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SONY v CONNECTIX

U.S. 9th Circuit Court of Appeals
SONY v CONNECTIX
9915852
SONY COMPUTER ENTERTAINMENT,
INC., a Japanese corporation; SONY
COMPUTER ENTERTAINMENT
AMERICA, INC., a Delaware No. 99-15852
corporation,
D.C. No.
Plaintiffs-Appellees,
CV-99-00390-CAL
v.
OPINION
CONNECTIX CORPORATION, a
California corporation,
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of California
Charles A. Legge, District Judge, Presiding

Argued and Submitted
September 14, 1999--San Francisco, California

Filed February 10, 2000

Before: Herbert Y. C. Choy, William C. Canby, Jr. and
Barry G. Silverman, Circuit Judges.

Opinion by Judge Canby

_________________________________________________________________

COUNSEL

William S. Coats, III, Howrey & Simon, Menlo Park, Califor-
nia, for the defendant-appellant.

Ezra Hendon, Crosby, Heafey, Roach & May, Oakland, Cali-
fornia; James G. Gilliland, Jr., Townsend and Townsend and
Crew, San Francisco, California, for the plaintiffs-appellees.

Annette L. Hurst, Howard, Rice, Nemerovski, Canady, Falk
& Rabkin, San Francisco, California, for amicus Institute for
Electrical and Electronics Engineers - USA. Peter M. C.
Choy, American Committee for Interoperable Systems, Palo
Alto, California, for amici American Committee for
Interoperable Systems and Computer & Communications
Industry Association. Mark Lemley, University of Texas at
Austin, Austin, Texas, for amicus Law Professors. Steven J.
Metalitz, Smith & Metalitz, Washington, D.C., for amici Nin-
tendo of America, Inc., Sega of America, Inc., and 3dfx Inter-
active.

_________________________________________________________________

OPINION

CANBY, Circuit Judge:

In this case we are called upon once again to apply the prin-
ciples of copyright law to computers and their software, to
determine what must be protected as expression and what
must be made accessible to the public as function. Sony Com-
puter Entertainment, Inc., which brought this copyright
infringement action, produces and markets the Sony PlaySta-
tion console, a small computer with hand controls that con-
nects to a television console and plays games that are inserted
into the PlayStation on compact discs (CDs). Sony owns the
copyright on the basic input-output system or BIOS, which is
the software program that operates its PlayStation. Sony has
asserted no patent rights in this proceeding.

The defendant is the Connectix Corporation, which makes
and sells a software program called "Virtual Game Station."
The purpose of the Virtual Game Station is to emulate on a
regular computer the functioning of the Sony PlayStation con-
sole, so that computer owners who buy the Virtual Game Sta-
tion software can play Sony PlayStation games on their
computers. The Virtual Game Station does not contain any of
Sony's copyrighted material. In the process of producing the
Virtual Game Station, however, Connectix repeatedly copied
Sony's copyrighted BIOS during a process of "reverse
engineering" that Connectix conducted in order to find out
how the Sony PlayStation worked. Sony claimed infringement
and sought a preliminary injunction. The district court con-
cluded that Sony was likely to succeed on its infringement
claim because Connectix's "intermediate copying " was not a
protected "fair use" under 17 U.S.C. S 107. The district court
enjoined Connectix from selling the Virtual Game Station or
from copying or using the Sony BIOS code in the develop-
ment of other Virtual Game Station products.

Connectix now appeals. We reverse and remand with
instructions to dissolve the injunction. The intermediate cop-
ies made and used by Connectix during the course of its
reverse engineering of the Sony BIOS were protected fair use,
necessary to permit Connectix to make its non-infringing Vir-
tual Game Station function with PlayStation games. Any
other intermediate copies made by Connectix do not support
injunctive relief, even if those copies were infringing.

The district court also found that Sony is likely to prevail
on its claim that Connectix's sale of the Virtual Game Station
program tarnishes the Sony PlayStation mark under 15 U.S.C.
S 1125. We reverse that ruling as well.

I. Background

A. The products

Sony is the developer, manufacturer and distributor of both
the Sony PlayStation and Sony PlayStation games. Sony also
licenses other companies to make games that can play on the
PlayStation. The PlayStation system consists of a console
(essentially a mini-computer), controllers, and software that
produce a three-dimensional game for play on a television set.
The PlayStation games are CDs that load into the top of the
console. The PlayStation console contains both (1) hardware
components and (2) software known as firmware that is writ-
ten onto a read-only memory (ROM) chip. The firmware is
the Sony BIOS. Sony has a copyright on the BIOS. It has
claimed no patent relevant to this proceeding on any compo-
nent of the PlayStation. PlayStation is a registered trademark
of Sony.

Connectix's Virtual Game Station is software that
"emulates" the functioning of the PlayStation console. That is,
a consumer can load the Virtual Game Station software onto
a computer, load a PlayStation game into the computer's CD-
ROM drive, and play the PlayStation game. The Virtual
Game Station software thus emulates both the hardware and
firmware components of the Sony console. The Virtual Game
Station does not play PlayStation games as well as Sony's
PlayStation does. At the time of the injunction, Connectix had
marketed its Virtual Game Station for Macintosh computer
systems but had not yet completed Virtual Game Station soft-
ware for Windows.

