The Battle of The Hague; R4 and mod chips game over?

Authors: Willem Leppink and Jeremy Schutte (Ploum Lodder Princen, The Netherlands)

Nintendo Co. Ltd and others v Snip Webwinkels and others, 324867/HA ZA 08-3879, Court of First Instance The Hague, The Netherlands, 21 July 2010.

The Court of The Hague ruled that several online resellers of flash cards (R4 cards) and mod chips that enable the use of (illegally) copied games on the Nintendo DS, DSi and the Nintendo Wii infringe Nintendo's copyrights, granting that company protection for ‘works in general’ and deeming the design of the video game to predominate the element of software programming. This decision is welcomed by the interactive entertainment industry, and is also interesting from a European copyright law perspective.

Citation: Journal of Intellectual Property Law & Practice (2010) doi: 10.1093/jiplp/jpq146

Legal context

Nintendo based the infringement of its copyrights by the resellers on two provisions from the Dutch Copyright Act, both having their origin in European directives.

First is the Dutch Copyright Act Article 29a, which is based on Article 6 of the Directive 2001/29 on the harmonization of certain aspects of copyright and related rights in the information society. This Article provides that it is unlawful to circumvent technological measures that are intended to prevent or restrict acts regarding works protected by copyright, which are not permitted by the producer or its successor.

Secondly Article 32a of the same Act played a role in this case. This Article is based on Article 7(1)(c) Directive 91/250 on the legal protection of computer programs and provides that it is unlawful to market technological devices solely intended for removal or circumvention technological measures intended to protect computer software.

The most important question the court had to decide is which of these two Articles provides the best protection against flash cards and mod chips: Article 29a which protects ‘works in general’, or Article 32a, which specifically protects computer software?

Facts

In the fight against illegally copied software Nintendo has taken measures to prevent the use of copied software on its Nintendo DS, DSi and Wii consoles. All software issued by Nintendo is provided with a specific code. The software is manufactured in such a manner that, when it is copied, the protective code cannot be copied. When such copied software is placed in, eg a console such as the Nintendo DS, the console registers that the software does not have a protective code and it will not run.

These protective measures, however, can be avoided by using of a flash card placed in an adaptor (Nintendo DS or DSi), or by means of installing a mod chip (Nintendo Wii). Both avoid the technological measures created by Nintendo and therefore enable the use of illegally copied software on the Nintendo consoles. Mainly online there is a large market in which these flash cards and mod chips are distributed.

In 2008 Nintendo sued several online resellers of these flash cards and mod chips on the ground that the sale of these products infringes Nintendo's copyrights.

Analysis

Nintendo sought an order to prohibit the resellers from selling the flash cards and mod chips. The claim was based on Articles 29a and 32a of the Dutch Copyright Act. Further, Nintendo stated that the resellers of the flash cards infringe Nintendo's trade marks because, on booting the DS and DSi with the R4 card, the logo of Nintendo is displayed.

Between the parties it was undisputed that videogames hold elements of computer software as well as of ‘works in general’ protected by copyrights. These works in general refer to aspects such as the storyline, the figures and the texts, together referred to as the design. The court must therefore decide whether protection is granted for ‘works in general’ under Article 29a of the Dutch Copyright Act, or for computer software under Article 32a.

The court stated that the element that demands the most creative effort of the producer should be decisive. In line with this, it deemed the general protection more appropriate. This decision was based on Nintendo's presentation of the creative process in which a video game is developed. The creative process as described by Nintendo falls into three phases. In the first the basic outline of the game is developed: the main features such as its design, concept, storyline and characters. During the second, which solely concerns the game's design, the basic outline is worked out in further detail: for example the appearance and gestures of the characters are developed. In the third the contents and course of the story are designed by merging the various components. It is only in this phase that the computer software which enables the game to be played and controlled is created.

This led to the court's conclusion that, since the software programming has to be fitted to the video game as it is designed, that programming is subordinated to the design. The defence that Nintendo's use of the term ‘video game software’ indicates that the element of software predominates was not followed by the court.

The court added that the protective technological measures taken by Nintendo can be viewed as measures as mentioned in Article 29a. The defendants submitted that those measures had a wider reach than Article 29a provides, since they disabled not only copied software but also software from third parties. The court however decided that Article 29a does not prohibit measures which reach further than is strictly necessary. Nor would such a restrictive interpretation of the term ‘technological measure’ be congruent with the other paragraphs of Article 29a.

