The Ultimate History of Video Games: From Pong to Pokémon and Beyond—The Story Behind the Craze That Touched Our Lives and Changed the World (62 page)

The FTC investigation may not have resulted in a large punitive settlement, but it served notice to Nintendo of America and its parent company in Japan that more investigations could follow if complaints continued. Though there is no proof that company executives made this decision because of the lawsuit, in October 1990 Nintendo announced that its licensees were free to manufacture their own cartridges and to publish games on competitors’ consoles.

In 1990, Lewis Galoob Toys obtained the U.S. manufacturing rights for a device called GameMage that enabled players to access hidden codes that designers placed in games as Easter eggs. Releasing the product in the United States as Game Genie, Galoob packaged the “game enhancer” with a “programming manual” containing codes for hundreds of games. Through Game
Genie, players could enter up to three codes at one time, codes that made games easier or gave players extra lives. The game
Contra
, for instance, allowed players to give their soldiers powerful weapons or set the game up so that the enemy soldiers did not shoot their weapons. The codes for
The Legend of Zelda
could give players endless supplies of bombs, let them purchase items in the game for free, and make Link, the hero of the game, invincible. Spokespeople for Galoob said that Game Genie added new life to old games, but Nintendo saw it as a threat and notified the toy manufacturer that the device infringed on copyrighted material. Galoob took Nintendo to court to ask for a declaration that Game Genie did not infringe upon protected material; it also tried to pacify Nintendo by offering to license the product through the company. The offer was declined.

In June 1990, Nintendo applied for an injunction to bar the toy manufacturer from distributing Game Genie. In a preliminary hearing, Judge Robert W. Schnacke granted Nintendo’s request on the likelihood that Nintendo could win the case. In April 1991, the case went to court before Fern Smith, the same judge who had presided over
Atari Games Corporation v. Nintendo of America.

Judge Smith’s interpretation of the Fair Use Doctrine would prove central to both Nintendo’s and Galoob’s case. Nintendo claimed that Game Genie was a derivative work. It did not play original games; rather, it altered the copyrighted work of other companies. Nintendo’s lawyers compared it to the unauthorized “speed-up kits” that were used to enhance arcade games. They referenced the case of
Midway Manufacturing v. Arctic International
, in which a judge barred a company called Arctic from selling chips that accelerated the arcade version
Galaxian.
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Judge Smith, however, disagreed with Nintendo’s argument, citing that Game Genie did not physically incorporate portions of any copyrighted works and that it in no way diminished the game market.

One interesting question that emerged in this case was whether Galoob was in fact infringing on Nintendo’s copyrights or whether the real perpetrators would be consumers using the device. The argument suggested that Game Genie was simply an adapter onto which consumers attached a game cartridge.
The decisive factor in the case, however, was that Nintendo’s lawyers could not demonstrate to Judge Smith’s satisfaction how Game Genie impacted their client’s business.

While Judge Smith was unable to certify that Game Genie users would not infringe on Nintendo’s copyrights, she did conclude that Galoob had not violated the Copyright Act and ruled in favor of the toy manufacturer, ordering Nintendo to pay the company $15 million for lost sales. When the case came up for appeal before Judge Jerome Farris in 1992, he affirmed Judge Smith’s opinions. Nintendo did not concede defeat, however, until the U.S. Supreme Court declined to hear arguments on the case on March 22, 1993, sealing the decision.

With the exception of the original Magnavox Odyssey, which had several games hardwired into its circuitry, all of the home television game consoles that retailed in the early 1970s were single-game (or dedicated) systems. In 1974, Alpex Computer Corporation created and patented a technology that enabled consoles to play multiple games stored on ROM chips stored in game cartridges. The first company to license Alpex’s technology was Fairchild Camera and Instrument, which used it in the Channel F game console released in 1976.
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Two years later, Alpex applied for patent protection on that technology and received patent number 4,026,555, also known as the “555 patent.”