B. Reverse engineering

Copyrighted software ordinarily contains both copyrighted
and unprotected or functional elements. Sega Enters. Ltd. v.
Accolade, Inc., 977 F.2d 1510, 1520 (9th Cir. 1993) (amended
opinion); see 17 U.S.C. S 102(b) (Copyright protection does
not extend to any "idea, procedure, process, system, method
of operation, concept, principle, or discovery" embodied in
the copyrighted work.). Software engineers designing a prod-
uct that must be compatible with a copyrighted product fre-
quently must "reverse engineer" the copyrighted product to
gain access to the functional elements of the copyrighted
product. See Andrew Johnson-Laird, Software Reverse Engi-
neering in the Real World, 19 U. Dayton L. Rev. 843, 845-46
(1994).

Reverse engineering encompasses several methods of gain-
ing access to the functional elements of a software program.
They include: (1) reading about the program; (2) observing
"the program in operation by using it on a computer;"
(3) performing a "static examination of the individual com-
puter instructions contained within the program; " and
(4) performing a "dynamic examination of the individual
computer instructions as the program is being run on a
computer." Id. at 846. Method (1) is the least effective,
because individual software manuals often misdescribe the
real product. See id. It would be particularly ineffective in this
case because Sony does not make such information available
about its PlayStation. Methods (2), (3), and (4) require that
the person seeking access load the target program on to a
computer, an operation that necessarily involves copying the
copyrighted program into the computer's random access
memory or RAM.1

Method (2), observation of a program, can take several
forms. The functional elements of some software programs,
for example word processing programs, spreadsheets, and
video game displays may be discernible by observation of the
computer screen. See Sega, 977 F.2d at 1520. Of course, the
reverse engineer in such a situation is not observing the object
code itself,2 only the external visual expression of this code's
operation on the computer. Here, the software program is cop-
ied each time the engineer boots up the computer, and the
computer copies the program into RAM.
Other forms of observation are more intrusive. Operations
systems, system interface procedures, and other programs like
the Sony BIOS are not visible to the user when they are oper-
ating. See id. One method of "observing" the operation of
these programs is to run the program in an emulated environ-
ment. In the case of the Sony BIOS, this meant operating the
BIOS on a computer with software that simulated the opera-
tion of the PlayStation hardware; operation of the program, in
conjunction with another program known as a "debugger,"
permitted the engineers to observe the signals sent between
the BIOS and other programs on the computer. This latter
method required copying the Sony BIOS from a chip in the
PlayStation onto the computer. The Sony BIOS was copied
again each time the engineers booted up their computer and
the computer copied the program into RAM. All of this copy-
ing was intermediate; that is, none of the Sony copyrighted
material was copied into, or appeared in, Connectix's final
product, the Virtual Game Station.

Methods (3) and (4) constitute "disassembly" of object
code into source code.3 In each case, engineers use a program
known as a "dissassembler" to translate the ones and zeros of
binary machine-readable object code into the words and math-
ematical symbols of source code. This translated source code
is similar to the source code used originally to create the
object code4 but lacks the annotations drafted by the authors
of the program that help explain the functioning of the source
code. In a static examination of the computer instructions,
method (3), the engineer disassembles the object code of all
or part of the program. The program must generally be copied
one or more times to perform disassembly. In a dynamic
examination of the computer instructions, method (4), the
engineer uses the disassembler program to disassemble parts
of the program, one instruction at a time, while the program
is running. This method also requires copying the program
and, depending on the number of times this operation is per-
formed, may require additional copying of the program into
RAM every time the computer is booted up.

C. Connectix's reverse engineering of the Sony BIOS

Connectix began developing the Virtual Game Station for
Macintosh on about July 1, 1998. In order to develop a Play-
Station emulator, Connectix needed to emulate both the Play-
Station hardware and the firmware (the Sony BIOS).

Connectix first decided to emulate the PlayStation's hard-
ware. In order to do so, Connectix engineers purchased a
Sony PlayStation console and extracted the Sony BIOS from
a chip inside the console. Connectix engineers then copied the
Sony BIOS into the RAM of their computers and observed the
functioning of the Sony BIOS in conjunction with the Virtual
Game Station hardware emulation software as that hardware
emulation software was being developed by Connectix. The
engineers observed the operation of the Sony BIOS through
use of a debugging program that permitted the engineers to
observe the signals sent between the BIOS and the hardware
emulation software. During this process, Connectix engineers
made additional copies of the Sony BIOS every time they
booted up their computer and the Sony BIOS was loaded into
RAM.

Once they had developed the hardware emulation software,
Connectix engineers also used the Sony BIOS to "debug" the
emulation software. In doing so, they repeatedly copied and
disassembled discrete portions of the Sony BIOS.

Connectix also used the Sony BIOS to begin development
of the Virtual Game Station for Windows. Specifically, they
made daily copies to RAM of the Sony BIOS and used the
Sony BIOS to develop certain Windows-specific systems for
the Virtual Game Station for Windows. Although Connectix
had its own BIOS at the time, Connectix engineers used the
Sony BIOS because it contained CD-ROM code that the Con-
nectix BIOS did not contain.