Finally the defence that Nintendo abused its power was not accepted. Nintendo successfully refuted this by referring to the fact that it also grants licences to other producers.

Based on the violation of Article 29a the dealers were prohibited from importing, distributing, selling or carrying out any commercial activity with the flash cards or mod chips, on pain of a penalty of EUR 10,000 per day, or EUR 1,000 per product. Destruction of all flash cards and mod chips in the possession of the defendants was also ordered. Finally Nintendo was entitled to damages suffered by the actions of the resellers, including the cost of the proceedings.

The court did not give a decision in relation to the trade mark infringement claim, as Nintendo did not have an interest which would exceed the legal measures to which it was entitled for copyright infringement.

Practical significance

In this case the court ruled that under the Dutch Copyright Act a video game, although it holds elements of a ‘work in general’ and of computer software, is considered to be a ‘work in general’. The decision of the court is based on the description of the creative process in which a video game is developed. After analysis of this process the court decided that the element of design (such as that of the characters, levels, storyline, texts, etc.) dominated the actual programming of the software, since the programming only occurred in the final phase of development and had to be accommodated to the existing design.

In concrete terms this protection as a ‘work in general’ leads to the judgment that the sale of flash cards and mod chips that circumvent the technological measures Nintendo has taken to prevent or restrict acts regarding its video games is not permitted, being an infringement of Nintendo's copyrights: an important battle was thus won by Nintendo.

Profile of JIPLP writers: Eddy Ventose

Eddy Ventose

This is the third in an occasional series of features on contributors to JIPLP, it is our pleasure to Eddy Ventose.  Eddy has provided some of the more detailed and cogent analyses of European patent law to appear in the journal, as well as some punchy Current Intelligence pieces. So what is Eddy all about? Let him speak for himself:

"My interest in intellectual property started during my undergraduate years at the University of the West Indies, Cave Hill Campus, although the subject was not offered there at that time. I did intellectual property as part of the LLM at the University of Cambridge and decided subsequently to focus on patent law which I found most challenging and intellectually stimulating. This explains why I decided to read for the D,Phil in medical patent law at the University of Oxford.

I have been a Lecturer in Law at the University of the West Indies Cave Hill Campus for just over four years. I am currently the Deputy Dean (Graduate Studies and Research) and Director of the LL.M. Programmes.

My interests broadly relate, on the one hand, to the ways in which patent law can foster research and innovation in the pharmaceutical industry, and, on the other, to the ways in which in doing so it may encroach on the activities of physicians when they treat their patients. For now, I have focused on three main areas of my main research agenda in relation to intellectual property law: first, whether patent protection may be provided for methods of treatment of the human or animal body by surgery, therapy and diagnostic methods practised on the human or animal body; secondly, whether the development of new dosage or treatment regimes are patentable; and, thirdly the impact of the exclusion for methods of medical treatment will have on new technologies, namely, gene therapy, genetic production of diagnostic aids, cell bombardments, stem cell research and nanotechnology therapy. I have published broadly in this field and my book, Medical Patent Law: The Challenges of Methods of Medical Treatments, will be published by Edward Elgar Publishing in 2011.

I am also interested in other areas of intellectual property rights, having also published on personality rights, copyright law and trade mark law. Recently I set up a blog, IP in the Caribbean, which seeks to provide a focal point for the dissemination of new developments in and discussion on all aspects of intellectual property and related rights in the Commonwealth Caribbean.

I am also a consultant at Delany Finisterre, a Corporate and Commercial law firm in Barbados, specialising in intellectual property and corporate transactions. After training at City law firm Slaughter and May and being admitted as a Solicitor of the Supreme Court of England and Wales, I returned to the Caribbean to pursue an academic career and re-qualified as an Attorney-at-Law to practice law in the Caribbean.  I have a keen research interests in aspects of Caribbean public law, in particular legitimate expectations and exhaustion of remedies in judicial review actions. My other areas of interest are E-Commerce Law, Information Technology Law, Public Service Law, Administrative Law, Corporate Finance Law and Law and Legal Systems.

