Nintendo of America, Inc. vs. Blockbuster LLC.

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Nintendo of America, Inc. v. Blockbuster LLC.
Sealnjd.gif
CourtDistrict Court of New Jersey
Full case nameNintendo of America, Inc. v. Blockbuster LLC.
DecidedSettled outside of court, 1990
Case history
Prior action(s)Letter of Request from Nintendo to Blockbuster, requesting cease of manual reproduction.
Case opinions
The photocopying of video game manuals was an infringement of copyright, but the rental of video games was completely legal
Court membership
Judge(s) sittingAlfred M. Wolin

On August 4, 1989, Nintendo of America filed an American copyright lawsuit through the District Court of Newark, New Jersey against Blockbuster LLC, seeking injunctive relief and damages.[1] The dispute was raised after multiple Blockbuster locations across the United States of America were accused of allegedly photocopying and reproducing Nintendo's video game manuals when renting out Nintendo titles. The game company claimed this was an infringement of their intellectual property, and hoped to change the laws on renting video games and rentals. After one year of battle in the District Court, the court ruled in favor of Blockbuster, as the House and Senate verdicts determined the law on video game rentals remain unchanged.

Background[]

Nintendo in 1989[]

Main article: History of Nintendo
Nintendo Game Boy, released in 1989

In 1989 Nintendo prioritised the release of the Game Boy handheld system, appearing on the Japanese market on April 21, 1989 alongside the title Super Mario Land. The system was later released on July 31, 1989 in North America, with the president of Nintendo of America Minoru Arakawa seeking to bundle the Game Boy with the third-party title Tetris. In securing the deal, the console launched to instant success. In Japan, new titles such as Mother and Zelda Game and Watch were released by Nintendo. In North America, Nintendo of America introduced the Dragon Warrior franchise, a series of three games that had previously released in Japan on the NES.

It is estimated that in 1989, Nintendo sold $2.7 billion in video game software and games, accounting for 80% of the market.[2] This number does not include the toys, apparel and miscellaneous merchandise that Nintendo was beginning to introduce into the market. Peter Main, the vice president of Nintendo of America at the time was named "Marketer of the Year" by Adweek's Marketing Week Magazine, and it was estimated that 15 million homes in America were in possession of a Nintendo product; this estimation raising to 20 million in consideration of the post-Christmas season.[2] Rick Anguila, editor of Toy and Business World, said of Nintendo and its products in America: "The kids of America are saying 'This is great, we've got to have one.' For boys in this country between the ages of 8 and 15, not having a Nintendo is like not having a baseball bat.''.[3] One of every four houses in America had a Nintendo product.

Nintendo's Previous Legal History[]

Nintendo of Japan and Nintendo of America have been recognised for having a 'complicated' legal history,[4] involved in cases both put forward by the company or imposed against them. In 1984, Nintendo was sued by Universal Studios under an infringed copyright claim, in which Universal claimed the game Donkey Kong was trademark infringement on the movie King Kong a film released over 50 years prior to the suit. The United States District Court for the Southern District of New York ruled in favor of Nintendo, after the company themselves proved in a prior legal case that the characters and plot of the film were available for public domain, and not holistically owned by Universal.[5]

In 1989, Nintendo had a legal battle with the company Tengen over the Tetris game copyrights, which they won and forced Tengen to recall all unlicensed copies of the game. Nintendo sues Tengen again in November over a number of unlicensed Nintendo games. Nintendo wins again.

Blockbuster in 1989[]

See also: Blockbuster LLC

Founded by David Cook only some 4 years previous, Blockbuster was slowly growing with 19 stores established across the United States. John Melk, an associate of Wayne Huizenga of Waste Management, saw the success of the business and was attracted to the family friendly image and business model. He pushed Huizenga to invest, and in 1987 he agreed to own some of the stores, despite his reservations about entering the video rental industry.[6] Combining the techniques they learned from their work in Waste Management and by following Ray Kroc's business expansion model, Huizenga and Melk worked to expand Blockbuster substantially across America. In 1989, it was estimated that a store was opening approximately every 24 hours.[7] This included the first UK store opening in March 1989 on Walmart Road, London.[8] Blockbuster's estimated revenue in 1989 was over $600 million cementing the brand as the 'king' of the video rental industry, as its closest rival West Coast Video Ltd. turned $180 million in profit.[9]

Copyright Law and Video Games[]

For Nintendo, the security of their product had always been highly coveted. In 1984, the Recording Industry Association of Japan successfully implemented the Rental Right, or Right of Lending into Japanese Copyright Law, allowing makers of a product of brand to specifically allocate how their product be reproduced or used by rental stores and services, implementing their own terms and conditions.[10] Nintendo, in line with this law, did not allow for any rental stores in Japan to rent their products, and continue to hold a strict 'no copy' policy on all their products, brand and associations.[11]