Early in the development process, Connectix engineer
Aaron Giles disassembled a copy of the entire Sony BIOS that
he had downloaded from the Internet. He did so for the pur-
pose of testing a "disassembler" program he had written. The
print-out of the source code was not used to develop the Vir-
tual Game Station emulator. Connectix engineers initially
used this copy of the Sony BIOS to begin the reverse engi-
neering process, but abandoned it after realizing that it was a
Japanese-language version.

During development of the Virtual Game Station, Connec-
tix contacted Sony and requested "technical assistance" from
Sony to complete the development of the Virtual Game Sta-
tion. Connectix and Sony representatives met during Septem-
ber 1998. Sony declined Connectix's request for assistance.

Connectix completed Virtual Game Station for Macintosh
computers in late December 1998 or early January 1999. Con-
nectix announced its new product at the MacWorld Expo on
January 5, 1999. At MacWorld, Connectix marketed the Vir-
tual Game Station as a "PlayStation emulator. " The materials
stated that the Virtual Game Station permits users to play
"their favorite Playstation games" on a computer "even if you
don't yet have a Sony PlayStation console."

D. Procedural history

On January 27, 1999, Sony filed a complaint alleging copy-
right infringement and other causes of action against Connec-
tix. Sony subsequently moved for a preliminary injunction on
the grounds of copyright and trademark infringement. The
district court granted the motion, enjoining Connectix:
(1) from copying or using the Sony BIOS code in the devel-
opment of the Virtual Game Station for Windows; and
(2) from selling the Virtual Game Station for Macintosh or
the Virtual Game Station for Windows. Order on Mot. for
Prelim. Inj. at 27. The district court also impounded all Con-
nectix's copies of the Sony BIOS and all copies of works
based upon or incorporating Sony BIOS. Id. at 27-28. Con-
nectix now appeals from this order.

II. Discussion

[1] To prevail on its motion for injunctive relief, Sony was
required to demonstrate "either a likelihood of success on the
merits and the possibility of irreparable injury or that serious
questions going to the merits were raised and the balance of
the hardships tip sharply in its favor." Cadence Design Sys.,
Inc. v. Avant! Corp., 125 F.3d 824, 826 (9th Cir. 1997) (inter-
nal quotation marks and bracket omitted), cert. denied, 523
U.S. 1118 (1998). We reverse the grant of a preliminary
injunction only when "the district court abused its discretion
or based its decision on an erroneous legal standard or on
clearly erroneous findings of fact." Roe v. Anderson, 134 F.3d
1400, 1402 n.1 (9th Cir. 1998) (internal quotation marks omit-
ted), aff'd on other grounds, sub nom. Saenz v. Roe, 526 U.S.
489 (1999). We review the scope of injunctive relief for an
abuse of discretion. SEC v. Interlink Data Network of L.A.,
Inc., 77 F.3d 1201, 1204 (9th Cir. 1996).

Connectix admits that it copied Sony's copyrighted BIOS
software in developing the Virtual Game Station but contends
that doing so was protected as a fair use under 17 U.S.C.
S 107. Connectix also challenges the district court's conclu-
sion that Sony has established a likelihood that Connectix's
Virtual Game Station tarnishes the PlayStation trademark. We
consider each of these claims below.

A. Fair use

The fair use issue arises in the present context because of
certain characteristics of computer software. The object code
of a program may be copyrighted as expression, 17 U.S.C.
S 102(a), but it also contains ideas and performs functions that
are not entitled to copyright protection. See 17 U.S.C.
S 102(b). Object code cannot, however, be read by humans.
The unprotected ideas and functions of the code therefore are
frequently undiscoverable in the absence of investigation and
translation that may require copying the copyrighted material.
We conclude that, under the facts of this case and our prece-
dent, Connectix's intermediate copying and use of Sony's
copyrighted BIOS was a fair use for the purpose of gaining
access to the unprotected elements of Sony's software.

[2] The general framework for analysis of fair use is estab-
lished by statute, 17 U.S.C. S 107.5 We have applied this stat-
ute and the fair use doctrine to the disassembly of computer
software in the case of Sega Enterprises Ltd. v. Accolade,
Inc., 977 F.2d 1510 (9th Cir. 1993) (amended opinion). Cen-
tral to our decision today is the rule set forth in Sega:

[W]here disassembly is the only way to gain access
to the ideas and functional elements embodied in a
copyrighted computer program and where there is a
legitimate reason for seeking such access, disassem-
bly is a fair use of the copyrighted work, as a matter
of law.
Id. at 1527-28 (emphasis added). In Sega , we recognized that
intermediate copying could constitute copyright infringement
even when the end product did not itself contain copyrighted
material. Id. at 1518-19. But this copying nonetheless could
be protected as a fair use if it was "necessary " to gain access
to the functional elements of the software itself. Id. at 1524-
26. We drew this distinction because the Copyright Act pro-
tects expression only, not ideas or the functional aspects of a
software program. See id. at 1524 (citing 17 U.S.C. S 102(b)).
We also recognized that, in the case of computer programs,
this idea/expression distinction poses "unique problems"
because computer programs are "in essence, utilitarian articles
-- articles that accomplish tasks. As such, they contain many
logical, structural, and visual display elements that are dic-
tated by the function to be performed, by considerations of
efficiency, or by external factors such as compatibility
requirements and industry demands." Id. Thus, the fair use
doctrine preserves public access to the ideas and functional
elements embedded in copyrighted computer software pro-
grams. This approach is consistent with the " `ultimate aim
[of the Copyright Act], to stimulate artistic creativity for the
general public good.' " Sony Corp. of Am. v. Universal City
Studios, Inc.,
464 U.S. 417, 432
(1984) (quoting Twentieth
Century Music Corp. v. Aiken,
422 U.S. 151, 156
(1975)).

