This particular case involved Universal City Studios and the Sony Corporation of America, and is most often referred to as "the Betamax case."  In 1976, Sony introduced their Betamax VCR, and used the machine's ability to record television as a marketing strategy.  Universal City Studios countered that Betamax's technological ability to copy programming for was a direct copyright infringement.   Sony argued that  their consumers had the right to record various programs in the privacy of their own home.  Rulings and appeals were traded back and forth until the case reached the Supreme Court in 1984  The Court eventually ruled that the company itself could not be held accountable for its creation of a new technology, even if said technology is used for specific infringements of copyright law.  As long as the technology can be used for legal purposes, then the manufacturer is not at fault for any user infringements.  The court's reasoning behind this ruling was that the public should not be deprived of a productive technology simply because some users choose to use the product unlawfully.  This case may in fact be the most important copyright infringement case in regards to how it affects and influences the decisions made regarding piracy and, specifically, peer-to-peer file sharing.  Another extremely famous case of MGM versus Grokster used the ruling of this case to argue in their defense.  It provides a great point of reference for my paper, as it shows the way in which the early beginnings of piracy were dealt with on a legislative basis.

The RIAA is not a popular name amongst many music consumers. Its actions against potential copyright infringement have created a huge backlash amongst the community, and it has done little if anything to alleviate the general ill will. Now, the video game industry risks following the same path. For years, the industry has attacked video game emulation and the copying of cartridges as detrimental to the industry and illegal. While it has succeeded in many places (and failed in others), the gaming community has started to become angry. Unless some middle ground can be found (such as has been attempted by websites such as vNES), this pursuit of piracy could turn the ESA into the next RIAA.

Another landmark emulation case, although slightly different from the Connectix one.  Bleem was another emulator for the Sony Playstation, and Sony sued it for the use of copyrighted images on their packaging.  Basically, on its packaging Bleem compared what a video game looked like on a Playstation vs. what it looked like on the emulator.  To do this, they used screen shots of Sony video games, which Sony contested.  Bleem, of course, claimed fair use.  The court decided in agreement with Bleem, noting that the use of copyrighted images fell under fair use because it was comparative advertising.  Since Bleem is a direct competitor to the Playstation, it needs to be able to use copyrighted material in order to make a successful advertisement.  Sony even claimed that Bleem was hurting the market for screen shots by using them in advertising, but the court shot that argument down as well, stating that Sony could still use the screen shots in advertising if they wanted to.  Also, since a screen shot is an absurdly small portion of the total work, Bleem is not actually copying that much from Sony. 

Similar to the Connectix case, the Bleem case drove home to the video game industry that contesting emulators themselves would lead nowhere.  With emulators being fully allowed to advertise using copyrighted video games, there was no need to hide their real uses.  Emulators and their creators are free to proudly display the abilities of their systems, without fear of any legal reprisal.  This makes it much easier to distribute a particular emulator using advertising, and in turn makes emulators much more widespread.  If this decision had gone the other way then the difficulty in advertising an emulator (remember, you wouldn’t be able to use any copyrighted shots in the advertising) would have been a huge obstacle to distribution.  But, without any legal recourse to stop the distribution of emulators or make them harder to spread, the video game industry needs to focus on the people illegally distributing the actual games, not the programs that play the games.

The definitive video game emulation case. In the late 1990's, Connectix created the Virtual Game Station, a commercial emulator designed to replicate the Sony Playstation on a PC. In doing so, they necessarily had to copy elements of the Sony BIOS (built-in operating system (the software that runs the Playstation)), but they claimed fair use. The court agreed, noting that law stated that disassembly could be considered fair use when it is the "only way to gain access to the ideas and functional elements embodied in a copyrighted computer program." Since Sony had provided little information about their BIOS to the public, Connectix could only gain access to it by taking it apart. The court also found VGS to be "moderately transformative"; it transfers the Playstation to a new platform, and thereby expresses the product in a different fashion. And since the VGS is transformative, it is not really a replacement for the Playstation. The court also ruled on the claim that Connectix tarnished Sony's Playstation name. Although the VGS does not play games as well as an actual Playstation, the court did not find that this would result in the VGS hurting Playstation's good name

This case follows sound logic, and clearly sets out the argument that emulation itself is perfectly legitimate. It clearly outlines exactly how Connectix copied Sony's BIOS, and explains why that path resulted in VGS being fair use (and in doing so, more or less created guidelines as to how to ensure the legality of an emulator). More importantly, this case made it clear to video game companies that contesting emulation itself would not succeed; if video game companies were intent on stopping piracy, they would have to go after the actual copies of the games, not the emulators. Since ROM files are much more prevalent than emulators, this decision in essence made it much more difficult to stop video game piracy, and forced companies to allow the creation of dozens of free emulators.

