## Facts

- Nintendo marketed the Nintendo Entertainment System (NES) and produced or licensed game cartridges used with the console.
- Nintendo’s NES games were protected as copyrighted audiovisual works.
- Galoob distributed the Game Genie, an accessory used with NES cartridges that let players alter up to three gameplay features (e.g., lives, speed, invincibility) by entering codes.
- The Game Genie worked by intercepting data sent from the game cartridge to the console and substituting different values during play.
- The device did not contain Nintendo game code and did not create a separate, permanent copy of Nintendo’s audiovisual works; it modified gameplay output only while the game was being played.
- Galoob sued for declaratory relief that the Game Genie did not infringe Nintendo’s copyrights; Nintendo counterclaimed for copyright infringement.
- A temporary injunction initially halted Game Genie sales, but after a bench trial the district court declared no infringement, dissolved the injunction, and denied Nintendo a permanent injunction.
- Nintendo appealed the judgment and denial of permanent injunctive relief.

## Issues

1. Whether audiovisual displays generated when users played Nintendo games using the Game Genie constituted infringing “derivative works” under 17 U.S.C. §§ 101, 106(2).
2. If the altered displays could be treated as derivative works, whether they were nonetheless permitted as fair use under 17 U.S.C. § 107.
3. Whether Nintendo was entitled to permanent injunctive relief against marketing and sale of the Game Genie.

## Decision

- The Ninth Circuit affirmed the district court’s judgment for Galoob.
- The court held the Game Genie did not infringe Nintendo’s derivative-work right because it did not create a separate, fixed derivative work.
- Alternatively, even assuming the altered displays were derivative works, the court agreed they were fair use.
- Because Nintendo failed to show infringement, it was not entitled to a permanent injunction, and dissolution of the temporary injunction was upheld.

## Legal Principles

- A “derivative work” requires recasting, transformation, or adaptation of a preexisting work that is fixed in a tangible medium; transitory, user-controlled on-screen alterations during lawful use are not a fixed derivative work.
- A device that modifies a copyrighted work’s output in real time, without embedding or distributing the copyrighted expression and without creating a separate fixed copy, does not violate the copyright owner’s exclusive right to prepare derivative works.
- In fair use analysis, private in-home use and lack of market substitution weigh against infringement even when the copyrighted work is highly creative.
- Market harm is less likely where the challenged product requires the user to own authorized copies of the copyrighted work and does not replace demand for those copies.
- Injunctive relief for copyright claims requires a showing of infringement; absent infringement, a permanent injunction is unavailable.

## Conclusion

The Ninth Circuit held that selling and using the Game Genie to make real-time gameplay changes did not infringe Nintendo’s derivative-work right because the changes were not fixed in a separate work; in any event, the altered displays constituted fair use, so Nintendo was not entitled to a permanent injunction.


Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc., 964 F.2d 965 (9th Cir. 1992)