We turn then to the statutory fair use factors, as informed
by our precedent in Sega.

1. Nature of the copyrighted work

[3] Under our analysis of the second statutory factor, nature
of the copyrighted work, we recognize that "some works are
closer to the core of intended copyright protection than
others." Campbell v. Acuff-Rose Music, Inc. ,
510 U.S. 569
,
586 (1994). Sony's BIOS lies at a distance from the core
because it contains unprotected aspects that cannot be exam-
ined without copying. See Sega, 977 F.2d at 1526. We conse-
quently accord it a "lower degree of protection than more
traditional literary works." Id. As we have applied this stan-
dard, Connectix's copying of the Sony BIOS must have been
"necessary" to have been fair use. See id. at 1524-26. We con-
clude that it was.

[4] There is no question that the Sony BIOS contains
unprotected functional elements. Nor is it disputed that Con-
nectix could not gain access to these unprotected functional
elements without copying the Sony BIOS. Sony admits that
little technical information about the functionality of the Sony
BIOS is publicly available. The Sony BIOS is an internal
operating system that does not produce a screen display to
reflect its functioning. Consequently, if Connectix was to gain
access to the functional elements of the Sony BIOS it had to
be through a form of reverse engineering that required copy-
ing the Sony BIOS onto a computer.6 Sony does not dispute
this proposition.

[5] The question then becomes whether the methods by
which Connectix reverse-engineered the Sony BIOS were
necessary to gain access to the unprotected functional ele-
ments within the program. We conclude that they were. Con-
nectix employed several methods of reverse engineering
(observation and observation with partial disassembly) each
of which required Connectix to make intermediate copies of
copyrighted material. Neither of these methods renders fair
use protection inapplicable. Sega expressly sanctioned disas-
sembly. See id. at 1527-28. We see no reason to distinguish
observation of copyrighted software in an emulated computer
environment. Both methods require the reverse engineer to
copy protected as well as unprotected elements of the com-
puter program. Because this intermediate copying is the gra-
vamen of the intermediate infringement claim, see 17 U.S.C.
S 106(1); Sega, 977 F.2d at 1518-19, and both methods of
reverse engineering require it, we find no reason inherent in
these methods to prefer one to another as a matter of copy-
right law. Connectix presented evidence that it observed the
Sony BIOS in an emulated environment to observe the func-
tional aspects of the Sony BIOS. When this method of reverse
engineering was unsuccessful, Connectix engineers disassem-
bled discrete portions of the Sony BIOS to view directly the
ideas contained therein. We conclude that intermediate copy-
ing in this manner was "necessary" within the meaning of
Sega.

[6] We decline to follow the approach taken by the district
court. The district court did not focus on whether Connectix's
copying of the Sony BIOS was necessary for access to func-
tional elements. Instead, it found that Connectix's copying
and use of the Sony BIOS to develop its own software
exceeded the scope of Sega. See Order at 17 ("[T]hey disas-
sembled Sony's code not just to study the concepts. They
actually used that code in the development of [their]
product."). This rationale is unpersuasive. It is true that Sega
referred to "studying or examining the unprotected aspects of
a copyrighted computer program." 977 F.2d at 1520 (empha-
sis added). But in Sega, Accolade's copying, observation and
disassembly of Sega's game cartridges was held to be fair use,
even though Accolade "loaded the disassembled code back
into a computer, and experimented to discover the interface
specifications for the Genesis console by modifying the pro-
grams and studying the results." Id. at 1515. Thus, the distinc-
tion between "studying" and "use" is unsupported in Sega.
Moreover, reverse engineering is a technically complex, fre-
quently iterative process. Johnson-Laird, 19 U. Dayton L.
Rev. at 843-44. Within the limited context of a claim of inter-
mediate infringement, we find the semantic distinction
between "studying" and "use" to be artificial, and decline to
adopt it for purposes of determining fair use.7

