## Facts

- Sega manufactured the Genesis console and licensed game cartridges that incorporated a lock-out system requiring an initialization code to run on the console.
- When the console detected the initialization code, it permitted play and automatically displayed “SEGA” on screen during startup.
- Accolade, a non-licensee game publisher, sought to develop Genesis-compatible games without entering Sega’s licensing program.
- To learn the functional requirements for compatibility, Accolade copied Sega game programs in full, loaded them into computers, and disassembled the object code to study the console’s interface requirements.
- Accolade then wrote its own original game code, but its cartridges necessarily included the short initialization code needed to run on the Genesis, which in turn triggered the on-screen “SEGA” display.
- Sega sued for copyright infringement based on the intermediate copying and disassembly and for trademark-related claims based on the startup display.
- The district court issued a preliminary injunction barring further disassembly and requiring recall of Accolade’s Genesis cartridges; Accolade appealed.

## Issues

1. Whether intermediate copying and disassembly of a copyrighted computer program to access unprotected functional elements necessary for compatibility is fair use under 17 U.S.C. § 107.
2. Whether use of an initialization code that triggers the console’s automatic display of the trademark “SEGA” constitutes a false or misleading designation of origin under the Lanham Act.

## Decision

- The Ninth Circuit reversed the preliminary injunction and remanded.
- The court held Accolade’s intermediate copying and disassembly were fair use where undertaken for a legitimate purpose and where no practical alternative existed to access unprotected functional elements.
- The court held Accolade’s use of the required initialization code did not violate the Lanham Act under the circumstances, even though it triggered a potentially misleading trademark display, because access to the console was otherwise unavailable to rivals and the display resulted from Sega’s design choices.

## Legal Principles

- Intermediate copying of a computer program may be fair use when necessary to study and extract unprotected functional elements (such as interface specifications) required for compatibility, and when the resulting product is independently created.
- In the fair use analysis for reverse engineering, copying an entire program may carry limited weight if full copying is necessary to obtain access to unprotected elements.
- Market harm attributable to lawful competition from independently created compatible products is not the type of harm that defeats fair use.
- A trademark owner may bear responsibility for confusion created by a system it designed to display its mark automatically upon functional access; a competitor’s functionally compelled use of an access code may not create Lanham Act liability when no readily available alternative method of access exists.

## Conclusion

The Ninth Circuit held that reverse engineering through intermediate copying and disassembly to achieve interoperability can qualify as fair use, and it declined to impose Lanham Act liability where a competitor’s functionally required access method triggered an automatic trademark display created by the trademark owner’s own system design.


Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992)