Page:Sega Enterprises v. Accolade.pdf/19

 the copyrighted work, as a matter of law. Our conclusion does not, of course, insulate Accolade from a claim of copyright infringement with respect to its finished products. Sega has reserved the right to raise such a claim, and it may do so on remand.

Ordinarily in a trademark case, a trademark holder contends that another party is misusing the holder’s mark or is attempting to pass off goods or services as those of the trademark holder. The other party usually protests that the mark is not being misused, that there is no actual confusion, or that for some other reason no violation has occurred. This case is different. Here, both parties agree that there is a misuse of a trademark, both agree that there is unlawful mislabeling, and both agree that confusion may result. The issue, here, is—which party is primarily responsible? Which is the wrongdoer—the violator? Is it Sega, which has adopted a security system governing access to its Genesis III console that displays its trademark and message whenever the initialization code for the security system is utilized, even when the video game program was manufactured by a Sega competitor? Or is it Accolade, which, having discovered how to gain access to the Genesis III through the initialization code, uses that code even though doing so triggers the display of Sega’s trademark and message in a manner that leads observers to believe that Sega manufactured the Accolade game cartridge? In other words, is Sega the injured party because its mark is wrongfully attached to an Accolade video game by Accolade? Or is Accolade wronged because its game is mislabeled as a Sega product by Sega? The facts are relatively straightforward and we have little difficulty answering the question.

Sega’s trademark security system (TMSS) initialization code not only enables video game program to operate on the Genesis III console, but also prompts a screen display of the SEGA trademark and message. As a result, Accolade’s inclusion of the TMSS initialization code in its video game programs has an effect ultimately beneficial neither to Sega nor to Accolade. A Genesis III owner who purchases a video game made by Accolade sees Sega’s trademark associated with Accolade’s product each time he inserts the game cartridge into the console. Sega claims that Accolade’s inclusion of the TMSS initialization code in its games constitutes trademark infringement and false designation of origin in violation of sections 32(1)(a) and 43(a) of the Lanham Trademark Act, 15 U.S.C. §§ 1114(1)(a), 1125(a), respectively. Accolade counterclaims that Sega’s use of the TMSS to prompt a screen display of its trademark constitutes false designation of origin under Lanham Act section 43(a), 15 U.S.C. § 1125(a).

Because the TMSS has the effect of regulating access to the Genesis III console, and because there is no indication in the record of any public or industry awareness of any feasible alternate method of gaining access to the Genesis III, we hold that Sega is primarily responsible for any resulting confusion. Thus, it has not demonstrated a likelihood of success on the merits of its Lanham Act claims. Accordingly, the preliminary injunction it obtained must be dissolved with respect to the trademark claim also. However, we decline to instruct the district court to grant Accolade’s request for preliminary injunctive relief at this time. The decision whether to grant such relief requires the making of factual and equitable determinations in light of the legal conclusions we express here. Such determinations are best left in the first instance to the district court.

Section 32(1)(a) of the Lanham Act creates a cause of action for trademark infringement against any person who, without the consent of the trademark owner, “use[s] in commerce any reproduction … of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive….” 15 U.S.C. § 1114(1)(a). Section 43(a) proscribes the use in commerce