In the 1999 case Sony Computer Entertainment America, Inc. v. Gamemasters, Sony sought a preliminary injunction on Gamemasters’ distribution of accessories for the Sony Playstation game console. Sony alleged that Gamemasters violated anti-circumvention regulations of the Digital Millennium Copyright Act (DMCA) as well as state and federal unfair competition laws. Gamemasters, a retail store in California, was sued for selling a game enhancing device. The court granted the injunction and essentially eliminated all sales of such devices by Gamemasters.

This external device performed two primary functions when plugged into the Playstation game console. First, the game enhancer allowed users to temporarily modify aspects of the game, similar to the Game Genie, manufactured by Galoob Toys for use on the Nintendo. Nintendo v. Galoob Toys, as decided in 1992, declared that the Game Genie was not in violation of copyright laws as it was not a derivative work of the Nintendo console and the Game Genie was a fair use of the Nintendo game system. Second, and most importantly, this game enhancer permitted players to play Playstation games sold in Japan or Europe which were intended by Sony for exclusive use on Japanese or European consoles. The game discs contain electronic check codes which are checked by the console when inserted. Discs with codes that do not match the region in which the console operated were rejected. The game enhancer overrode this protection.

By invoking the DMCA, Sony stopped the use of potential copyright and trademark violating technologies. However, critics of the DMCA noted that this decision also allowed Sony to continue its controversial business practice. Sony divided its game distribution and operations into separate international regions. By disabling games from one region to be played in another, authentic Sony Playstation games played in one part of the world suddenly became illegal versions after crossing borders. With increasing video game products offering multiplayer and global competition, these restraints pose legitimate threats for the future of fair gaming, especially online games. Such restrictions enabled Sony to protect its anti-competitive business model and possibly promote price discrimination between different areas of the world.

In the late 1990s, Connectix sold a product called the Virtual Game Station, an emulator program that could play Sony Playstation games, intended for play on the Playstation game console, on Apple Macintosh computers. Bleem, a vendor of Playstation emulator software for Windows computers, was also sued. Initially, Sony won a permanent injunction against the Connectix Virtual Game Station in 1999, but the decision was successfully appealed in 2000. Connectix and Bleem both won rulings that their reverse engineering of the Sony products constituted fair and non-infringing uses. However, their products were eventually taken off the market because they could not bear the high costs of litigation against Sony.

Emulators typically contained additional features not found on the real console and generally had completely different interfaces. To create the emulator, Connectix programmers had to first purchase a Sony Playstation and reverse engineer the source code. The court ruled that this and other intermediate copies made by Connectix were all legitimate fair uses. Regardless of Connectix and Bleem’s financial state, the landmark decision shocked the gaming industry. Emulators existed prior to the trial, but the question of their legality was always unknown.

Since personal computers are much more popular than game consoles due to their ability to run many types of applications, gamers have the option of purchasing emulators and emulator games instead of a separate game console. For Sony, one of their primary arguments was that this software would negatively impact the market for their consoles. Vendors of the system claimed that emulators would take away from their console and game revenue. However, emulations of games were never the same in quality and in experience as the real games. In the end, the Sony v. Connectix trial set a huge precedent for future emulator and associated game software. As long as the software did not infringe on original intellectual property rights, then emulators were deemed lawful. A system vendor cannot prohibit the distribution of non-infringing third-party emulators such as the Virtual Game Station. The result of this case has prompted questioning of the amount of control that companies should have over their intellectual property.

This article is written by the Center for Democracy and Technology, a non-profit interest group that “seeks to promote free expression, privacy, and individual liberty on the open, decentralized internet.” This document “outlines the limits on the scope of secondary copyright liability,” looking at the Grokster decision, the landmark decision in Sony Corporation of America v. Universal City Studios, Inc. (1984), and patent law precedents relating to inducement liability. The goal of this investigation is to make sure that "secondary liability for copyright infringement does nothing to compromise legitimate commerce or discourage innovation having lawful promise.’” The Grokster case and the Sony decision can obviously be looked at be looked at individually, but this article does a nice job of synthesizing the information and explaining how they impact each other.

