Page:Lewis Galoob Toys v. Nintendo of America.pdf/6

 Section 107 codifies the fair use defense: "In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(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;

(4) the effect of the use upon the potential market for or value of the copyrighted work."

The factors are nonexclusive, see Fisher v. Dees, 194 F.2d 432, 435 (9th Cir.1986), and section 107 does not indicate how much weight should be ascribed to each.

Much of the parties’ dispute regarding the fair use defense concerns the proper focus of the court’s inquiry: (1) Galoob or (2) consumers who purchase and use the Game Genie. Nintendo’s complaint does not allege direct infringement, nor did it try the case on that theory. The complaint, for example, alleges only that “Galoob’s marketing advertising [sic], promoting and selling of Game Genie has and will contribute to the creation of infringing derivatives of Nintendo’s copyrighted … games. [sic]” (emphasis added). Contributory infringement is a form of third party liability. See Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright § 12.04[A][2], at 12-68 (1991). The district court properly focused on whether consumers who purchase and use the Game Genie would be infringing Nintendo’s copyrights by creating (what are now assumed to be) derivative works.

Nintendo emphasizes that the district court ultimately addressed its direct infringement by authorization argument. The court concluded that, “[b]ecause the Game Genie does not create a derivative work when used in conjunction with a copyrighted video game, Galoob does not ‘authorize the use of a copyrighted work without the actual authority from the copyright owner.’ ” Galoob, 780 F.Supp. at 1298 (quoting Sony, 464 U.S. at 435 n. 17, 104 S.Ct. at 785 n. 17). Although infringement by authorization is a form of direct infringement, this does not change the proper focus of our inquiry; a party cannot authorize another party to infringe a copyright unless the authorized conduct would itself be unlawful.

Nintendo disputes this conclusion. According to Nintendo, a party can unlawfully authorize another party to use a copyrighted work even if that party’s use of the work would not violate the Copyright Act. Nintendo’s argument is unpersuasive. In Sony, 464 U.S. at 449, 104 S.Ct. at 792, for example, the Court considered whether consumers were using the Betamax for a commercial or noncommercial purpose even though Sony itself obviously was acting in its own commercial self-interest. Professor Nimmer similarly concludes that, “to the extent that an activity does not violate one of those five enumerated rights [see 17 U.S.C. § 106], authorizing such activity does not constitute copyright infringement.” 3 Nimmer on Copyright § 12.04[A][3][a], at 12-80 n.82.

The district court concluded that “a family’s use of a Game Genie for private home enjoyment must be characterized as a non-commercial, nonprofit activity.” Galoob, 780 F.Supp. at 1293. Nintendo argues that Game Genie users are supplanting its commercially valuable right to make and sell derivative works. Nintendo’s reliance on Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 562, 105 S.Ct. 2218, 2231, 85 L.Ed.2d 588 (1985), is misplaced. The commercially valuable right at issue in Harper & Row was the right of first publication; Nation Enterprises intended to publish the copyrighted materials for profit. See id. at 562–63, 105 S.Ct. at 2231–32. See also Sony, 464 U.S. at 449, 104 S.Ct. at 792 (“If the Betamax were used to make copies for a commercial or profit-making purpose, such use would presumptively be unfair.”). Game Genie users are engaged in a non-profit activity. Their use of the Game Genie to create derivative works therefore is presumptively fair. See Sony, 464 U.S. at 449, 104 S.Ct. at 792.

The district court also concluded that “[t]he [Nintendo] works’ published nature supports the fairness of the use.” Galoob, 780 F.Supp. at 1293. Nintendo argues that it has not published the derivative works created by the Game Genie. This argument ignores the plain language of section 107: “the factors to be considered shall include … the nature of the copyrighted work.” The argument also would make the fair use defense unavailable in all cases of derivative works, including “criticism, comment, news reporting, teaching …, scholarship, or research.” 17 U.S.C. § 107. A commentary that incorporated large portions of For Whom the Bell Tolls, for