## Facts

- Nintendo manufactured and held copyrights in Nintendo Entertainment System (NES) games.
- Galoob distributed the Game Genie, a device that altered certain game parameters during play without permanently changing a game cartridge.
- Nintendo sued alleging copyright infringement and obtained a preliminary injunction stopping Game Genie sales.
- As a condition of the preliminary injunction, Nintendo posted a $15 million bond under Federal Rule of Civil Procedure 65(c).
- After a bench trial, the district court held the Game Genie was noninfringing and dissolved the injunction; Nintendo did not obtain permanent injunctive relief.
- Galoob then sought damages on the injunction bond, asserting the injunction prevented sales during a period of high consumer demand.
- The district court found Galoob had been wrongfully enjoined, found damages of at least $15 million, and ordered execution of the full bond in Galoob’s favor.

## Issues

1. Whether a wrongfully enjoined party is presumptively entitled to recover proven damages up to the amount of an injunction bond, and whether equitable considerations (including the plaintiff’s good faith) can defeat or reduce recovery.
2. Whether the district court clearly erred in finding the preliminary injunction caused Galoob at least $15 million in damages.
3. Whether the district court clearly erred in its methodology for calculating lost profits and related harm.

## Decision

- The Ninth Circuit affirmed the order executing the entire $15 million bond.
- The court held that once the injunction was determined wrongful in light of the final merits determination, Galoob had a cause of action on the bond.
- The court applied a rebuttable presumption that a wrongfully enjoined party may recover proven damages up to the bond amount; Nintendo failed to rebut the presumption.
- The court rejected Nintendo’s argument that the district court was required to deny or reduce recovery based on equitable factors such as Nintendo’s good faith.
- The court held the district court did not clearly err in finding the injunction caused at least $15 million in damages or in relying on record evidence and expert testimony to quantify lost sales and profits.
- Recovery was limited to the bond amount, even if actual damages exceeded $15 million.

## Legal Principles

- A party later determined to have been wrongfully enjoined has a cause of action on the injunction bond posted under Federal Rule of Civil Procedure 65(c).
- There is a rebuttable presumption that the wrongfully enjoined party is entitled to recover proven damages up to the bond’s limit.
- The bond functions to allocate the risk of an erroneous preliminary injunction to the party that sought and obtained the injunction.
- The plaintiff’s good faith in seeking preliminary injunctive relief does not, by itself, bar or reduce recovery on the bond.
- At the bond-execution stage, the primary questions are wrongful issuance and the amount of recoverable damages; broad equitable relitigation of the injunction’s propriety is generally not a basis to deny recovery.
- Damages for wrongful injunction are generally capped at the bond amount absent an independent basis for additional relief.

## Conclusion

The Ninth Circuit affirmed execution of the full $15 million injunction bond, holding that Galoob—having been wrongfully enjoined—was presumptively entitled to recover proven damages up to the bond amount, and that Nintendo’s equitable defenses and challenges to the district court’s damage findings did not show error.


Nintendo of Am., Inc. v. Lewis Galoob Toys, Inc., 16 F.3d 1032 (9th Cir. 1994)