[7] We also reject the argument, urged by Sony, that Con-
nectix infringed the Sony copyright by repeatedly observing
the Sony BIOS in an emulated environment, thereby making
repeated copies of the Sony BIOS. These intermediate copies
could not have been "necessary" under Sega , contends Sony,
because Connectix engineers could have disassembled the
entire Sony BIOS first, then written their own Connectix
BIOS, and used the Connectix BIOS to develop the Virtual
Game Station hardware emulation software. We accept
Sony's factual predicate for the limited purpose of this appeal.8
Our doing so, however, does not aid Sony.
[8] Sony contends that Connectix's reverse engineering of
the Sony BIOS should be considered unnecessary on the
rationale that Connectix's decision to observe the Sony BIOS
in an emulated environment required Connectix to make more
intermediate copies of the Sony BIOS than if Connectix had
performed a complete disassembly of the program. Under this
logic, at least some of the intermediate copies were not neces-
sary within the meaning of Sega. This construction stretches
Sega too far. The "necessity" we addressed in Sega was the
necessity of the method, i.e., disassembly, not the necessity of
the number of times that method was applied. See 977 F.2d
at 1524-26. In any event, the interpretation advanced by Sony
would be a poor criterion for fair use. Most of the intermedi-
ate copies of the Sony BIOS were made by Connectix engi-
neers when they booted up their computers and the Sony
BIOS was copied into RAM. But if Connectix engineers had
left their computers turned on throughout the period during
which they were observing the Sony BIOS in an emulated
environment, they would have made far fewer intermediate
copies of the Sony BIOS (perhaps as few as one per com-
puter). Even if we were inclined to supervise the engineering
solutions of software companies in minute detail, and we are
not, our application of the copyright law would not turn on
such a distinction.9 Such a rule could be easily manipulated.
More important, the rule urged by Sony would require that a
software engineer, faced with two engineering solutions that
each require intermediate copying of protected and unpro-
tected material, often follow the least efficient solution. (In
cases in which the solution that required the fewest number of
intermediate copies was also the most efficient, an engineer
would pursue it, presumably, without our urging.) This is pre-
cisely the kind of "wasted effort that the proscription against
the copyright of ideas and facts . . . [is] designed to prevent."
Feist Publications, Inc. v. Rural Tel. Serv. Co.,
499 U.S. 340
,
354 (1991) (internal quotation marks omitted). Such an
approach would erect an artificial hurdle in the way of the
public's access to the ideas contained within copyrighted soft-
ware programs. These are "aspects that were expressly denied
copyright protection by Congress." Sega, 977 F.2d at 1526
(citing 17 U.S.C. S 102(b)). We decline to erect such a barrier
in this case. If Sony wishes to obtain a lawful monopoly on
the functional concepts in its software, it must satisfy the
more stringent standards of the patent laws. See Bonito Boats,
Inc. v. Thunder Craft Boats, Inc.,
489 U.S. 141
, 160-61
(1989); Sega, 977 F.2d at 1526. This Sony has not done. The
second statutory factor strongly favors Connectix.

2. Amount and substantiality of the portion used

[9] With respect to the third statutory factor, amount and
substantiality of the portion used in relation to the copyrighted
work as a whole, Connectix disassembled parts of the Sony
BIOS and copied the entire Sony BIOS multiple times. This
factor therefore weighs against Connectix. But as we con-
cluded in Sega, in a case of intermediate infringement when
the final product does not itself contain infringing material,
this factor is of "very little weight." Sega, 977 F.2d at 1526-
27; see also Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417, 449
-50 (1984) (copying of entire work does not
preclude fair use).

3. Purpose and character of the use

[10] Under the first factor, purpose and character of the use,
we inquire into whether Connectix's Virtual Game Station
merely supersedes the objects of the original cre-
ation, or instead adds something new, with a further
purpose or different character, altering the first with
new expression, meaning, or message; it asks, in
other words, whether and to what extent the new
work is "transformative."

Campbell v. Acuff-Rose Music, Inc.,
510 U.S. 569, 579
(1994)
(internal quotation marks and citations omitted). As an initial
matter, we conclude that the district court applied an errone-
ous legal standard; the district court held that Connectix's
commercial purpose in copying the Sony BIOS gave rise to
a "presumption of unfairness that . . . can be rebutted by the
characteristics of a particular commercial use." Order at 14-15
(citing Sega, 977 F.2d at 1522). Since Sega, however, the
Supreme Court has rejected this presumption as applied to the
first and fourth factor of the fair use analysis. Acuff-Rose, 510
U.S. at 584, 594 (clarifying Sony,
464 U.S. at 451
). Instead,
the fact that Connectix's copying of the Sony BIOS was for
a commercial purpose is only a "separate factor that tends to
weigh against a finding of fair use." Id. at 585 (internal quota-
tion marks omitted).10

[11] We find that Connectix's Virtual Game Station is
modestly transformative. The product creates a new platform,
the personal computer, on which consumers can play games
designed for the Sony PlayStation. This innovation affords
opportunities for game play in new environments, specifically
anywhere a Sony PlayStation console and television are not
available, but a computer with a CD-ROM drive is. More
important, the Virtual Game Station itself is a wholly new
product, notwithstanding the similarity of uses and functions
between the Sony PlayStation and the Virtual Game Station.
The expressive element of software lies as much in the orga-
nization and structure of the object code that runs the com-
puter as it does in the visual expression of that code that
appears on a computer screen. See 17 U.S.C.S 102(a)
(extending copyright protection to original works of author-
ship that "can be perceived, reproduced, or otherwise commu-
nicated, either directly or with the aid of a machine or
device"). Sony does not claim that the Virtual Game Station
itself contains object code that infringes Sony's copyright. We
are therefore at a loss to see how Connectix's drafting of
entirely new object code for its VGS program could not be
transformative, despite the similarities in function and screen
output.

