Red Baron v. Taito

Citation: Red Baron-Franklin Park, Inc. v. Taito Corp., 883 F.2d 275 (4th Cir. 1989), ''cert. denied,'' 493 U.S. 1058 (1990).

Factual Background
Plaintiff, Taito Corporation (“Taito”), is a Japanese-based business engaged in selling electronic video games and printed circuit boards that contain games for use with coin-operated arcade units. One such video game in Taito’s collection is entitled “Double Dragon”. Upon the release of Double Dragon, Taito registered the game with the United States Copyright Office. Shortly after registration, the Copyright office granted Taito America, Taito’s wholly owned American subsidiary, an “exclusive license in all of its copyright rights in Double Dragon.”

Defendant, Red Baron – Franklin Park, Inc. (“Red Baron”), is the operator of an arcade that makes video game units available for public use upon payment of a set fee. Among the various games in its arcade, Red Baron provides several units fitted with Double Dragon circuit boards for use to the general public. Red Baron never obtained licenses for the Double Dragon circuit boards, rather it purchased them used from abroad and imported them to the United States without Taito’s consent.

Taito had intended the circuit boards to be sold only within Japan and had not retained any right to control their resale. Additionally, when put into use, each copy of Double Dragon displayed the following restrictive notice: “This game is for use in Japan only….operation outside this territory may violate international copyright and trademark laws. . . .”

Upon learning of Red Baron’s acquisition of Double Dragon and subsequent use in the arcade, Taito filed a lawsuit alleging that Red Baron violated its right of distribution and public performance.

Trial Court Proceedings
At trial, the district court held that both of Taito’s copyright infringement claims were barred under the “first sale” doctrine, codified in 17 U.S.C. §106(3). In reaching this determination, the court reasoned, “Taito’s initial sale in Japan of the circuit boards for Double Dragon extinguished all rights that it had under copyright laws”. Among the “rights” that were extinguished were the right of public performance and the right of distribution. As a result, Taito’s copyright infringement claims were dismissed.

Shortly after the district courts ruling was entered, Taito appealed.

Appellate Court Proceedings
On appeal, Taito sought to overturn the district courts ruling regarding Red Baron’s right to publicly perform the Double Dragon game. Taito argued that the first sale doctrine, although essential to the discussion of Taito’s “right to distribute”, has a separate and distinct application regarding the right to perform publicly.

In reviewing Taito’s argument, the court determined that “the first sale doctrine has no application to the rights of the owner of a copyright guaranteed by §106, except the right of distribution. In support of this, the relied on Columbia Pictures Industries, Inc. v. Aveco, Inc., which stated, “The rights protected by copyright are divisible and the waiver of one does not necessarily waive any of the others. . . . It therefore cannot protect one is infringing rights by the public performance of the copyrighted work." Since the court previously determined that Red Baron’s use of Double Dragon constituted a “public performance” due to the nature of the screen sequence and public accessibility of the arcade, the appellate court found that the district court erred in dismissing Taito’s copyright infringement claim relating to public performance. Consequently the court reversed the lower court ruling and remanded the case for further proceedings consistent with the views expressed on appeal.