TABLE OF CONTENTS

I. Introduction   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
II Background   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
 A. History of Pirated Software on the Internet . . . . . . . . . . . . . . . . . . . . .3
 B. Current world of videogame piracy . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III Discussion  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
 A. Sega Enterprises v. MAPHIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
 B. Sony v. Connectix  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
 C. Sony v. Bleem  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
IV. Public Policy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
V. Suggested Solutions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
VI Conclusion  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Recent highly-visible cases have put MP3s into our dinner table conversations.  College students around the world utilize peer-to-peer programs like Napster to "share" copyright-infringing files of music.  Seems today everyone is using MP3 players to burn their own cd's and carry in their portable MP3 players and now even using MP3 players in their car audio.  While MP3s have been getting much of publicity, there's another form of media that is whole-sale infringed on by peer-to-peer devices and software:  videogames.

As a market that traditionally has not warranted much serious discussion, many people do not take the videogame industry very seriously.  It is a multi-billion dollar international industry that can no longer be ignored.  Sony has sold more than 60 million of their Playstation consoles and 460 million video game disks worldwide.   The consoles were priced at about $200 for most of its market life and the video game disks (software) were priced at about $50.  It doesn't take a mathematician to see the large impact that wide-spread piracy can have on Sony and the rest of the industry.  I would like to discuss a recent ruling in the Ninth Circuit involving an emulator company and the affects this ruling will have on the industry in the present and the future.

I will first discuss the current technology that is available legally and illegally.  Second I will explore how the law and the Ninth Circuit has dealt with copyright infringement issue in the area.  Third I will discuss what the future looks like in the videogame industry and copyrights.  Finally I will present what I think should happen in the industry regarding this problem.

II. Background

 So what are these "emulators"? and how does it relate to cyberspace law?  Emulators are software that can "allows one to cross the divide between console games and PC games."   The consoles are machines that allow one to play videogames on their home televisions.  While the emulators are software that basically act like the console itself, allowing the games to run on an average home computer without the need to purchase the console itself.   While the average television is relatively limited in its ability to show graphics, having the videogames run on a computer monitor greatly increases the graphic parameters of the games.  Costing around $50 this emulator not only saves the consumer money by saving money on the console, but it gives the consumer incentives in providing superior graphics of their favorite games.  There are currently a few illegal emulators in cyberspace but the legal emulator that has emerged as the leader is a software named "Bleem!"  Sony has brought suit against this emulator company with charges of copyright and trademark violations.  They claim, among other things, that the products will produce inferior gaming experiences that could hurt Sony and disappoint consumers.   Here, the courts in California tackled this new issue.

 A. History of pirated software trade and the Internet.

 Long since the days of the Commodore 64, videogame piracy has been prominent in the industry.  Mostly played by young people who couldn't afford to purchase too many games themselves, many people copied programs onto blank disks and shared them with their friends.  With the advent of the Internet and new technology, there are many new efficient way to make piracy easier.  While Napster is limited to "sharing" music files, the new software out there such as Aimster, Gnutella and Kazaa are not limited to such files.  All of these programs are well capable of trading and "sharing" movie files, music files and program software (which includes videogames).
 The videogame version of the MP3 is what is called ROMs.  They are rewritten videogame programs that would allow them to run on a computer instead of a console.  Much of these ROMs are of old games that do not have a real market effect.  Not too many people are going to stores to buy a copy of old games like Pacman or Frogger, but they can easily find copies of these games on the internet and play them for free on their computer.  What the emulators can do now is allow even the most sophisticated and contemporary games to be played on the computer.  There already are emulators for the Dreamcast, Playstation 2 and emulators for Microsoft's new X-box console are not too far in the future.

