Stern Elecs., Inc. v. Kaufman, 669 F.2d 852, 855, 213 U.S.P.Q. (BNA) 443 (2d Cir. 1982) (full-text).
Factual Background Edit
Stern Electronics, an arcade video game manufacturer, obtained an exclusive sublicense from Konami Industry, a Japanese game developer, to distribute Konami's game "Scramble" in North and South America. The videogame features a speaceship moving horizontally and the player controls the speed and the altitude of the spaceship. The player then fires weapons at enemies, attempting to destroy as many as possible before running out of fuel or crashing into an obstacle.
Stern gained significant success with the game, selling approximately 10,000 units and generating about $20 million in revenue within two months. The U.S. Copyright Office granted a copyright registration to Konami for the audiovisual work "Scramble."
District Court Proceedings Edit
Stern brought suit against Omni for trademark infringement and copyright infringement. Omni contended that it intended to market this line of games with the label "Scramble" on each unit. Omni ordered ten silk-screen nameplates, and sold five videogame units, bearing the name "Scramble" (although these games were not similar to Stern's "Scramble" game). During the initial period in which Stern was selling its videogame, Omni sold five videogame units bearing the name "Scramble," which were virtually identical to Stern's Scramble game both in sound and sight. Omni’s game was known in the trade as a "knock-off," selling for hundreds of dollars less than Stern’s game.
The trial court granted a preliminary injunction enjoining Omni from infringing Stern's copyright in "Scramble" and from using the trademark "SCRAMBLE" in connection with videogames. Further, it found that Omni's prior use was not bona fide, but instead a "bad faith attempt to reserve a mark." Omni appealed.
Appellate Court Proceedings Edit
Omni contended that the sights and sounds of a videogame should not be afforded copyright protection because the work is neither "fixed in any tangible medium of expression" nor "original" under the Copyright Act. It argued that the sequence of scenes varied, depending on the actions taken by the player when playing the game each time.
The Second Circuit held that, without player participation, the display of the videogame would be eligible for copyright because the display would meet the definition of an original "audiovisual work" and the memory devices would constitute a "copy" in which the work is "fixed."
The court concluded, however, that "the player's participation does not withdraw the audiovisual work from copyright eligibility." Although the sequence of images change as the game is played, many of the sights and sounds stay the same, such as 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."
On the trademark issue, the court upheld the district court’s finding that Omni's prior use was not bona fide. It reasoned that it was too remarkable a coincidence that Omni independently thought of the name "Scramble" and to develop only a few months later a game virtually identical to Stern's "Scramble." The court explained that it was more likely that Omni appropriated the trademark with the expectation of imitating the audiovisual display. Tt determined that the equities justified an injunction because Stern had made a substantial investment in the mark and achieved commercial success using the "Scramble" mark, whereas Omni had placed the mark on five videogame units that were not "Scramble."