RED BARON--FRANKLIN PARK, INC.; Fun Factories of Ohio, Inc., Plaintiffs-Appellees, v. TAITO CORPORATION; Taito American Corporation, Defendants-Appellants, and American Amusement Machine Association, Defendant, Recording Industry Association of America, Inc.; Amusement & Music Operators Association, Inc.; American Amusement Machine Association, Amici Curiae.
No. 88-1368.
United States Court of Appeals, Fourth Circuit.
Decided July 18, 1989.
As Modified on Denial of Rehearing and Rehearing In Banc Sept. 5, 1989.
883 F.2d 275 | 11 ITRD 1520 | 58 USLW 2130 | Copr.L.Dec. P 26,444 | 1989 Copr.L.Dec. P 26,484 | 11 U.S.P.Q.2d 1548
Before WINTER, PHILLIPS and CHAPMAN, Circuit Judges.
Richard Harvey Stern, Washington, D.C., for plaintiffs-appellees.
Stanley Rothenberg, Moses & Singer, New York City, on brief, for amicus curiae, Recording Industry Ass‘n of America, Inc.
Donald M. Barnes, Salvatore A. Romano, Doris E. Long, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., on brief, for amicus curiae, American Amusement Machine Ass‘n.
Elroy H. Wolff, Gary I. Resnick, Sidley & Austin, Washington, D.C., on brief, for amicus curiae, Amusement & Music Operators Ass‘n, Inc.
OPINION
HARRISON L. WINTER, Circuit Judge:
As part of more extensive federal and state antitrust litigation which is not before us, Red Baron--Franklin Park, Inc. and Fun Factories of Ohio, Inc. (collectively “Red Baron“), as plaintiffs, and Taito Corporation and Taito America Corporation (sometimes collectively “Taito” and sometimes “Taito America“), as defendants, by petition for declaratory judgment litigated the question of whether Red Baron infringed Taito‘s copyright in a video game known as “Double Dragon,” when Red Baron imported the game, and installed it in its video arcades for use by the public for profit. The district court ruled that Red Baron did not infringe and Taito appeals.
We reverse and remand for further proceedings.
Taito is a Japanese corporation engaged in the business of selling electronic video games, including electronic printed circuit boards which embody games and are used in coin-operated video game units. Video games “can roughly be described as computers programmed to create on a television screen cartoons in which some of the action is controlled by the player.” Stern Electronics, Inc. v. Kaufman, 669 F.2d 852, 853 (2 Cir.1982). Double Dragon is such a game. A video game unit consists of an electronic printed circuit board, a television monitor, a cabinet and a coin mechanism. When the component parts are connected and an electric current, activated by the insertion of the proper coin, run through the machinery, the game‘s audiovisual images appear on the television screen.
Taito has registered Double Dragon in the United States Copyright Office--Registration No. PA 327-710, issued June 26, 1987--and it has granted its wholly owned subsidiary, Taito America, an exclusive United States license in all of its copyright rights in Double Dragon.
Red Baron operates arcades where it makes available to the public for play upon payment of a set fee various video game units, including units fitted with Double Dragon circuit boards. Red Baron has no license from Taito or Taito America to use the Double Dragon circuit boards for profit nor did it obtain these circuit boards from Taito or Taito America. Rather, it obtained them in the “parallel” or “gray market,” which is to say, that it purchased used circuit boards abroad and imported them without Taito‘s consent, at a cost less than the cost of a new unit purchased from Taito in the United States.1 Taito had, of course, originally sold the circuit boards obtained by Red Baron in Japan and had not purported to retain any right to control their resale. However, it is claimed that each of these boards, when put into play, exhibited the following restrictive notice:
This game is for use in Japan only. Sales, exports, or operation outside this territory may violate international copyright and trademark law and the violator subject to severe penalties.2
In the district court, it was Taito‘s legal theory that it had a valid copyright in the United States for all rights in Double Dragon, including the rights of distribution and public performance, that Red Baron had not obtained a license or other permission to exercise any of those rights, and that Red Baron was therefore infringing Taito‘s copyright rights when it imported Double Dragon circuit boards into the United States and when it installed the boards in units in its video arcades and made them available to the public for play upon payment of a fee. The district court, however, rejected this theory of the case. It ruled that the “first sale” doctrine, codified in
In appealing, Taito does not contest the correctness of the district court‘s ruling with respect to Red Baron‘s right to purchase, import and even to sell Double Dragon circuit boards without Taito‘s consent. In effect, it concedes for the purposes of this appeal that the first sale doctrine gives Red Baron that right. It argues vigorously, however, that it has a separate and distinct right to “perform” Double Dragon, that it has not conferred this right on Red Baron and that, as a consequence, the latter is infringing Taito‘s copyright by its activities in making use of the circuit boards available to the public for a fee. This argument requires us to consider first whether Red Baron‘s use of Double Dragon constitutes a public performance within the meaning of
A. Public Performance.
We begin with the proposition that the Double Dragon video game is an “audiovisual work” as defined by
To “perform” a work and to perform it “publicly” are also defined by the Copyright Act,
to recite, render, play, dance, or act [a work], either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.