The article focuses on the new implications of the “inducement test,” what repercussions the situation has for the Sony rule and what this all means for vicarious liability. The article focuses on one key difference in clarification between the Grokster and Sony decisions. The language in the Grokster decisions "suggests that the Sony test focuses on 'substantial' non-infringing uses, not 'commercially significant' non-infringing uses." With Grokster, the emphasis was certainly placed on the commerical uses of the site. Monetary gains became one of the most significant factors of the case, not just ethical or legal implications. Certainly the internet is just as much a business as any other commerical frontier in the world, but more and more - especially illustrated with the Grokster decision - financial viability is the determining legal decision making. For example, today YouTube is currently seen as protected by the safe harbor provison, although some of the content being posted on YouTube today was possibly (or probably) also availible on Grokster. YouTube has been able to position itself not only in a safe harbor in a legal sense, but also in a financial sense by teaming up with companies who own many of the copyrighted works that are being infringed.

Of course the Sony case was also motivated by money, but more than ever before the current world of the web and the sites that are allowed to function within its borders are completely a function of their monetary potential for copyright holders. Grokster was taken to court because it posed a threat to the financial success of copyright holders. YouTube poses a similar threat as well, but thus far has been able to keep in partnership with the people who would be taking them to court in the first place.

In this case, Universal City Studios lays out its arguments against the commercialization of Sony’s Betamax. The essence of their reasoning is that owners of video tape recorders had been recording copy-righted material, which had been aired on television. This action, they claimed, infringed their copyrights, and thus Sony was liable for facilitating infringement by marketing the Betamax to consumers. Universal Studios sought relief for these damages through money damages and an injunction against the manufacture and marketing of Betamax recorders.

In its ruling, the court explained its reasoning for supporting the legality of the Betamax. It found that the average Betamax owner uses the device to record programs he cannot view as it is aired. This practice, termed "time-shifting," widens the audience for television media consumption. Thus, the majority of copyright owners didn’t even object to this use of the Betamax. However, there were two respondents in this case who did object to “time shifting” but were unable to prove that there was any material economic harm to their copyrights. The court decided that because there were “substantial non-infringing” uses of the Betamax, Sony was not liable and would be allowed to further manufacture and market the Betamax.

The dissenting opinion gives more detail in regards to the arguments made by Universal. The Studios claimed that video recorders would result in a decrease in revenue by reducing the marketability of their works in movie theaters and through diminished demand for prerecorded videotapes. They also feared that video recorders would decrease their viewing audience, and thus the licensing fees they could charge. While these damages could not be proved, the dissenters extolled the Studios view that as long as there exists a “reasonable possibility” of harm, then the use should be considered an infringement.

Importance for thesis:

This case demonstrates the thought process that media companies went through when considering how to react to the VCR.  The emphasis that the Studios placed on protecting their current sources of revenue, despite the fact that they couldn’t prove the VCR even threatened these income streams, exemplifies their short sighted viewpoint.  Additionally, the case demonstrates how media companies fixate on maintaining their current business models without considering the larger changing competitive landscape.  The results of adopting this stance will allow me to demonstrate the negative consequences of trying to fight technological evolutions.   

 

Hays and Macdonald v Sony  847 F.2d 412; 1988 U.S. App.

     This was one of the few cases I could find that specifically dealt with the academic exception at a high school level. 

     Hays and MacDonald were two high school business teachers who developed a handbook for a word processor that the high school owned.  They distributed the handbook to the staff and students of the high school.  When the high school purchased new word processors from Sony, the school gave the handbook to Sony asking them to adapt it for the new word processors.  Sony did so by taking large parts of the document and copying it into the new handbook.  Sony then gave it back to the school at no charge.  When Hays and MacDonald found out about the new handbooks they sued Sony for copyright infringement arguing that they owned the rights to the handbook.  The District Court found for Sony.  Hays and MacDonald tried to appeal the decision but they filed their appeal to late.  The Appeals Court thus denied their appeal and they lost their case.  However in issuing the denial the Appeals Court discussed the case in more depth, exploring the issues as if the case had been heard.  They argued that that since Sony didn’t make any direct profits from the handbook there would have been no damages to be awarded based on the arguments made by the plaintiffs.  However the court did say that it appeared that Hays and MacDonald were the rightful owners of copyright and so might have been entitled to an injunction.  They also discussed the nature of the work for hire clause of the 1976 Copyright Act.  They said that although it appears to have eliminated the academic exception there seems to have been no intent by Congress to do so and therefore if another case came before this Appeals Circuit they might be inclined to uphold the academic exception.

     This case relates very well to Mauro v Allentown.  Both occur at the high school level, and both deal with teachers preparing works beyond the basic scope of the classroom.  The fact that this case ended with a denial of appeal makes drawing any concrete conclusions from it more difficult, but it does appear that if Mr. Mauro did proceed with his case his might be able to receive an injunction to prevent the high school from performing his work without his permission.