[12] Finally, we must weigh the extent of any transforma-
tion in Connectix's Virtual Game Station against the signifi-
cance of other factors, including commercialism, that militate
against fair use. See Acuff-Rose,
510 U.S. at 579
. Connectix's
commercial use of the copyrighted material was an intermedi-
ate one, and thus was only "indirect or derivative." Sega, 977
F.2d at 1522. Moreover, Connectix reverse-engineered the
Sony BIOS to produce a product that would be compatible
with games designed for the Sony PlayStation. We have rec-
ognized this purpose as a legitimate one under the first factor
of the fair use analysis. See id. Upon weighing these factors,
we find that the first factor favors Connectix.

The district court ruled, however, that the Virtual Game
Station was not transformative on the rationale that a com-
puter screen and a television screen are interchangeable, and
the Connectix product therefore merely "supplants " the Sony
PlayStation console. Order at 15. The district court clearly
erred. For the reasons stated above, the Virtual Game Station
is transformative and does not merely supplant the PlaySta-
tion console. In reaching its decision, the district court appar-
ently failed to consider the expressive nature of the Virtual
Game Station software itself. Sony's reliance on Infinity
Broadcast Corp. v. Kirkwood, 150 F.3d 104 (2d Cir. 1998),
suffers from the same defect. The Infinity court reasoned that
a "change of format, though useful, is not technically a
transformation." Id. at 108 n.2. But the infringing party in that
case was merely taking copyrighted radio transmissions and
retransmitting them over telephone lines; there was no new
expression. Id. at 108. Infinity does not change our conclu-
sion; the purpose and character of Connectix's copying points
toward fair use.

4. Effect of the use upon the potential market

[13] We also find that the fourth factor, effect of the use
upon the potential market, favors Connectix. Under this fac-
tor, we consider

not only the extent of market harm caused by the
particular actions of the alleged infringer, but also
"whether unrestricted and widespread conduct of the
sort engaged in by the defendant . . . would result in
a substantially adverse impact on the potential
market" for the original.

Acuff-Rose,
510 U.S. at 590
(quoting 3 M. Nimmer & D.
Nimmer, Nimmer on Copyright, S 13.05[A][4], at 13-102.61
(1993)). Whereas a work that merely supplants or supersedes
another is likely to cause a substantially adverse impact on the
potential market of the original, a transformative work is less
likely to do so. See id. at 591; Harper & Row, Publishers, Inc.
v. Nation Enters, Inc.,
471 U.S. 539, 567
-69 (1985).

[14] The district court found that"[t]o the extent that such
a substitution [of Connectix's Virtual Game Station for Sony
PlayStation console] occurs, Sony will lose console sales and
profits." Order at 19. We recognize that this may be so. But
because the Virtual Game Station is transformative, and does
not merely supplant the PlayStation console, the Virtual
Game Station is a legitimate competitor in the market for plat-
forms on which Sony and Sony-licensed games can be played.
See Sega, 977 F.2d at 1522-23. For this reason, some eco-
nomic loss by Sony as a result of this competition does not
compel a finding of no fair use. Sony understandably seeks
control over the market for devices that play games Sony pro-
duces or licenses. The copyright law, however, does not con-
fer such a monopoly. See id. at 1523-24 ("[A]n attempt to
monopolize the market by making it impossible for others to
compete runs counter to the statutory purpose of promoting
creative expression and cannot constitute a strong equitable
basis for resisting the invocation of the fair use doctrine.").
This factor favors Connectix.

[15] The four statutory fair use factors must be "weighed
together, in light of the purposes of copyright. " Acuff-Rose,
510 U.S. at 578
. Here, three of the factors favor Connectix;
one favors Sony, and it is of little weight. Of course, the statu-
tory factors are not exclusive, Harper & Row, 471 U.S. at
560, but we are unaware of other factors not already consid-
ered that would affect our analysis. Accordingly, we conclude
that Connectix's intermediate copying of the Sony BIOS dur-
ing the course of its reverse engineering of that product was
a fair use under 17 U.S.C. S 107, as a matter of law. With
respect to its claim of copyright infringement, Sony has not
established either a likelihood of success on the merits or that
the balance of hardships tips in its favor. See Cadence Design
Sys., Inc. v. Avant! Corp., 125 F.3d 824, 826 (9th Cir. 1997),
cert. denied,
523 U.S. 1118
(1998). Accordingly, we need not
address defenses asserted by Connectix under 17 U.S.C.
S 117(a)(1) and our doctrine of copyright misuse. We reverse
the district court's grant of a preliminary injunction on the
ground of copyright infringement.11

B. Tarnishment

[16] The district court found that Connectix's sale of the
Virtual Game Station tarnished Sony's "PlayStation" mark
under 15 U.S.C. S 1125(c)(1). The district court based its pre-
liminary injunction, however, exclusively on Sony's copy-
right claim, and did not cite its tarnishment finding as a
ground for the injunction. Although we can "affirm the dis-
trict court on any ground supported by the record, " Charley's
Taxi Radio Dispatch Corp. v. SIDA of Haw., Inc., 810 F.2d
869, 874 (9th Cir. 1987), we decline to affirm on this alterna-
tive ground. Sony has not shown a likelihood of success on
each element of the tarnishment claim.