After receiving its patent, Alpex embarked on a campaign to enforce it, selling nonexclusive licenses to companies that infringed. Magnavox, Atari, Mattel, Bally, and Coleco were just a few of the companies that Alpex contacted. Though the other settlement sums are not public, it is known that Atari paid $380,000 to settle the affair.

Alpex declared
Chapter 11
bankruptcy and ceased operation in 1983. As the company dissolved, creditors found that its only valuable asset was the “555 patent.”

Of the seventy companies that received the letter, six companies expressed interest in settling without litigation. By 1985, Alpex had won licensing agreements in suits against ten companies.
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Most companies preferred to pay Alpex rather than risk a court battle. This was especially true of Japanese companies, which were supposedly scared that U.S. jury awards might reflect anti-Japanese sentiments.
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Sega Enterprises, for instance, elected to purchase a license from Alpex in 1993. Nintendo, however, refused to settle, so Alpex sued for willful infringement of the “555 patent.”
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The case, which was tried before Judge Kimba Wood
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of the South New York District in Manhattan, hinged on a question of technology. Nintendo claimed that while the NES did use interchangeable cartridges, the bit-mapping technology developed by Alpex was not powerful enough to handle the sophisticated images in NES games.

According to Nintendo’s defense, Alpex’s RAM-based technology was simply too slow. Nintendo’s lawyers claimed that the NES featured a patented “picture processing unit” (PPU) that received pre-formed “slices” of data.

The case turned into a debate about whether “on-the-fly” graphics did indeed differ from the technology in the Alpex patent. Nintendo maintained that while Alpex’s bit-mapping was fast enough for games with “linear player images,” it lacked the speed for games with “animated cartoon characters,” such as
Mario.
The highlight of the case was when John Strauch, lead attorney on the Alpex team, cross-examined Nintendo expert witness Stephen Ward. Strauch questioned Ward about the differences between linear player images and animated cartoons. Strauch tried to corner Ward into explaining the precise differences between the two kinds of graphics. Ward, either unwilling or unable to specify, refused to be pinned down, although he maintained that he could detect concrete differences, having viewed hundreds of games.

To clarify, Strauch drew a stick figure that he identified as a drawing of a hockey player. Ward agreed that the character would definitely be classified as a linear image. Next, Strauch colored the figure red and asked if it was still a linear image. When Ward said that it was, Strauch drew a bulge on the
player that he identified as a hip and asked if it was still linear. Ward answered that they had “entered into a region” in which he had no answer. Strauch next added two little arms and asked if they were still in the gray area in which Ward could not distinguish between linear images and cartoons. Ward said, “I believe that one could arbitrarily decide to draw the line either way in that case.”

“Now using your terminology and understanding, we are using your terminology the way you want to define this, if I add a nose, are we still in a situation where we can put this one on either side of the line?”

Ward responded, “I think that at some point when you add features that make it look like a human form, for example, then it is no longer a linear player image, and if you keep adding noses and arms, then you do cross that line.”

According to Alpex attorneys John Strauch and Thomas Young, members of the jury tried to duck behind the rail of the jury box so that the rest of court would not see them laughing during this exchange. The jury agreed with Alpex, finding that Nintendo willfully infringed Alpex’s patent and that 118 of the games that had been introduced for the NES before the patent expired on July 31 infringed on the “555 patent.” Alpex was awarded $208 million for damages. Stating that she saw “scant” evidence of willful infringement, Judge Wood did not add further punitive damages to the award, but she allowed interest and legal fees to be tacked on, bringing it to $252 million—one of the largest patent awards in history.

Judge Glen Archer of the Federal Circuit did not see substantial evidence of infringement when the case went to Federal Appeals Court on November 25, 1996. After a thorough investigation of the bit-map and “on-the-fly” technologies, he ruled that there was insubstantial evidence that the devices operated in the same way. Based on his findings, Judge Archer reversed the original decision.