The definition of a “public” performance is as follows:
To perform ... a work ‘publicly’ means--
(1) to perform ... it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered....
When we apply these definitions to Red Baron‘s conduct of its business, we conclude that Red Baron publicly performed Double Dragon. When a video game is activated by the insertion of a proper coin, the television monitor displays a series of images and the loudspeaker makes audible their accompanying sounds. See Williams Electronics, 685 F.2d at 874 (“there is always a repetitive sequence of a substantial portion of the sights and sounds of the game“); Stern Electronics, 669 F.2d at 856. The exhibition of its images in sequence constitutes a “performance” of an audiovisual work. Indeed, it is the sequential showing of its images that distinguishes the “performance” of an audiovisual work from its “display,” which is defined as a nonsequential showing of individual images.
Thus our conclusion is that Red Baron caused the public performance of Double Dragon.
B. The First Sale Doctrine and the Performance Right.
Red Baron‘s contention that the first sale doctrine is applicable to the performance right has a certain superficial, logical appeal in this case. Printed circuit boards embodying Double Dragon are not serviceable in and of themselves. They are functional only when they are used in combination with a television monitor, sound reproduction device and a console containing the controls to play the game. It is also a fair inference that there is only a very limited market for Double Dragon for home use. Rather, from the price and the complexity of the combination of items of equipment necessary to play the game, Taito may be fairly said to know that the circuit boards have utility only in the hands of someone who plans to exploit them commercially.5 Thus, by selling the boards, so the argument runs, Taito must intend to transfer the performance right, or must become estopped to deny that result, or must waive its right to claim infringement.
There is some support for Red Baron‘s contention. In Universal Film Mfg. Co. v. Copperman, 218 F. 577 (2 Cir.), cert. denied, 235 U.S. 704, 35 S.Ct. 209, 59 L.Ed. 433 (1914), the Second Circuit held that a copyright owner‘s sale of a print of a motion picture film conferred on the purchaser and its successors in title to the print the right to perform the motion picture publicly in theatres. And in United Artists Television, Inc. v. Fortnightly Corp., 377 F.2d 872, 882 (2 Cir.1967), rev‘d on other grounds, 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968), the Second Circuit stated that “a sale does not generally release other exclusive rights, such as the right to copy, although this Court has held that the sale of a motion picture print conveys the right to perform it in public for profit [citing Copperman ].” See also Hampton v. Paramount Pictures Corp., 279 F.2d 100, 103 (9 Cir.), cert. denied, 364 U.S. 882, 81 S.Ct. 170, 5 L.Ed.2d 103 (1960) (discussing rule stated in Copperman but holding it inapplicable to facts of Hampton case).
It may well be that Copperman and United Artists are distinguishable from the instant case, as Taito argues. See 2 Nimmer on Copyright Sec. 8.12[D] at 8-132.1 n. 53 (arguing that first sale doctrine was not basis for Copperman court‘s holding with respect to performance right). In any event, from our examination and understanding of the Copyright Act and decisions of the Third Circuit, we are persuaded that the first sale doctrine does not apply to the performance right, that Taito America possesses and retains a valid copyright in the public performance of Double Dragon in the United States, that it has not granted a performance license to Red Baron and that the latter is thus guilty of copyright infringement.
We begin with the statute.
In Columbia Pictures Industries, Inc. v. Aveco, Inc., 800 F.2d 59 (3 Cir.1986), the court again considered the rental of video cassettes by a proprietor which had obtained the right to distribute from the producers of the films, but, having obtained no performance right, nevertheless exhibited the cassettes in private viewing rooms for a fee. When sued for infringement, the proprietor asserted the first sale defense, but, again, the court soundly rejected it:
[E]ven assuming, arguendo, both a waiver by Producers of their Section 106(3) distribution rights and a valid transfer of ownership of the video cassette during the rental period, the first sale doctrine is nonetheless irrelevant. The rights protected by copyright are divisible and the waiver of one does not necessarily waive any of the others.... In particular, the transfer of ownership in a particular copy of a work does not affect Producers’ Section 106(4) exclusive rights to do and to authorize public performances.... It therefore cannot protect one who is infringing Producers’ Section 106(4) rights by the public performance of the copyrighted work.
Aveco, 800 F.2d at 64 (citing Redd Horne, 749 F.2d at 160; United States v. Powell, 701 F.2d 70, 72 (8 Cir.1983); and United States v. Moore, 604 F.2d 1228, 1232 (9 Cir.1979)).
Other courts and commentators likewise agree that the first sale doctrine has no application to the rights of the owner of a copyright guaranteed by
We have considered Red Baron‘s other arguments and find them lacking in merit. We hold that Red Baron, not having a performance license from Taito or Taito America, infringed Taito‘s copyright. We therefore reverse the judgment of the district court and remand the case for further proceedings consistent with the views expressed herein.
REVERSED AND REMANDED.