Page:Sony Computer Entertainment, Inc. v. Connectix Corporation.pdf/12

 program could not be transformative, despite the similarities in function and screen output.

Finally, we must weigh the extent of any transformation in Connectix’s Virtual Game Station against the significance of other factors, including commercialism, that militate against fair use. See Acuff-Rose, 510 U.S. at 579, 114 S.Ct. 1164. Connectix’s commercial use of the copyrighted material was an intermediate one, and thus was only “indirect or derivative.” Sega, 977 F.2d at 1522. Moreover, Connectix reverse-engineered the Sony BIOS to produce a product that would be compatible with games designed for the Sony PlayStation. We have recognized this purpose as a legitimate one under the first factor of the fair use analysis. See id. Upon weighing these factors, we find that the first factor favors Connectix.

The district court ruled, however, that the Virtual Game Station was not transformative on the rationale that a computer screen and a television screen are interchangeable, and the Connectix product therefore merely “supplants” the Sony PlayStation console. Order at 15. The district court clearly erred. For the reasons stated above, the Virtual Game Station is transformative and does not merely supplant the PlayStation console. In reaching its decision, the district court apparently failed to consider the expressive nature of the Virtual Game Station software itself. Sony’s reliance on Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104 (2d Cir.1998), suffers from the same defect. The Infinity court reasoned that a “change of format, though useful, is not technically a transformation.” Id. at 108 n. 2. But the infringing party in that case was merely taking copyrighted radio transmissions and retransmitting them over telephone lines; there was no new expression. Id. at 108. Infinity does not change our conclusion; the purpose and character of Connectix’s copying points toward fair use.
 * 4.Effect of the use upon the potential market

We also find that the fourth factor, effect of the use upon the potential market, favors Connectix. Under this factor, we consider "not only the extent of market harm caused by the particular actions of the alleged infringer, but also “whether unrestricted and widespread conduct of the sort engaged in by the defendant … would result in a substantially adverse impact on the potential market” for the original."

Acuff-Rose, 510 U.S. at 590, 114 S.Ct. 1164 (quoting 3 M. Nimmer & D. Nimmer, Nimmer on Copyright, § 13.05[A][4], at 13–102.61 (1993)). Whereas a work that merely supplants or supersedes another is likely to cause a substantially adverse impact on the potential market of the original, a transformative work is less likely to do so. See id. at 591, 114 S.Ct. 1164; Harper & Row Publishers, Inc. v. Nation Enters., Inc., 471 U.S. 539, 567–69, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985).

The district court found that “[t]o the extent that such a substitution [of Connectix’s Virtual Game Station for Sony PlayStation console] occurs, Sony will lose console sales and profits.” Order at 19. We recognize that this may be so. But because the Virtual Game Station is transformative, and does not merely supplant the PlayStation console, the Virtual Game Station is a legitimate competitor in the market for platforms on which Sony and Sony-licensed games can be played. See Sega, 977 F.2d at 1522–23. For this reason, some economic loss by Sony as a result of this competition does not compel a finding of no fair use. Sony understandably seeks control over the market for devices that play games Sony produces or licenses. The copyright law, however, does not confer such a monopoly. See id. at 1523–24 (“[A]n attempt to monopolize the market by making it impossible for others to compete runs counter to the statutory purpose of promoting creative