[17] To prevail on its tarnishment claim, Sony must show
that (1) the PlayStation "mark is famous;" (2) Connectix is
"making a commercial use of the mark;" (3) Connectix's
"use began after the mark became famous;" and
(4) Connectix's "use of the mark dilutes the quality of the
mark by diminishing the capacity of the mark to identify and
distinguish goods and services." Films of Distinction, Inc. v.
Allegro Film Prods., Inc., 12 F. Supp. 2d 1068, 1078 (C.D.
Cal. 1998); 15 U.S.C. SS 1125(c)(1), 1127 (definition of
"dilution"). Connectix does not dispute the first and third of
these elements. We address only the fourth element.

Because Sony proceeds under a tarnishment theory of dilu-
tion, it must show under this fourth element that its PlaySta-
tion mark will "suffer negative associations" through Connec-
tix's use. Hormel Foods Corp. v. Jim Henson Prods., Inc., 73
F.3d 497, 507 (2d Cir. 1996); see also 4 J. Thomas McCarthy,
McCarthy on Trademarks and Unfair CompetitionS 24.95
(4th ed. 1996 & Supp. 1999). The district court found the Vir-
tual Game Station does not play PlayStation games as well as
the PlayStation console, and that although the Virtual Game
Station's packaging contains a disclaimer to this effect, "game
players do not comprehend this distinction." Order at 24-25.
The Sony PlayStation mark therefore suffers negative associa-
tions because of this confusion on the part of consumers who
play Sony games on the Virtual Game Station software. Id. at
25.

[18] The evidence on the record does not support such a
finding of misattribution. The district court relied primarily on
a series of semi-anonymous reviews posted on the Internet
and submitted by Connectix. As the district court acknowl-
edged, these reviews were neither authenticated nor identi-
fied. More important, the print-out of the comments does not
reveal the context in which the comments were made; this
omission makes the extent of any confusion by game players
difficult to assess reliably. The district court also referred to
two focus group studies conducted by market research firms
at Sony's bequest. These studies address the difference of
quality between the Virtual Game Station and PlayStation, but
shed no light on the question of misattribution. Thus, we
reject as clearly erroneous the district court's finding that the
Virtual Game Station tarnishes the Sony PlayStation mark on
a misattribution theory of tarnishment.

[19] Nor are we persuaded by Sony's argument that the dif-
ference in quality between the two platforms is itself suffi-
cient to find tarnishment. See Deere & Co. v. MTD Prods,
Inc., 41 F.3d 39, 43 (2d Cir. 1994) (" `Tarnishment' generally
arises when the plaintiff's trademark is linked to products of
shoddy quality," diminishing the value of the mark "because
the public will associate the lack of quality . . . with the plain-
tiff's unrelated goods."). Even if we assume, without decid-
ing, that the concept of tarnishment is applicable to the
present factual scenario, there is insufficient evidence to sup-
port a finding of tarnishment. "The sine qua non of tarnish-
ment is a finding that plaintiff's mark will suffer negative
associations through defendant's use." Hormel Foods, 73 F.3d
at 507. The evidence here fails to show or suggest that Sony's
mark or product was regarded or was likely to be regarded
negatively because of its performance on Connectix's Virtual
Game Station. The evidence is not even substantial on the
quality of that performance. The Sony studies, each of
included eight participants, presented a range of conclusions.
One study concluded that "[o]n balance, the results of this
focus group study show that the testers preferred the PlaySta-
tion gaming experience over the Virtual Game Station gaming
experience." The other concluded that consumers found the
Virtual Game Station was "generally acceptable " for one
game, but "nearly unplayable" on another. The internet
reviews submitted by Connectix also presented a range of
opinion; while some anonymous reviewers loved the Virtual
Game Station, some were ambivalent, and a relative few
hated the Virtual Game Station emulation. In the only review
for attribution, Newsweek said the software played
"surprisingly well," and that some games on the Virtual Game
Station "rocked." Steven Levy, "Play it Your Way,"
Newsweek, Mar. 15, 1999, at 84. This evidence is insufficient
to support a conclusion that the shoddiness of the Virtual
Game Station alone tarnishes the Sony mark. Sony's tarnish-
ment claim cannot support the injunction.

CONCLUSION

Connectix's reverse engineering of the Sony BIOS
extracted from a Sony PlayStation console purchased by Con-
nectix engineers is protected as a fair use. Other intermediate
copies of the Sony BIOS made by Connectix, if they infringed
Sony's copyright, do not justify injunctive relief. For these
reasons, the district court's injunction is dissolved and the
case is remanded to the district court. We also reverse the dis-
trict court's finding that Connectix's Virtual Game Station has
tarnished the Sony PlayStation mark.

REVERSED AND REMANDED.
_______________________________________________________________

FOOTNOTES

1 Any purchaser of a copyrighted software program must copy the pro-
gram into the memory of a computer in order to make any use at all of the
program. For that reason, 17 U.S.C. S 117(a)(1) provides that it shall not
be an infringement for one who owns a software copy to make another
copy "created as an essential step in the utilization of the computer pro-
gram in conjunction with a machine and that it is used in no other
manner." Connectix contends that its copying is within the protection of
section 117, but our disposition of the fair use issue makes it unnecessary
for us to address that contention. See Sega, 977 F.2d at 1517-18 (rejecting
contention that disassembly is protected by section 117).
2 Object code is binary code, consisting of a series of the numerals zero
and one, readable only by computers.
3 Source code is readable by software engineers, but not by computers.
4 Software is generally written by programmers in source code (and in
other more conceptual formats) and then assembled into object code.
5 The factors for determining fair use 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.