  B. Current world of videogame piracy

 Seems like everyone has their own website these days.  Any teenager with a computer can set up their own homepage with pictures from their digital camera and provide links to places they feel are interesting.  These people can also provide direct links to an emulator and to an illegal copy of a videogame just in their daily journal for anyone to download.   You do not have to know where to go or know people's homepages to get such ROMs.  If you have America Online all you have to do is go into a chatroom with the words "ROM" or "Warez" in their chatroom name.  Once inside there are people in the chatroom that send out ROMs, Warez, MP3s, pictures or movies.   You do not have to know these people, they just give these out for free.  It is not a hassle either, all you have to do is type in what you want and their computers are running a program called a "server" which will find the program on their hard drive, attach it to an email, then send it to your email address.  The "serving" person doesn't have to do a thing, he chats in the room while the program takes care of all the distribution.

 All this on top of search engines like Kazaa, or Gnutella in which you just search for what media you want as you would do on Napster and things are just right there for you to double click and thereupon possess in your own computer.  Seems internet/cyber piracy can hardly get any easier or more prominent, emulators just jump into the mix by adding the prospect that we do not have to pay for a Sony Playstation nor do we have to pay for the games that run with them.

 As a leader in the industry, Sony has brought suit against two of the more prominent emulator companies last year.  They claimed victory against one of the companies while losing to the other, only to have their previous victory overturned by the Ninth Circuit court of Appeals.  These decisions present the industry with a new set of parameters within which to work in.  The decisions also give them limited choices in protecting themselves against internet piracy.  I believe the Ninth Circuit made the right decision.  First we will visit the four decisions that have set the roadmap of emulators to come.

III. Discussion

 A. Sega Enterprises v. MAPHIA

 This case involved a bulletin board where there were little machines were made available for purchase.  These machines copied Sega games which were stored in cartridges into disk form so that they can be easily copied and distributed.  Sega won their preliminary injunction against MAPHIA and allowed for seizure of the illegal copies of the games.  The court found that the machines will do irreparable harm to Sega's market and found for the plaintiffs in this case.

What this case, and what the other cases I will talk about turns on is copyright law.  They all also involved trademark law but for the purposes of this paper I would like to focus on the copyright aspects alone.  In order to prove copyright infringement, plaintiffs need to prove   (1) ownership of a valid copyright in the infringed work, and (2) "copying" by the Defendants.   Since there is no question that videogames are computer programs they should be treated as such.   The unauthorized copying of copyrighted computer programs is prima facie an infringement of the copyright.   The question isn't so much whether or not there has been infringement of programs.  The question is whether people providing the technology to facilitate such behavior should also be liable for the infringement.

Other courts have ruled that such activities are seen as contributory infringers.  "[O]ne who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another," may be held liable as a contributory infringer.    The court found injunction against MAPHIA was appropriate here and set precedence against other facilitators of such piracy.

In light of such rulings, emulator companies still braved the legal waters by creating software that can be viewed as contributory infringing on copyrights.  Sony attacked them both.

 B. Sony v. Connectix

 Connectix created an emulator that worked for the Macintosh computer called the "Virtual Game Machine".  Sony attacked Connectix with the same type of infringement challenges as the above case and argued that this software was illegally reverse engineered with the computer program embedded within the memory chips of the consoles.   As stated above, there were important trademark issues also present here that I will not get into.  The copyrights challenge was met by the usual fair use defenses.  The fair use doctrine is an affirmative defense to copyright infringement claims.  The defense entails that you will consider,

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. 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; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.

The first fair use factor takes into account the purpose and character of the use. This is mostly to find out if the defendant's copy is used for commercial purposes.  The commercial nature of the infringement and the intent to use for profit gives the work a presumption of "unfairness."  This presumption can, however, be rebutted by the characteristic of a particular commercial use since not all commercial use is purely for profit.

The second fair use factor involves the nature of the copyrighted work. An important part of this is whether or not the work is "creative" enough to be provided protection. The factor recognizes that creative works are "closer to the core of intended copyright protection" than information or functional works, "with the consequence that fair use is more difficult to establish when the former works are copied."  This factor makes distinctions between works that merit more access to the public than others, to further the goal of copyright to increase our fund of information.

 The third fair use factor, not as important in this discussion, weighs the quantity of the work that is allegedly being copied, asking whether the defendant took more than what was necessary for that specific fair use purpose.  While the fourth factor tries to calculate the effect the potential market will receive due to this alleged infringement.

