## Facts

- Taito Corporation created the coin-operated video game *Double Dragon* and registered it with the U.S. Copyright Office.
- Taito granted its wholly owned U.S. subsidiary, Taito America, an exclusive U.S. license to exercise all copyright rights in *Double Dragon*.
- Taito sold *Double Dragon* printed circuit boards in Japan for use in that market, with notices stating the game was for use only in Japan and warning against operation outside the territory.
- Red Baron-Franklin Park, Inc. and Fun Factories of Ohio, Inc. operated video-game arcades in the United States.
- Red Baron acquired used *Double Dragon* circuit boards abroad, imported them into the United States without Taito’s consent, installed them in arcade cabinets, and offered gameplay to the public for a fee.
- Red Baron did not obtain any license authorizing public performances of the *Double Dragon* audiovisual work in the United States.
- Red Baron sought declaratory relief that its importation and arcade use did not infringe; the district court agreed, reasoning that the first authorized sale in Japan exhausted all copyright rights in those copies, including public performance.
- On appeal, Taito did not challenge the ruling permitting Red Baron to purchase, import, or resell the circuit boards; it challenged only the conclusion that operating the game did not infringe the public performance right.

## Issues

1. Whether operating a coin-operated video game in an arcade constitutes a “public performance” of a copyrighted work.
2. Whether the first-sale doctrine extinguishes the copyright owner’s exclusive right of public performance, or only the right to distribute a particular copy.

## Decision

- The court reversed the declaratory judgment of non-infringement and remanded.
- It held that *Double Dragon* is an audiovisual work and that operating the game causes a “performance” by showing images in sequence with accompanying sounds.
- It held that arcade operation for paying patrons is “public” because the work is performed in a place open to the public.
- It held that the first-sale doctrine does not exhaust the public performance right; it limits only the distribution right in a particular copy.

## Legal Principles

- A video game’s on-screen sequence of images and sounds qualifies as an “audiovisual work” even if player input affects the sequence.
- “Performance” includes showing an audiovisual work’s images “in any sequence”; operating a game that displays such images and sounds is a performance.
- A performance is “public” when it occurs in a place open to the public or where members of the public are gathered, including commercial arcades charging a fee.
- The first-sale doctrine under 17 U.S.C. § 109(a) limits only the copyright owner’s § 106 distribution right in a lawfully made copy; it does not terminate other exclusive rights, including the § 106(4) right of public performance.
- Lawful acquisition and importation of a copy (as assumed on appeal) does not, without a license, authorize public performances of the copyrighted audiovisual work embodied in that copy.

## Conclusion

The court held that operating imported *Double Dragon* circuit boards in U.S. arcades constitutes an unlicensed public performance of an audiovisual work and that the first-sale doctrine does not exhaust the separate public performance right, requiring reversal and remand.


Red Baron-Franklin Park, Inc. v. Taito Corp., 883 F.2d 275 (4th Cir. 1989)