In the Canadian decision Nintendo of America Inc. c. Jeramie Douglas King et al., 2017 FC 246, the Plaintiff, Nintendo of America Inc., sought a declaration that the Respondent, Go Cyber Shopping (2005) Ltd., circumvented Nintendo’s TPMs and infringed Nintendo’s copyright in certain works in Canada. The copyrighted works and TPMs at issue are found in three of Nintendo’s popular gaming consoles: the DS and 3DS handheld video game consoles, and the Wii home video game console.
Nintendo has registered copyright in 585 video game works on the DS, 3DS and Wii consoles. Nintendo also has registered copyright in three works of header data – data provided on authorized game cards for the DS and 3DS consoles which serves to display Nintendo’s logo when the consoles are turned on, and to provide a security check for verifying that the game card is genuine.
Nintendo employs a number of measures to prevent users from playing unauthorized copies of video games and from installing unauthorized software, including counterfeit games and software, on its consoles. These measures include the physical configuration of game cards, boot up security checks, encryption and scrambling, a proprietary data format, and copy protection code.
The Respondent offered for sale and provided installation services for different devices which Nintendo contends are designed to circumvent Nintendo’s TPMs and allow users to play unauthorized copies of video games on Nintendo’s consoles. These devices included “game copiers” which are essentially customizable DS and 3DS game cards which can be programmed by users, and “mod chips” which modify the Wii console’s hardware and/or firmware to disable certain security routines.
In the decision, the Federal Court had to decide on three issues: a) did the Respondent infringe Nintendo’s copyrights contrary to s. 27(2) of the Copyright Act (herein the “Act”), b) did the Respondent contravene the anti-circumvention provisions under s. 41.1(1) of the Act, and c) in the affirmative, what would be the appropriate remedies?
a) Secondary Infringement
The Court found that the Respondent was liable for secondary infringement of Nintendo’s header data works. Essentially, the court found that the devices sold by the Respondent contained unauthorized copies of Nintendo’s header files at the time of sale, or that the Respondent provided users with instructions for downloading copies of Nintendo’s header files onto the devices. The court further found that the Respondent had knowledge of these facts, thereby meeting all elements required to establish secondary infringement according to the three-part test set out in CCH Canadian Ltd v. Law Society of Upper Canada, 2004 SCC 13.
b) Circumvention of TPMs
The court found that the Respondent was liable for circumventing TPMs in violation of s. 41.1 of the Act. To arrive at this conclusion, the Court had to consider: i) whether Nintendo’s technology, device or component is a TPM within the definition of s. 41 of the Act, ii) whether the Respondent had engaged in circumvention activities prohibited by s. 41.1(1) of the Act and iii) if raised, whether any exceptions apply. In considering the issues, the Court provided valuable insight as to how the TPM provisions should be interpreted and applied.
i) Definition of a TPM
Under dispute was whether or not the physical configurations of Nintendo’s DS and 3DS game cards fall under the statutory definition of a TPM. The Respondent argued that a TPM must create a barrier to copying, and that providing a game card with a particular physical shape does not meet this requirement.
The Court disagreed with the Respondent’s pretentions, and interpreted the definition of a TPM in s. 41 of the Act as encompassing any effective technology which controls access to a work. Access control TPMs therefore do not necessarily need to employ a barrier to copying in order to be “effective”. In the present case, the court found that the physical configuration of Nintendo’s game cards was effective in controlling access, in that they are designed to fit specifically into a corresponding slot on each of its consoles, operating much like a lock and key.
The Respondent did not contest whether the remaining measures employed by Nintendo fall under the definition of TPMs. The Court found that these measures were effective, and therefore respected the statutory definition of a TPM.
ii) Circumvention Activities
The Respondent attempted to argue, to no avail, that their game copier devices merely “replicated” Nintendo’s TPMs, and thus did not “circumvent” TPMs as required under s. 41.1(1) of the Act. The Court took a broad interpretation of the meaning of the word “circumvent”, and clarified that circumventing a TPM does not exclude replication. The Court therefore concluded that replicating the physical configuration and the header data constitute a circumvention of TPMs.
The Respondent also tried to argue that their game copiers merely provide access to the operating system of Nintendo’s consoles by descrambling or decrypting communications, and do not act upon the TPMs implemented on Nintendo Games. The Court rejected this argument, and asserted that providing access to the operating system is irrelevant, because the devices also provide unauthorized access to Nintendo Games, which is all that is required to constitute a circumvention.
The evidence showed that the Respondent’s devices were not commercially significant other than to circumvent the TPMs, and that the Respondent knew that its Game Copiers were used by its customers to play pirated Nintendo Games, thus satisfying the conditions of s. 41.1(1) of the Act.
iii) Interoperability Exception
The Respondent failed to provide a defence of Interoperability under s. 41.12 of the Act. Under this provision, the Respondent had the burden of proving that their infringing activities were undertaken for the purpose of making Nintendo’s data and program code "interoperable", a concept in information technology that relates to the ability of a system to work with another system, with the objective of promoting coherence. The Court quickly rejected this defence because although the devices could theoretically be used for legitimate “homebrew” purposes, the proof revealed that these devices were designed and marketed principally to play pirated copies of Nintendo’s video games.
The Court favoured a calculation of statutory damages on a per-work basis, and not on the TPMs themselves. The Court stated that this approach is more harmonious with the wording of the Act, and consistent with the economic reality of copyright, “[a] robber breaks a lock because of the value behind the lock, not because of the value of the locks”.
Damages of $11,700,000 were awarded to Nintendo for TPM circumvention of 585 games, corresponding to $20,000 per work, the statutory maximum. The Court also awarded $60,000 for copyright infringement, corresponding to $20,000 for infringement of each of the three header data works. Although the Court has the possibility of reducing statutory damages when a number of works are involved in a single medium and the total amount awarded would be grossly out of proportion to the infringement, it refused to do so since the Respondent did not meet their burden regarding these two elements. The Court favoured awarding the statutory maximum due to evidence of bad faith on the part of the Respondent, and the need to deter future infringement.
Finally, the Court emphasized the Respondent’s disregard for Nintendo’s rights and decided that the deliberate conduct and nature of the wrongdoings justified an award of punitive damages in the amount of $1,000,000. In total, $12,760,000 in damages were awarded to Nintendo.
This case shows that the courts are taking a firm approach to enforce TPMs, and are ready to award significant remedies to deter those who engage in circumvention activities. This decision is of particular importance to those in the creative industry, including specifically the video game industry, as it shows that employing TPMs can be an effective way of preventing piracy and protecting their investments in Canada.