When not working, I enjoy taking trips to Saint Lucia, where I grew up, or Martinique, where I was born, to visit friends and family. I also enjoy visiting friends in other Caribbean islands, particularly Jamaica and Trinidad and Tobago. When I am not teaching, researching, or writing, I can be found at a local bar with friends, enjoying a nice rum and coke, or at the beach (in the shade, of course, usually editing one article or other) on the West Coast of Barbados.

New data privacy publication for 2011 launch

JIPLP will shortly have a new sister publication, International Data Privacy Law (IDPL). Due for launch in 2011, IDPL comes with high expectations from its publisher OUP:

"Combining thoughtful, high level analysis with a practical approach, International Data Privacy Law has a global focus on all aspects of privacy and data protection, including data processing at a company level, international data transfers, civil liberties issues (e.g., government surveillance), technology issues relating to privacy, international security breaches, and conflicts between US privacy rules and European data protection law".

IDPL is to be edited by some distinguished experts -- Editor-in-chief is Christopher Kuner (Hunton & Williams, Brussels), supported by Christopher Millard (Queen Mary University of London, Oxford Internet Institute and law firm Bristows) and Fred H. Cate (Director, Center for Applied Cybersecurity Research, Indiana University of Bloomington).  Dan Jerker B. Svantesson (Bond University, Australia) is Managing Editor.

JIPLP wishes this title the best of luck.

Intellectual Property and the Moral Maze: a rejoinder

Earlier this week the jiplp weblog published the Editorial of the forthcoming November 2010 issue of the Journal, "IP and the Moral Maze" (here). This weblog has now received a spirited rejoinder from Lauren V. Perez (LVP Solutions), along the following lines:

"IP and the Moral Maze: a Rejoinder

I was misled. Every day I look forward to IKAT and JIPLP. And the title of the November editorial "IP and the moral maze" led me to believe I had an ally, that someone else understood my sometimes-feeling that IP owners have discarded morality in favor of greed and self-righteousness. But it appears I was wrong.

As a premise, the editorial set forth the following:

We all knew, without any sense of doubt, that
* copying is wrong;
* using another's intellectual creation so as to obtain a gain at his expense is unfair;
* intellectual creation is entitled to legal protection in exchange for the disclosure of its intellectual content to the public;
* investors in new products and services are more confident of seeing a return on their investors when free-riders are kept at bay for a reasonable period.

All is good until the final bullet. What exactly is a “free rider”? Is it a counterfeiter who intentionally copies a trademarked article in order to deceive the public into believing it is other than a fake? Is it the person who sneaks a camcorder into a movie theatre to permit downloads of hit movies before even opening weekend has expired? Or is the term, in this context, referencing downstream suppliers and distributors who freely sell and resell genuine merchandise for which the “investor” has already received its reward? Is “free rider” an intentionally prejudicial term against wholesalers and distributors not bound to those marketing investments mandated by manufacturers luring “authorized” distributors to a selective supply chain in a world more and more dependent upon a borderless economy?

At this point, I assume many readers have branded me a traitor and may have even already left the page to read a more reasonable article. So, what can I say to lure you back? I have been working with brand owners since before the Internet. I have worked with businesses for years and years to build strong, global IP portfolios. I could not be more opposed to or appalled at or about counterfeiting and blatant piracy. I agree that technological innovations have simplified copying, making appear right what has always been considered wrong. I also “get” that manufacturers have and should have the right to contractually and territorially restrict sales made by their “authorized” distributors. I am however angry when the rights holders file lawsuits not against their distributors for breach of contract as a result of unauthorized sales to third parties, but against these downstream purchasers. I am angry at the way rights holders manipulate courts and congress into believing that they are incredibly injured by purported “free riders” when they have been paid for the products and consumers depend upon the competition and access provided by downstream, discount retail outlets. I am angry that it is easier to pass legislation or for countries to enter into treaties potentially criminalizing lawful product resales, than it is for governments to insist that private businesses enforce their contracts. I am angry that the smallest of website operators are expected to know the IP laws of every jurisdiction in the world as the only means of avoiding lawsuits from powerful brand owners. I am angry that innovators are more eager to collect damages through litigation than they are to value technology as an advance to our society as a whole. And I am angry that because I am angry about these things my friend, IKat, may consider me morally deficient.

