Nintendo of America v. Bung Enterprises

Citation
Nintendo of America, Inc. v. Bung Enterprises, Ltd., 1999 WL 34975007 (C.D. Cal. Dec. 14, 1999).

Factual Background
Nintendo is a wholly owned subsidiary of Nintendo Company Ltd. engaged in marketing and distribution of videogames products. Bung is a Hong Kong corp. that manufactures, markets and distributes tech devices. Nintendo introduced several types of videogame systems with different sizes of microprocessors. These contain two important components: a hardware unit and videogame cartridges. These cartridges are created by NCL or other companies and Nintendo received assignments of the copyrighted work created by NCL. Its licenses display Nintendo’s registered trademark notices.

Bung manufactures and distributes devices that are compatible with Nintendo’s videogames. It allows the users of its devices to copy Nintendo’s videogames. Bung maintains copies of a program on the Internet that allows the users to transfer or download the videogames. The users are allowed to make unauthorized copies of the videogames. The customers within United States are shipped the devices necessary to copy the games which in return harms Nintendo’s market. The customers may just buy the device to copy the videogames and avoid buying the videogames from the retail store.

Nintendo sells its videogames only in cartridge format. It does not place its software on the internet and it did not authorize Bung to do so. Bung had never received any authorization to use Nintendo’s copyrights or trademarks. Nintendo brought suit against Bung for copyright infringement and trademark infringement and unfair competition. Plaintiff made a motion for default against Bung.

Appellate Court Proceedings
The Second Circuit granted the motion for default against Bung. The court held Bung infringed Nintendo’s intellectual property rights. The damages to Nintendo and its licenses were substantial because the users could make unlimited copies of the videogames without Nintendo’s authorization.

The court explained that the loading of data from a storage device or memory chip into another constitutes copying in violation of 17 U.S.C. § 106(1). Moreover, changing the format of Nintendo’s copyrighted work from its original cartridge to a hard drive electronic format violates Nintendo’s exclusive rights under 17 U.S.C. § 106(2). The court noted that Bung mislabeled the products when shipping them to United States in order to pass the United States Customs’ inspection. In addition, Bung solicited customers in the United States and Western Hemisphere where Nintendo had the exclusive rights, under 17 U.S.C. § 106(3), to distribute and sell its copyrighted and trademarked products.

The court also held that Nintendo’s trademark was infringed because Bung used a mark that was owned by Nintendo because when every game begins with a screen showing Nintendo’s registered trademarks; and Bung’s use of Nintendo mark creates confusion amongst consumers. Therefore, Bung was also engaged in unfair competition because of the likelihood that the consumers would be confused and mislead by the final product copied believing that the games are endorsed by Nintendo.

The court final point was the applicability of Digital Millennium Copyright Act of 1998. The act prohibits the manufacture, distribution, or sale of any device with primary use circumventing the security measures adopted by the copyright owners to control access to their works and prevent unauthorized copying. Nintendo had have such a security system which was designed and patented to prevent unauthorized use of game cartridges that contained copied programs. The court held that Bung’s product circumvented that protection.

Therefore, the Second Circuit granted the motion for default against Bung and enjoined the Bung from making such devices.