Sega Enterprises Ltd. v. Accolade, Inc.
977 F.2d 1510 (9th Cir. 1992)

  • Sega made video game consoles and licensed the rights to third-party video game developers to make games for their console.
  • Accolade wanted to sell their games for the Sega console but didn't want to pay Sega's licensing fee. They figured out how to get their games compatible with the Sega console and started selling them.
    • Accolade got some Sega consoles, reverse engineered how the computer chips worked, and then created a manual that had no Sega computer code in it, but explained how to modify a program so it would run on a Sega console.
  • Sega sued for copyright infringement for copying the code on their computer chips.
    • Accolade argued that they had never actually copied any of the computer code on Sega's chips, they just copied the specifications for how to write the software. Since those specification were not copyrightable, they did nothing wrong according to 17 U.S.C. 102(b).
    • In addition, Accolade argued that they were protected by the fair use provision (17 U.S.C. 107).
  • The Trial Court found for Sega. Accolade appealed.
  • The Appellate Court reversed.
    • The Appellate Court found that Accolade did reproduce Sega's computer code, and so they had made a copy for purposes of 17 U.S.C. 106(1).
    • The Appellate Court found that based on 107 there is a four-factor test for determining if something counts as fair use:
      • Is the purpose and character of the use commercial or non-commercial?
        • The Court found that while Accolade ultimate intended to make money selling video games, the direct purpose in copying Sega's code was simply to study the functional requirements of the console's compatibility.
        • In addition, Accolade's work helped the publics because lots of companies started using their information to make exciting, creative video games.
      • The nature of the copyrighted work.
        • The Court found that there were aspects of Sega's code that were unprotected by copyright. But there was no way to examine them without also copying the copyrighted parts.
          • The Court noted that if someone couldn't look at the code to see the uncopyrighted parts, then Sega would have a de facto monopoly on things they couldn't legitimate get a copyright on
      • The amount of the original work used.
        • The Court found that there was no other way Accolade could have learned about the functionality of the console without copying as much as they did copy. While they did copy the entire code, that didn't mean much because the final product (the video games) did not contain any infringing material.
      • The effect on the potential market.
        • The Court found that Accolade's work did not stop people from buying Sega's video games. Accolade's games could legitimately compete in the marketplace with Sega's games, which might reduce Sega's sales. However, this factor wasn't meant to be applied to competition like that.
          • For example, if a company made Pac-man and another company made a Pac-man knock off, people who bought the knock off wouldn't buy the original because they already had essentially the same game. However, if one company sold Pac-man and another company sold Space Invaders, some people would buy both, and people who only bought one would pick the one they thought was more fun. No one would say, "I don't need to buy Pac-man since I already have Space Invaders."
    • Based on their balancing of the four factors, the Court found that Accolade's copying was protected by fair use.