JIPLP editorialized that the starting point for things going downhill was when IPR became subject to economic analysis:

You can exclusively possess and control a painting, a plot of land, or a piece of pottery—but you cannot own a market for goods or services. So for the innovator who creates a market, the question was no longer ‘how can he keep what he has created?’ but ‘how can the market, once created, be competitive?’

Why, in the world, is this a bad thing? How can we, in the 21st century, believe that an obligation to ensure competition is the starting event for the “rot’ setting in?

It is not ok to counterfeit. It is not ok to infringe. It is not ok to cheat at your taxes , rob a bank or deprive a man of his privacy. But it is just as not ok to lump parallel traders into a pile of morally deficient commoners without appreciation for law or private property. It is possible to believe in the value of IPR, while still believing that the goal of innovation is not to quash competition. It is possible to take the moral high ground by insisting that the bad guys who steal technology go to jail while, at the same time, defending the rights of purported “free riders” to ensure global access to critical, safe, authentic, branded merchandise --- even if such unfettered access provides unwanted competition to those incredibly moral technological “investors”.

Thanks, Laura, for your viewpoint -- and for taking the trouble to let us share it.  I concede that morality and the benefits of a competitive market are not inherently mutually exclusive, though once a debate on IP takes place on the basis of economic criteria it can be hard for moral issues to muscle their way in.

Profile of JIPLP writers: Peter A. Jabaly

In this, the second in an occasional series of features on contributors to JIPLP (click here for the first, featuring Charley Macedo), we introduce Peter Anthony Jabaly, a Washington, DC attorney and graduate of Rutgers Law School. Like Charley, Peter has frequently contributed Current Intelligence notes to JIPLP, as well as a recent article.

Peter tells us that he is passionate about IP.  As a former student of Michael A. Carrier, one of the most highly respected IP attorneys and professors around, Pete (as his friends affectionately call him) is most interested in copyright and trade marks. However, he isn’t shy about taking on difficult patent issues on behalf of Zero Waste, Inc. where he assists the renewable energy firm in patent licensing issues and other complex corporate matters such as restructuring and government affairs.  Dealing with the commercial phase of the patent protection process, Peter approaches the inventor to either taking a licence or buying the technology outright, systematically going through the valuation, negotiation, and drafting of the agreement.

Another side to Peter's professional activity involves representing indigent clients in pro bono cases in a variety of fields, finding consumer advocacy the best way for him to give back to his community and to hone his negotiation skills. He first acquired an interest in negotiation when he represented his law school in the Willem C. Vis International Commercial Arbitration Moot held each year in Vienna, Austria. One of his most loved books is about negotiation: Roger Fisher and William L. Ury’s Getting to YES: Negotiating Agreement Without Giving In.

Peter also works closely on a pro bono basis with a non-profit organization that aims to educate U.S. policymakers in the crucial role they can play in building a peaceful future for the millions who live in Lebanon and Israel. As a graduate of George Mason University with a B.A. degree in government & international politics, he remains very interested in foreign affairs and has also passed the State Department’s notoriously difficult Foreign Service Officer test in the hope that he may serve his country abroad in the not-so-distant future.

Peter enjoys traveling whenever he can. His favourite destinations are Eastern Europe, the Middle East and the southeastern United States. Peter lived in Paris for a semester during his junior year at University and visits every year to participate in the Sorbonne reunions. Being trilingual he hopes that, with the broadening internationalization of the IP field, he’ll be able to utilize his linguistic and cultural fluency to increase IP protection and awareness in areas of the globe that have ordinarily resisted the trend. A sort of niche interest is IP protection (or its lack) in the Middle East. Peter is visiting Beirut, Lebanon, this December to get a better sense of the landscape. There, he will be meeting with a number of IP firms to discuss just that.

Traveling as a tourist is never appealing; instead, Peter likes to visit friends he has acquired over his years abroad. Whether in Warsaw or Paris, these friends provide an insight that he finds invaluable. Many of them are attorneys who generously offer their views on the developments in their own jurisdictions. Peter has, admittedly, learned much from the comparative study of the law.

When Peter isn’t problem-solving, he’s relaxing with a good pick-up game of soccer. He likes watching Champions and Premier League games when he can, but it's difficult with the time difference. In his other free time, he’s driving to the Shenandoah National Park with some friends for a hike, white-water rafting, or some fishing. He’s recently made the purchase of a lifetime -- a motorbike -- taking his Ducati Monster whenever the elements allow. He enjoys the feeling he gets when he is able to navigate smoothly through the heavy traffic in the District of Columbia.