In America of 1989 however, renting video games was considered differently, as Copyright Law of the United States did not have a clause specific to video game rentals. The music industry was protected by the Rental Records Amendments Act, and music rentals were completely banned. Video, television and movies had created an extremely successful rental business, annual revenue of 1988 estimated to be over $5 billion; surpassing the box office revenue of $4.5 billion.[12] Video rental stores sought to profit from the success of video games, and created rental sections to rent out software and titles. There was divided opinion about video game rental, especially between the general consumer and those in the industry. Howard Lincoln, who serves as the vice president of Nintendo of America, went on Record in David Sheff's book Game Over: How Nintendo Zapped an American Industry, Captured Your Dollars, & Enslaved Your Children and said video game rental was "nothing less than commercial rape."[13] The general consumer saw many benefits to renting a video game or its software; a whole game cost a fair amount of money, and it gave people the opportunity to try a game before investing in it.

The computer software industry was facing a similar issue with rentals, and sought to gain protection with the Computer Software Rental Amendments Act. In theory, this bill was to cover video games software as well, but the Video Software Dealer's Association excluded video games from the final draft. The VSDA was so determined to leave video games out of the bill, in fact, that they were determined to defeat the bill should video games be included. This was justified in the belief that Nintendo cartridges were extremely difficult to copy and reproduce, unlike normal computer software that could be replicated with hard drives and discs.

Lawsuit[]

On July 31, 1989, Nintendo of America sent a letter of request to Blockbuster LLC., after learning that some of the stores had been photocopying and reproducing Nintendo's video game manuals to be paired with game rentals.[14] On August 4, 1989, Nintendo - claiming that the request had been ignored[14] - filed a formal lawsuit against Blockbuster in New Jersey federal court, under the claim that copyright law had been breached.[15] The suit charges at least one company owned store and three franchises within New Jersey of having photocopied gaming manuals to rent them out to consumers with their respected games.[15] Nintendo's general counsel Lynn Hvalsoe said in a prepared statement, "The photocopying of Nintendo's game instruction manuals by video rental outlets infringes Nintendo's registered copyrights... We intend to stop this illegal practice".[1]

Blockbuster reacted negatively to the suit, calling it a "reflection of the frustration [Nintendo] feel,[16]" after being removed from the Computer Software Rental Amendments Act.[15] Blockbuster now sought alternatives to photocopying the manuals, as they still needed to produce some when renters returned with the booklets either lost or damaged. Robert A. Guerin, the vice president of Blockbuster's national development, stated that "If need be, we might even consider writing our own [manuals],".[16] The company did not pursue this course of action, deeming it a waste of resources when video games made up only 3% of annual profits.[17] Instead, they replaced the Nintendo original manuals with generic copies made by third party companies.[18]

Outcome[]

On August 9, Blockbuster filed court papers in compliance to Nintendo's request of ceasing photocopying manuals, and released a statement claiming they had contacted managers of Blockbuster stores to stop copying the manuals when the original letter of request was received on July 31.[14] Both companies settled the matter outside of court for an undisclosed amount,[17] but Nintendo still hoped for their inclusion in the Computer Software Rentals Amendment Act. In September 1990, in a revision of the case, the House and Senate ruled in favor of Blockbuster, and agreed that the rental of video games be widely allowed.[17] On November 10, 1990, the Computer Software Rentals Amendment Act was passed through the Senate and House and made an official bill.[19] Nintendo remained excluded from the bill. Nintendo and Blockbuster repaired the business relationship lost during the lawsuit, and collaborated throughout the 1990s. This included Nintendo allowing Blockbuster to rent and sell a number of games made exclusive to the rental company's stores[20] and the 1994 Blockbuster Video World Game Championship making use of the Super NES console throughout the competition's preliminary, regional and final rounds.[21][22][23] For many years, Blockbuster continued to rent video game consoles and software, where Nintendo had finally backed down from the battle to ban all rentals. However, due to other competition from mail-order services such as Netflix, video on demand services and Redbox automated kiosks, Blockbuster suffered huge profit losses in the early and late 2000s, and on September 23, 2010, filed for bankruptcy protection.[24][25]

Nintendo continues to grow as a leading video game corporation, with over 5,500 employees working internationally as of 2017[26] and a net sales earn of $9.95 billion in 2018.[27] They also continue to be very strict about copyright law, with a large number of cases taken out after 1989 with varied success. Most notable include the case of Lewis Galoob Toys, Inc. v. Nintendo of America, Inc. in which Nintendo sued the Canadian gaming company Camerica Ltd. for patent violations of the Game Genie for the NES. Nintendo sued Camerica and their USA counterpart Galoob many times, including in the courts of Canada, New York and California. Nintendo lost every suit filed. The case taken out against NTDEC is an example of one of Nintendo's greatest successes in court, being awarded $24 million in damages. The case was based on the arrest of two employees at NTDEC in 1991, convicted of large-scale piracy in reproducing NES games and using the Nintendo trademark. In 1993, the case was settled and Nintendo was awarded over $24 million,[28] subsequently driving NTDEC out of business.