17 U.S.C. S 107.
6 Connectix offers evidence that it attempted to gain access to the func-
tionality of the Sony BIOS by attaching a "logic analyzer" to the input and
output leads of the chip on which the Sony BIOS was located within the
PlayStation console. This form of observation does not appear to require
the making of an intermediate copy, but was of limited value because it
permitted the observation of inter-chip, but not intra-chip signals. Sony
does not suggest that this form of observation alone would have permitted
Connectix engineers to gain access to the functional elements of the Sony
BIOS.
7 We are unable to locate evidence in the record to support the district
court's finding that Connectix "gradually convert[ed] Sony's code to their
own code," Order at 11, if by this statement the court meant that Connec-
tix engineers failed to create an original work. True, Connectix engineers
admitted to combining the Sony BIOS with the Virtual Game Station
hardware emulation software to test and develop the hardware emulation
software. But in drafting the Connectix BIOS, Connectix engineers never
claimed to do anything other than write their own code, even though they
used, observed, copied and sometimes disassembled the Sony BIOS as
they did so. Sony presents no evidence to the contrary, nor does Sony con-
tend that Connectix's final product contains infringing material.
8 The depositions of Connectix engineers Aaron Giles and Eric Traut
suggest that Connectix engineers recognized that other engineering solu-
tions were sometimes available.

With respect to the observation of the Sony BIOS in an emulated envi-
ronment, Traut admitted that it was easier to use the Sony BIOS to
develop the hardware emulation software than to develop Connectix own
BIOS first, and then use the Connectix BIOS to develop the hardware
emulation software.

With respect to the observation of the Sony BIOS with selective disas-
sembly of the code, Traut stated with respect to one bug that there would
have been no way to fix the bug without disassembling a portion of the
Sony BIOS. He also stated that at other times he disassembled portions of
the Sony BIOS when doing so was "the most efficient way of finding that
bug." In a subsequent question, he clarified that disassembly was not the
only way to fix the bug, just the fastest way to do so.
With respect to Connectix's observation of the Sony BIOS in the devel-
opment of the Virtual Game Station for Windows, other solutions, pre-
sumably disassembly, may have been possible. Connectix engineer Giles
responded "I don't know" when asked by Sony counsel if "it would have
been possible to write the CD-ROM code before building the emulator."
9 Sony relies on these RAM copies for its contention, which we reject,
that there is no significant difference between the facts of this case and our
decisions in Triad Systems Corp. v. Southeastern Express Co., 64 F.3d
1330 (9th Cir. 1995) and MAI Systems Corp. v. Peak Computer, Inc., 991
F.2d 511 (9th Cir. 1993). Those cases are inapposite to our fair use analy-
sis. Neither involved reverse engineering of software to gain access to
unprotected functional elements.
10 Sony points to Micro Star v. Formgen, Inc., 154 F.3d 1107 (9th Cir.
1998), for the proposition that commercial use creates a presumption of
unfairness. See id. at 1113 (quoting Sony Corp. of Am. v. Universal City
Studios, Inc.,
464 U.S. 417, 451
(1984)). We do not read Micro Star that
way; moreover, such a reading would be contrary to Acuff-Rose. Acuff-
Rose expressly rejected such a "hard evidentiary presumption" and stated
that the Court of Appeals "erred" by giving such dispositive weight to the
commercial nature of the use.
510 U.S. at 584
. Also, Micro Star itself
involved a use that was non-transformative, which is not the case here. See
Micro Star, 154 F.3d at 1113 & n.6. Cf. American Geophysical Union v.
Texaco, Inc., 60 F.3d 913, 921-22 (2d Cir. 1995) (amended opinion)
(rejecting, on grounds of Acuff-Rose and collected cases, presumption of
unfairness for commercial use as applied to Texaco's intermediate copy-
ing of copyrighted articles).
11 We do not accept Sony's argument that the downloading of Sony's
BIOS from the Internet was itself an infringement justifying the injunc-
tion. The evidence of record suggests that the downloaded BIOS played
a minimal role, if any, in development of the Virtual Game Station. We
conclude that, on this record, the downloading infringement, if such it
was, would not justify our upholding the injunction on the development
and sale of the Virtual Game Station. The Virtual Game Station itself
infringes no copyright. Bearing in mind the goals of the copyright law, "to
stimulate artistic creativity for the general public good," Sony, 464 U.S.
at 432 (internal quotation marks omitted), we conclude that there is a legit-
imate public interest in the publication of Connectix's software, and that
this interest is not overborne by the record evidence related to the down-
loaded BIOS. The imposition of an injunction is discretionary. See 17
U.S.C. S 502(a). On this record, we conclude that it would be inappropri-
ate to uphold the injunction because of Connectix's copying and use of the
downloaded Sony BIOS; damages would adequately protect Sony's inter-
est with respect to that alleged infringement. See Acuff-Rose, 510 U.S. at
578 n.10 (discussing factors to be evaluated in deciding whether to enjoin
product found to have exceeded bounds of fair use).


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