The November issue: IP and the moral maze

The November 2010 issue of JIPLP is now available in full to its online subscribers. The full list of contents can be viewed here, whether you are a subscriber or not. The November Editorial, "IP and the moral maze", decries the erosion of principles of morality from the criteria by which intellectual property rights are judged, while the influence of economic analysis on IP has grown. It reads as follows:

"IP and the moral maze"

Almost all of today's more senior IP practitioners, R&D businesses, entrepreneurs, and investors cut their teeth on a set of simple propositions that, if not actually axiomatic, were rarely challenged. We all knew, without any sense of doubt, that

* copying is wrong;

* using another's intellectual creation so as to obtain a gain at his expense is unfair;

* intellectual creation is entitled to legal protection in exchange for the disclosure of its intellectual content to the public;

* investors in new products and services are more confident of seeing a return on their investors when free-riders are kept at bay for a reasonable period.

These and other beliefs formed part of a credo that, rightly or wrongly, shaped the 20th century for many of us. Where this credo was not intoned, there was little or no innovation and investment was stultified.

Only 10 short years into the new millennium, one might be forgiven for imagining that a revolution had taken place not only in terms of new technologies but in terms of morality. Copyright has been undermined no less by a shift in attitude on the part of consumers than by the digital delivery of content; patents are increasingly regarded as the privilege of the greedy few, with the sector-specific moral argument in favour of access to healthcare being used as a stick with which to beat all patents, of whatever subject-matter. Within the sphere of brands we are now informed by learned reports commissioned by the European Union that counterfeiting is good for consumers, good for the economy, and good for brand owners. As for design, we are given to understand that it is a bar, an inhibition to the promotion of the fashion and clothing industries. Trade secrets, it is also suggested, have outlived their utility and should be limited in time.

It is possible that the rot set in at the point when IP rights were not actually detached from the sphere of morality but were subjected to rigorous economic analysis. The privilege of profit and the ability to exploit a market fully once one's IP rights had created it was no longer an issue of enjoyment of ownership of one's own property (which itself is recognized as a human right) but an issue of checks, balances, and social utility. You can exclusively possess and control a painting, a plot of land, or a piece of pottery—but you cannot own a market for goods or services. So for the innovator who creates a market, the question was no longer ‘how can he keep what he has created?’ but ‘how can the market, once created, be competitive?’

Is there still a place in IP for this word?

Now even economics has been pushed aside, in favour of a rule which, though articulated in lofty and respectable terms, is not one that commends itself to the morality of IP. We understand that, if copyright infringement is now so easy to commit and we all have the equipment to infringe it, we should legitimize it so that people do not feel bad about what they are doing. Likewise, since consumers are not in general confused or deceived by the most common forms of counterfeit product (CDs, DVDs, fashion items, and accessories) but indeed connive in the fakery by providing a market for it, society should tolerate such infringements rather than stigmatize them. In other words, if enough people want to do it, the law should not stop them.

It is not difficult to turn this form of reasoning, applied here to IP, so as to provide a corresponding justification for turning a blind eye to motoring speed limits, parking restrictions, fare-dodging, and tax-cheating, among other things. This is because it is a form of reasoning from which the consideration of any moral principles has been increasingly excluded.

Where, then, are the moral arguments that support IP rights, just as they support a man's right to his home, the clothes on his back, and the privacy of his personal thoughts and feelings? And where are the philosophers who are prepared to identify the moral propositions on which the IP system has hitherto been based, at least in part? Or has IP become so morally bankrupt that there none prepared to stand up and defend it?

Authors wanted -- and a word on co-authors

Here follows a shortlist of articles in search of authors. Some are on new topics; others have been listed before and either (i) were taken up by authors who subsequently found that they could not commit themselves to writing them or (ii) were not taken up at all.

* Issues arising from the need to dispose of infringing stock;

* Roving injunctions and John Doe orders against unidentifiable defendants in IP infringement proceedings;

* Potential liability of landlords and lawful occupants of premises for infringements that take place on them -- how to establish it and how to avoid it;

* Good practice in dealing with client complaints arising from professional services in intellectual property -- can a firm be wise before the event?