Although these factors are to be considered, this is not an exhaustive list of factors.  And this was not enough to save Connectix.  Connectix lost on all the factors of purpose and character of use, nature of copyrighted work, amount and substantiality, and the effect on the market.   They found the purpose and character of use was commercial in nature, the nature of work was definitely covered by copyright law, the amount and substantiality was the entire computer program embedded in the BIOS chip of the emulator and that the effect on the market would be hurtful for Sony's profits.   Given that much of the revenue that Sony makes off the Playstation comes from the licensing of software for the console, and that the PC market is a huge source , this argument is valid and should be taken into consideration when applying to all other emulators.  This was also asserted by Connectix's expert witnesses, contending that the emulator would actually increase Sony's revenue; by increasing the sale of licensed software.   Sony had something to say about this argument however.  The Interactive Digital Software Association president as a representative of Sony, voiced the concern that the emulators are used in conjunction with "ROMS" which is a slang word for pirated software games that are available for free at illegal websites.  This concern for piracy could potentially hurt Sony in a huge way.  IDSA claims that the videogame industry lost upwards of 3.1 billion dollars last year due to piracy.   From all these reasons Connectix had an injunction against the sale of their software.  This decision would not hold up for too long however.

 C. Sony v. Bleem

 Bleem! is an emulator company that is virtually identical to Connectix.   The only practical difference is that the emulator is there for use with IBM compatible computers and not the Macintosh.  Sony brought virtually the same arguments to this case as they have with Connectix, but with vastly different results.  Focus however was on how the advertisements of Bleem! included screenshots of how the games would look on the Playstation and how it would look on a home computer.  The home computer having the more powerful computer monitors and computer graphics cards at its disposal had the better looking pictures.  Nevertheless, the main question when they were arguing for preliminary injunctions were how this was infringement or not and how this would hurt Sony's market.  Here, the Fair use defense was effectively used and Sony's attacks were dismissed.   It is important to note that even though the facts of these two emulator cases are mostly identical, we have to remember that The process of applying these fair use factors to the facts of any particular scenario calls for case-by-case analysis, and the "task is not to be simplified with bright-line rules."    Thus, this same court came out with a completely different result.

 The Fair use factor of commercial use was not damaging for Bleem because the use of screenshots was not enough to warrant protection.  Although this case was more focused than the Connectix case, they ran through the same fair use factor analysis that Bleem did.

 Connectix was later overturned by the Ninth Circuit, because they found that the intermediate copy of Sony's BIOS was a fair use because it allowed them to educate themselves on how the program worked.  The finished product did not contain any of Sony's original BIOS code thus the District Court was reversed in their decision.

 In Sum both Connectix and Bleem have shown us that the emulator program itself is not infringing on console's copyrighted materials.  Each marketplace factor analysis favored the emulator companies and basically left Sony to fend for themselves in dealing with the illegal ROMs that might damage Sony in the long run.  I think these rulings were correct in both law and public policy.

IV Public Policy

John Perry Barlow has expressed that traditionally, it has been the bottle that has been protected and not the wine.  The metaphor is that the bottle is the CD, the floppy disk etc. and the wine is the program contained within.   He says that everything we know about intellectual property is wrong and that we have to rethink what we know about copyright law in terms of the digital age.  This paradigm shift is in no way easy.  Since we used to only protect the bottle, now the wine is shared, multiplied at will and flows freely to everyone who has a connection to the internet.  All legal considerations aside we should take a step back and also rethink what we know in the public policy domain of these types of infringement.

 Companies like Sony or Microsoft have the money and resources to out spend any little emulator firm in legal costs.  The president of Bleem! has stated that most of his firm's profits go straight into their legal needs.   So what are we protecting here?  Copyright law was designed to protect our expression.  It can be argued that its hardly ever right to suppress advancement in technology.  But if there doesn't exist another purpose for a technology to exist besides illegal acts, then the technology should actually be suppressed.  The question whether or not something is copyrightable material inevitably looks at whether the code that was copied out of the BIOS chips of the consoles is an expression or a "method of operation".  Section 102(a) of the Copyright Act of 1976 does not include computer programs as works of authorship, but the legislative history suggest that programs were considered copyrightable literary works.   As to the ROM(the Read Only Memory contained within the BIOS chip not to be confused with the ROMs which are the pirated games) existing within the consoles as a "method of operation," it seems intuitive to allow emulators to "build freely upon" the idea and information conveyed by these works.  The First Circuit has stated that:  "original developers are not the only people entitled to build freely upon the methods of operation they create; anyone can."

