Competing Ends of Copyright Law, 78 Cal.L.Rev. 1633, 1635 (1990). Some time ago, for example, computer companies began marketing spell-checkers that operate within existing word processors by signalling the writer when a word is misspelled. These applications, as well as countless others, could not be produced and marketed if courts were to conclude that the word processor and spell-checker combination is a derivative work based on the word processor alone. The Game Genie is useless by itself, it can only enhance, and cannot duplicate or recasterecast [sic], a Nintendo game’s output. It does not contain or produce a Nintendo game’s output in some concrete or permanent form, nor does it supplant demand for Nintendo game cartridges. Such innovations rarely will constitute infringing derivative works under the Copyright Act. See generally Nadan, supra, at 1667–72.

2.&emsp;Fair use

“The doctrine of fair use allows a holder of the privilege to use copyrighted material in a reasonable manner without the consent of the copyright owner.” Narell v. Freeman, 872 F.2d 907, 913 (9th Cir.1989) (citations omitted). The district court concluded that, even if the audiovisual displays created by the Game Genie are derivative works, Galoob is not liable under 17 U.S.C. § 107 because the displays are a fair use of Nintendo’s copyrighted displays. “Whether a use of copyrighted material is a ‘fair use’ is a mixed question of law and fact. If the district court found sufficient facts to evaluate each of the statutory factors, the appellate court may decide whether defendants may claim the fair use defense as a matter of law.” Abend v. MCA, Inc., 863 F.2d 1465, 1468 (9th Cir.1988), aff’d sub nom. Stewart v. Abend, 495 U.S. 207, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990).