* The balance between EU legislative and judicial powers -- who gets to decide what Europe's IP laws really are?

* Best strategy for an IP-backed business which is threatened by multiple small-scale infringers.

As before, if you feel that you'd like the chance to write on one of these topics, please let me know by emailing me. Before you contact me, you may want to check out the guidance for authors here, so see what we expect.

Monkeying around with JIPLP submissions
can lead to disappointment

While on the subject of authors, I'd like to raise what is probably a delicate issue. 

From time to time this journal (in common with many others) receives submissions from two named authors, one of whom is a senior member of a law firm and the other of whom is a very junior lawyer, or sometimes even a trainee.  When editing the article, the degree of contribution of each is often sorely apparent. 

Can I say just this: it is in general preferable for the senior contributor to write the piece and for the junior one to proof and correct it, rather than for the junior to write it and the senior to put it right. This is because senior IP practitioners tend to know their subject better, while their junior assistants are generally more conscientious background researchers and proof-readers.

ACTA: first suggestions received

Following Friday's request for assistance from readers regarding those issues within the Anti-Counterfeiting Trade Agreement (ACTA) which most require serious treatment in the form of analysis in JIPLP (see "ACTA: the search for the key issues", here), this weblog has already received some helpful suggestion:

"Border enforcement

• If Customs can act on its own without a court order and without rights holders information, how can a port inspector possibly determine what is counterfeit versus a parallel import?

• Many importers cannot afford to fight a Customs determination of infringement for low value shipments. Is administering civil fines for infringing goods which is oftentimes an undefined quality appropriate?

• If Customs can act on its own without a court order and without rights holder information, won't some IP necessarily be granted more "free" border enforcement? In other words, won't a Customs official be more likely to recognize a counterfeit version of a famous mark and not one of a not so famous mark? How can Customs officials possibly know of all trademarks that are actually registered without checking all of the marks on all the goods on all of the shipments in order to provide non discriminatory treatment at the border -- and this won't happen as a result of limited resources and the need not to add to entry delays?"

"Enforcement in Digital Environment

• How can governments orders ISPs to turn over subscriber information to an unrelated rights holder upon an allegation of infringement? Why is this not protected business information? Does the ISP own this information so that it has the right to give it away?

• How can privacy be protected in a digital environment with so much prejudice in favor of rights holders? Who owns information related to commercial transactions involving two or more parties both of whom may be unrelated to the rights holder or the ISP and who has the right to disclose that information?"

The weblog thanks Lauren V. Perez (LVP Solutions) for these bullets and looks forward to receiving more from other readers. 

ACTA: the search for key issues

The Attack ACTA movement
reflects some of the strong
feeling generated by it.  JIPLP
 is not looking for polemics
and policy debates, however,
but for legal issues and practical
problems that arise from them

The publication of the 11th round text of the Anti-Counterfeiting Trade Agreement (ACTA) on 2 October raised fresh interest in this controversial proposed measure. While it is still premature for JIPLP to be commissioning definitive articles on how different aspects of ACTA will affect IP owners, infringers, border authorities, public sector administrators and legal practitioners, it's not too early to size up the contents of ACTA so that the issues of most significance can be more clearly identified.

Accordingly this weblog invites readers to pick a topic within ACTA and fillet it for matters of critical concern, which can be listed on the blog so that authors can be found for them when the time comes. ACTA -- which is not very long (the full text runs to just 24 sides of well-spaced A4) -- can be divided as follows:

• Initial provisions and general definitions
• Civil enforcement
• Border measures
• Criminal enforcement
• Enforcement of Intellectual Property Rights in the Digital Environment
• Enforcement practices
• International cooperation
• Institutional arrangements

If you'd like to take responsibility for identifying topics under one of the listed headings, please email me here with the subject line "ACTA topics".  A reminder: I'm not looking for an article, just for lists (and perhaps just bullet-points) of things which people working in the field of IP enforcement would want to be thinking about.

Patent research platform: possible review

JIPLP's Review section has in its time covered more than just books: it has reviewed occasional weblogs, articles  -- and even a film.

CPA Global is launching a new web-based patent research platform, Discover, on 1 November. If any reader who is suitably qualified would like to see a demo of Discover and put it through its paces, with a review to writing a review for publication in JIPLP, could he or she please email me here and let me know?