Page:Lewis Galoob Toys v. Nintendo of America.pdf/7

 example, would be undeserving of fair use protection because the incorporated portions would constitute an unpublished derivative work. This cannot be the law.

The district court further concluded that the amount of the portion used in relation to the copyrighted work as a whole “cannot assist Nintendo in overcoming the presumption of fair use.” Galoob, 780 F.Supp. at 1293. The video tape recorders at issue in Sony allowed consumers to tape copyrighted works in their entirety. The Supreme Court nevertheless held that, “when one considers … that [video tape recording] merely enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact that the entire work is reproduced does not have its ordinary effect of militating against a finding of fair use.” 464 U.S. at 449–50, 104 S.Ct. at 792 (citations omitted). Consumers are not invited to witness Nintendo’s audiovisual displays free of charge, but, once they have paid to do so, the fact that the derivative works created by the Game Genie are comprised almost entirely of Nintendo’s copyrighted displays does not militate against a finding of fair use.

Nintendo would distinguish Sony because it involved copying copyrighted works rather than creating derivative works based on those works. In other words, the consumers in Sony could lawfully copy the copyrighted works because they were invited to view those works free of charge. Game Genie users, in contrast, are not invited to view derivative works based on Nintendo’s copyrighted works without first paying for that privilege. Sony cannot be read so narrowly. It is difficult to imagine that the Court would have reached a different conclusion if Betamax purchasers were skipping portions of copyrighted works or viewing denouements before climaxes. Sony recognizes that a party who distributes a copyrighted work cannot dictate how that work is to be enjoyed. Consumers may use a Betamax to view copyrighted works at a more convenient time. They similarly may use a Game Genie to enhance a Nintendo Gamegame [sic] cartridge’s audiovisual display in such a way as to make the experience more enjoyable.

“The fourth factor is the ‘most important, and indeed, central fair use factor.’ ” Stewart, 495 U.S. at 238, 110 S.Ct. at 1769 (quoting 3 Nimmer on Copyright § 13.05[A], at 13-81). The district court concluded that “Nintendo has failed to show any harm to the present market for its copyrighted games and has failed to establish the reasonable likelihood of a potential market for slightly altered versions of the games at suit.” Galoob, 780 F.Supp. at 1295. Nintendo’s main argument on appeal is that the test for market harm encompasses the potential market for derivative works. Because the Game Genie is used for a noncommercial purpose, the likelihood of future harm may not be presumed. See Sony, 464 U.S. at 451, 104 S.Ct. at 793. Nintendo must show “by a preponderance of the evidence that some meaningful likelihood of future harm exists.” Id. (emphasis supplied).

Nintendo’s argument is supported by case law. Although the Copyright Act requires a court to consider “the effect of the use upon the potential market for or value of the copyrighted work,” 17 U.S.C. § 107(4) (emphasis added), we held in Abend that “[a]lthough the motion picture will have no adverse effect on bookstore sales of the [underlying] novel—and may in fact have a beneficial effect—it is ‘clear that [the film’s producer] may not invoke the defense of fair use.’ ” 863 F.2d at 1482 (quoting 3 Nimmer on Copyright § 13.05[B], at 13-84). We explained: “ ‘If the defendant’s work adversely affects the value of any of the rights in the copyrighted work … the use is not fair even if the rights thus affected have not as yet been exercised by the plaintiff.’ ” Id. (quoting 3 Nimmer on Copyright § 13.05[B], at 13-84 to 13-85 (footnotes omitted)). The Supreme Court specifically affirmed our finding that the motion picture adaptation “impinged on the ability to market new versions of the story.” Stewart, 495 U.S. at 238, 110 S.Ct. at 1769.

Still, Nintendo’s argument is undermined by the facts. The district court considered the potential market for derivative works based on Nintendo game cartridges and found that: (1) “Nintendo has not, to date, issued or considered issuing altered versions of existing games,” Galoob, 780 F.Supp. at 1295, and (2) Nintendo “has failed to show the reasonable likelihood of such a market.” Id. The record supports the court’s findings. According to Stephen Beck, Galoob’s expert witness, junior or expert versions of existing Nintendo games would enjoy very little market interest because the original version of each game already has been designed to appeal to the largest number of consumers. Mr. Beck