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Stern Electronics, Inc. v. Kaufman
669 F.2d 852 (2nd Cir. 1982).

I. Background

In late 1980, Konami Industry Co., Ltd. developed a video game titled “Scramble,” to which, in early 1981, Stern Electronics, Inc., a video game equipment manufacturer, obtained the exclusive right to distribute in North and South America. Stern quickly met with success after the start of sales on March 17, 1981, selling approximately 10,000 units and generating about $20 million in revenue within two months. In April 1981, the United States Copyright Office granted a copyright to Konami for the audiovisual work “Scramble,” based on video tape recordings of the game submitted by Konami.

Scramble:


Also in late 1980, Omni Video Games, Inc. developed and began marketing a video game product, which allowed for playing different games on the same unit. The program for each game could be transferred to a programmable read only memory (PROM), such that playing a particular game on a unit merely required substituting in the PROM containing that game’s program. Prior to March 17, 1981, Omni ordered ten silk screen nameplates, and sold five video game units, bearing the name “Scramble.” In April 1981, Omni began selling a video game unit bearing the name “Scramble,” in which the game was virtually identical to Stern’s Scramble game, i.e., Omni’s game was a “knock-off.”

Stern brought suit against Omni, and the trial court granted a preliminary injunction enjoining Omni from infringing the Stern’s copyright in “Scramble” and from using the trademark “SCRAMBLE” in connection with video games. Omni appealed, arguing that the sights and sounds of a video game should not be afforded copyright protection because the work is neither “fixed in any tangible medium of expression” nor “original” within the meaning of 17 U.S.C. § 102(a) because the sequence of images and sounds vary depending on the actions taken by the player during each time the game is played.

II. Issue

The primary issue before the United States Court of Appeals for the Second Circuit was whether copyright protection extended to the visual images electronically displayed by a video game. The Second Circuit also considered whether Omni was entitled to use the trademark “SCRAMBLE.”

III. Analysis

1. The Copyright Issue

The Second Circuit noted that, without player participation, the display of the video game would undoubtedly be eligible for copyright protection because the display would clearly be an original “audiovisual work” and the memory devices would constitute a “copy” in which the work is “fixed.” The court concluded that “the player’s participation does not withdraw the audiovisual work from copyright eligibility.” Even though the player affects the sights and sounds of the video game, many of the sights and sounds stay the same, such as, in the case of “Scramble,” the appearance of the spaceships, enemy crafts, ground missile bases and fuel depots and the sounds of destroying enemy crafts and dropping bombs. Therefore, the court held that “[t]he repetitive sequence of a substantial portion of the sights and sounds of the game qualifies for copyright protection as an audiovisual work.”

2. The Trademark Issue

Regarding the trademark issue, the Second Circuit upheld the district court’s finding that Omni’s prior use was not bona fide, but instead a “bad faith attempt to reserve a mark.” The Second Circuit reasoned that it was too remarkable of a coincidence that Omni independently thought of the name “Scramble” only to develop a few months later a game virtually identical to Stern’s “Scramble.” The court thought it more likely that Omni appropriated the trademark with the expectation of imitating the audiovisual display. The court also determined the equities justified an injunction because Stern had made a substantial investment and achieved commercial success using the “Scramble” mark, whereas Omni had only placed the “Scramble” mark on five units that were not “Scramble” game “knock-offs.”

The Second Circuit therefore affirmed the district court’s preliminary injunction enjoining Omni from infringing Stern’s copyright and using the trademark “SCRAMBLE.”

Thanks to Brandon Rash for his assistance in the preparation of this case summary.
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