In the case of emulators, they existed mostly to bring back old memories of the classic games we used to play.  Since they have little market value, they were given out for free without much protest from the original game owners.  Now since the new markets are threatened with this new technology, they fought every step of the way to suppress these efforts and kill off the little companies that dare challenge the authority of companies like Sony and Microsoft.

 To me creating a console is no different than creating a VCR.  In a way, a VCR is a console of bringing theater movies into our home television, just like a Playstation is a console that is bringing the arcade videos games into our home computers.  No one company owns the rights to all the VCRs in the world and they should not.  If someone comes up with a better, more efficient way to conduct business and advancement of human kind, then it should be wholly celebrated and not shot down.  The day may not be too far away that we all start to own DVD burners and make VCRs obsolete.  That technology should not be suppressed just because the new technology will have an adverse affect on the current VCR manufacturing market.

V. Suggested solutions

 I do not claim that Sony should not be afforded any protection in their software.  I however do not think that hardware technology should be held back because they will not make as much money.  So how does Sony protect themselves with this?  Technological fixes come immediately to mind.  Just like there is a secret formula for the sauce in your Big Mac or your Coke Classic, Sony should encrypt their BIOS chip with some kind of a technological fix.  Sony v. Connectix has shown us that reverse engineering and using the information in the BIOS chip to be "fair use" under the doctrine.   If Sony took more time encrypting that information rather than spending all this time and money on legal fees, they would be better off.  Some might argue that there are good enough computer engineers to crack any code that exists out there.  The one thing about the videogame industry that these people forget is that consoles come and go and become obsolete like the rate of computer processor chips become obsolete.  The Sony Playstation had a processor that ran at 133 mhz, with its new model, Playstation 2 running at 300 mhz.   People are still fighting tooth and nail to try to get a chance to purchase the Playstation 2 which has been sold out for months now.   Before even most of the consumers have had a chance to play the Playstation 2, Microsoft has now announced their release date for their X-box which runs at 700 mhz and has superior graphics capabilities.  Sega, the same Sega company that was involved in Sega v. MAPHIA has been a main player in the console market, and now they have retired their consoles all together.  They will focus on creating games and software for other people's consoles because that is where they will make the most money anyway.   Thus, if the encryption of their BIOS will last them long enough to sell enough of their consoles, companies like Sony will sell enough hardware to make their hardware sales, and with the emulators creating a bigger base for their software sales their software profits should more than make up for the difference.    The profit margin for sale of software is much greater than the sale of hardware.  The Playstation currently sells for $99, which is less money than the purchase of two videogame disks.  The disks are nothing more than a couple of compact disks full with information and only costs a couple dollars to make.  This is while the console is full with technical parts and computer components that the manufacturer had to spend time and money putting together, making the profit margin much smaller for the hardware.   This raises a question why anyone would even strive to make a better console.  We do not have to worry about everyone jumping off the industry.  Sony, Nintendo and the like all charge third-party software developers a licensing fee for the right to develop games made for the specific console.   This gives enough incentive for Sony to create a better console that consumers would want to purchase so that they can make licensing fee profits off the popularity of their machines.

 Addressing the ROM problem, Sega v. MAPHIA still applies to all the bulletin boards and the like.  Just like MAPHIA has been affected, so has MP3 sharing programs like Napster.  A centralized place facilitating the infringement of copyrighted material will be found contributory infringers.  This does not however address the other methods like using Gnutella or Aimster where there isn't a centralized server.  While this holds true for MP3s where sharing the files have been compared to friends making mix tapes of their favorite songs I think software should be treated differently in the law.