See also[]

References[]

  1. ^ Jump up to: a b "Nintendo Sues Video Rental Chain". The Spokesman Review. August 7, 1989. Retrieved March 15, 2019.
  2. ^ Jump up to: a b Ramirez, Anthony (December 21, 1989). "The Games Played For Nintendo's Sales". The New York Times. ISSN 0362-4331. Retrieved May 25, 2019.
  3. ^ McGill, Douglas C. (December 4, 1988). "Nintendo Scores Big". The New York Times. ISSN 0362-4331. Retrieved May 25, 2019.
  4. ^ Braun, Ethan (August 4, 2018). "Nintendo's Complicated Legal History". Culture of Gaming. Retrieved May 25, 2019.
  5. ^ , Wikipedia, 2019-05-31, retrieved 2019-05-31
  6. ^ DeGeorge, Gail (1997). The Making of Blockbuster. New York: Wiley. p. 32. ISBN 0-471-15903-4.
  7. ^ DeGeorge, Gail (1997). The Making of Blockbuster. New York: Wiley. pp. Prologue. ISBN 0471159034. OCLC 59593290.
  8. ^ "Blokcbuster Launched First UK Store in 1989". ITV. January 16, 2013. Retrieved April 17, 2019.
  9. ^ Citron, Alan (July 22, 1990). "Blockbuster vs. the World : Entertainment: When it comes to videos, Blockbuster is aptly named. Now this industry leader is storming Southern California". Los Angeles Times. ISSN 0458-3035. Retrieved May 25, 2019.
  10. ^ Ganea, Peter; Heath, Christopher; Hiroshi, Saito; Saikô, Hiroshi (2005). Japanese Copyright Law: Writings in Honour of Gerhard Schricker. Kluwer Law International B.V. p. 54. ISBN 9041123938.
  11. ^ "Legal - Intellectual Property". Nintendo. Retrieved April 17, 2019.
  12. ^ Herbert, Daniel (2014). Videoland: Movie Culture at the American Video Store. University of California. pp. 17, 18. ISBN 978-0520279636.
  13. ^ Sheff, David (1993). Game Over: How Nintendo Zapped an American Industry, Captured Your Dollars, & Enslaved Your Children. Diane Publishing Company. ISBN 0788163205.
  14. ^ Jump up to: a b c "Chain to Stop Giving Out Nintendo Books". The Los Angeles Times. August 10, 1989. Retrieved March 21, 2019.
  15. ^ Jump up to: a b c Forman, Ellen (August 13, 1989). "Nintendo Zaps Blockbuster Reproduction of Game Instructions Spurs Copyright Lawsuit". The Sun Sentinel. Retrieved March 15, 2019.
  16. ^ Jump up to: a b Forman, Ellen (August 10, 1989). "Nintendo Steps Up Blockbuster Battle". The Sun Sentinel. Retrieved March 21, 2019.
  17. ^ Jump up to: a b c "Video Rental Firms Win Round in Struggle with Nintendo". The Baltimore Sun. September 19, 1990. Retrieved March 15, 2019.
  18. ^ Lowell, Michael (March 30, 2012). "Used Video Games: The New Software Piracy: Part 2". Learn to Counter. Retrieved May 6, 2019.
  19. ^ Mace, Scott (November 12, 1990). "Congress Restricts Software Rental". InfoWorld. 12. No. 46: 66 – via Google Books.
  20. ^ McGee, Maxwell (February 6, 2015). "Blockbuster's Curious Collection of Exclusive Games". GamesRadar+. Retrieved May 6, 2019.
  21. ^ "1994 Blockbuster Video World Game Championship: The Intro". CrazdGamer. January 31, 2007. Retrieved May 5, 2019.
  22. ^ "1994 Blockbuster Video World Game Championship: The Middle". CrazdGamer. February 1, 2007. Retrieved May 5, 2019.
  23. ^ "1994 Blockbuster Video World Game Championship: The End". CrazdGamer. February 5, 2007. Retrieved May 5, 2019.
  24. ^ "Blockbuster Reaches Agreement on Plan to Recapitalize Balance Sheet and Substantially Reduce its Indebtedness" Archived 2018-10-03 at the Wayback Machine (Press release). Blockbuster. September 23, 2010. Retrieved April 17, 2019.
  25. ^ "Blockbuster LLC Chapter 11 Petition" (PDF). PacerMonitor. PacerMonitor. Retrieved April 17, 2019
  26. ^ "Nintendo - Statistics and Facts". Statista. 2019. Retrieved May 25, 2019.
  27. ^ "Nintendo's Net Sales from Fiscal 2008 to 2018". Statista. 2019. Retrieved May 25, 2019.
  28. ^ Tucson, Ariz (May 25, 1993). "Nintendo Awarded $24 Million In Suit Over Pirated Video Games". AP NEWS. Retrieved May 25, 2019.
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