VI. Conclusion

 In this new world of paradigm shifts we have to protect copyrightable materials from internet/cyber piracy.  The efficient, cheap methods of contemporary piracy puts industries affiliated with digital media at an alarming danger of being financially walloped.  However, in this process of giving protection, we must remember why copyright law was created in the first place.  We are to build freely on the ideas of others but we are not free to take their expressions as our own.  The programs that run the consoles are methods of operations, therefore they are ideas that people should be able to build freely upon.  Anyone arguing against this idea is merely arguing the "sweat of the brow".  This does not mean that illegal copies of software should be freely distributed.  Just like we shouldn't suppress the technology that brought us the VCR just because it can be used for illegal purposes, we shouldn't suppress emulation technology just because it can be used for illegal means.  This country was built on pioneers building freely upon eachother's ideas.  Emulators create a cheaper, higher-quality alternative to what is currently available and to suppress that technology would be un-American.

  www.mazda.com
  Sony v. Bleem, 214 F.3d 1022, (9th Cir. 2000).
  Id at 1024.
  See Id.
  Dean Takahashi, SONY MOVES TO AGGRESSIVELY TO BLOCK PLAYSTATION 'EMULATORS', 7/1/99 WALL ST. J., July 1, 1999, at B4.

  www.chellecam.com, she's providing an emulator for a Nintendo console and provides access to a ROM that will let anyone play a game named "contra" on their computers for free.
  "Warez" is a term for programs that are pirated.  You can get things like Photoshop, Microsoft Office or even Windows just be these people sending you an email with the program attached.
  See Sega Enterprises v. MAPHIA, 857 F.Supp. 679 (1994).
  See Id; 3 Nimmer on Copyright,  § 13.01 (1985). 7. Sega's certificates of registration establish a prima facie valid copyright in its video game programs. 17 U.S.C. _ 410(c); Apple Computer, Inc. v. Formula Int'l Inc., 725 F.2d 521, 523 (9th Cir. 1984).
  See generally Sony v. Connectix, 203 F.3d 596 (2000).

  See MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 518 (9th Cir. 1993).
  Casella v. Morris, 820 F.2d 362, 365 (11th Cir. 1987) (quoting Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)).
  See Sega Enterprises v. MAPHIA, 857 F.Supp. 679 (1994).

  Sony v. Connectix, 203 F.3d 596 (2000).
  17 U.S.C. § 107
  LEAFFER MARSHALL, UNDERSTANDING COPYRIGHT LAW, § 10.7 (1995).
  See Sega v. Accolade, 977 F.2d 1510, 1522 citing Harper & Row, Publishers, Inc. Nation Enterprises, 471 U.S. 539, 562 (1985).
  Id.
  Campbell v. Acuff-Rose Music Inc., 510 U.S. 569, 586 (1994).
  LEAFFER § 10.8.
  Id at  § 10.9.
  Id at § 10.10.
  Sony v. Connectix, 203 F.3d 596 (2000).
  Id.
  See Annette Carwell, CYBERSCENE; Imitation is not always flattering, Sony insists, Boston Herald, April 20, 1999, at 45.
  Connectix, 48 F.Supp.2d at 1220.
  www.idsa.com
  See Sony v. Bleem, 214 F.3d 1022 (2000).
  Campbell v. Acuff-Rose Music Inc., 510 U.S. 569,577
  See Sony v. Bleem, 214 F.3d 1022 (2000).
  Barlow John Perry, Wired, 2.03 March 1994, "The economy of ideas, A framework for patents and copyrights in the Digital Age. (Everything you know about intellectual property is wrong.)
  www.bleem.com
  ROBERT A. GORMAN & JANE C. GINSBURG, COPYRIGHT:  CASES AND MATERIALS 205 (1999).
  Lotus v. Borland, 49 F.3d 807, 818 (1st Cir. 1995), aff'd 516 U.S. 233 (1996).
  See Sony v. Connectix, 203 F.3d 596 (2000).
  www.videogames.com
  Id.
  Id.
  Id.
  Id.
  Sony v. Bleem, 214 F.3d 1022 (2000).