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II. Background
A. Mod Chips and Homebrew
Video game modification chips, or mod chips, are enhancement devices which users place inside video game consoles to add functionality to the machines.
These small devices are typically used to either rewrite or bypass the hardware code on video game systems allowing the owner to run programs not provided by the manufacturer.
The user completes installation by adding a mod chip to the motherboard of the console by soldering wires or using alternate connections within the console.
Potential changes to the hardware code include enabling the system to perform additional functions, including functioning as “media players, file managers, and [FTP] servers.”
Homebrew is the term coined by computer hackers and other tinkerers for the software designed and created by consumers to add additional functions to the console, beyond those which are inherent, to their video game systems.
Without mod chips, homebrew applications would not be viable for video game hardware systems.
Mod chips can serve both legal and illegal purposes.
One potentially legal use of mod chips is defeating the “region encoding” of video game systems.
Region encoding allows video game systems to “prohibit the use of games legally purchased in other countries.”
Mod chips also serve the legal function of remedying failures of video game manufactures to enhance system functionality, such as Nintendo's failure to equip DVD playback on the Nintendo Wii.
Mod chips are frequently utilized for the legal purposes of enabling the use of different and varied operating systems, media applications, and other homebrew.
Unfortunately, mod chips are often used for the illegal purpose of defeating both software and hardware protections within video game systems in order to allow owners to play pirated video games.
There are statistics available which support the conclusion that piracy, including both the sale and use of mod chips, costs video game producers billions of dollars in lost sales and revenue each year;
however, it is extremely difficult to gauge the impact of both mod chip use and sales.
For these reasons, there have been several major crackdowns on mod chip distributors in recent months. These crackdowns have included the federal government raiding distributors,
video game companies limiting online accessibility based on detection of mod chips,
and video game manufacturers disabling access to discussion board conversations related to homebrew software.
With the federal government's involvement, under the authority of both copyright law and the Digital Millennium Copyright Act (“DMCA” or “Act”), there will likely continue to be a heavy price to pay for mod chip distributors.
B. Anti-Circumvention Under the DMCA
The DMCA was enacted in 1998 as a hallmark of the digital age to address some of the issues of digital revolution.
In pertinent part, the DMCA is violated where any “technology” or “product” is used to “circumvent” a protection measure used to prevent copying and where there is only a “limited commercially significant purpose” other than circumvention.
The DMCA also clarifies that no other rights or limitations are affected by the Act, including fair use.
An entity that alleges a violation of the DMCA must show:
(1) [O]wnership of a valid copyright on a work, (2) effectively controlled by a technological measure, which has been circumvented, (3) that third parties can now access (4) without authorization, in a manner that (5) infringes or facilitates infringing a right protected by the Copyright Act, because of a product that (6) the defendant either (i) designed or produced primarily for circumvention; (ii) made available despite only limited commercial significance other than circumvention; or (iii) marketed for use in circumvention of the controlling technological measure.
To establish a prima facie case for a violation of the DMCA, a plaintiff must demonstrate each of the first five elements and satisfy one of the sub-requirements in the sixth element to shift the burden of proof to the defendant.
The DMCA also has a reverse engineering provision.
Reverse engineering is defined as “the general process of analyzing a technology specifically to ascertain how it was designed or how it operates.”
The reverse engineering provision in the DMCA states that a person may circumvent a technological protection or develop a means of circumventing the protection if it is done to “achieve interoperability of an independently created computer program with other programs.”
Interoperability is “the ability of computer programs to exchange information and of such programs mutually to use the information which has been exchanged.”
Reverse engineering, a technological protection to achieve interoperability, is valid so long as it does not infringe under the terms of the DMCA and the information obtained was previously not “readily available.”
The information obtained through reverse engineering may be shared with others so long as it is predicated on interoperability and no infringement or violation of other laws occurs.
C. Fair Use
Fair use is a defense to allegations of copyright infringement, and therefore use meeting this definition is excused under copyright law. Fair use includes “use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching[,] . . . scholarship, or research.”
Four factors must be considered to determine if an item's application qualifies as fair use: (1) The purpose and character of the use, [i.e.] commercial versus nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use [on] the potential market for or value of the copyrighted work.
Fair use was successfully used as an argument to allow recording television programs on a video cassette recorder.
Similarly, fair use could also protect other personal, noncommercial uses such as using a mod chip to help back up games or to install new software on a video game console.
D. The Sony v. Divineo Case
Divineo involved a claim brought by plaintiff Sony against defendant Divineo, Inc.
for allegedly trafficking in software and mod chips, circumventing the hardware protection of plaintiff Sony's Playstation video game console.
Sony moved for summary judgment under the DMCA.
The court granted Sony's motion, finding that Sony “made a prima facie showing of evidence” sufficient to support its claim that the Divineo violated the DMCA.
The court made findings of facts relying primarily on the affidavit of Sony's director of hardware engineering.
The director swore in his affidavit that the “ 'primary function' of mod chips is to bypass the copyright protection afforded by Playstation's technological measures.”
Evidence showed that over 7,500 mod chips were sold in the United States from “the fourth quarter of 2003 through the second quarter of 2005.”
The court also considered but dismissed testimony from Frederick Legault, president of Divineo, related to the noninfringing, legal uses of the mod chips and software, including using software as a means to reduce loading times, allowing storage of games on a hard disk drive, allowing play of over one hundred types of homebrew software, and allowing developers to use Divineo's products as a cheaper means to test their own games.
The court focused primarily on the anti-circumvention sections of the DMCA in making its decision.
The DMCA states that no one can “traffic” in items that are “primarily designed for the purpose of circumventing” technological protection measures.
It also states that a product shall not be sold that has “only limited commercially significant purpose or use other than to circumvent a technological measure” for protectable works
or that is “marketed by that person . . . with that person's knowledge for use in circumventing a technological measure” for protectable works.
Circumventing protection by a technological measure is defined as “avoiding, bypassing, removing, deactivating, or otherwise impairing a technological measure.”
The court stated the hallmark of a technological measure is “[e]ffectively protect[ing] a right of the copyright owner in the ordinary course of its operation to prevent, restrict, or otherwise limit the exercise of a right of a copyright under the [DMCA].”
1. Divineo Argues Its Devices Are Not Circumvention Devices
None of Divineo's evidence could dispute the claim that the “primary” function of its devices was circumvention.
Therefore, the court concluded that Divineo sold devices that were “primarily designed or produced for the purpose of circumventing the Playstation authentication system.”
Despite evidence that the device's primary function was circumventing the Playstation's protection scheme, Divineo countered that there were other uses for mod chips besides those that violate the DMCA, including uses “that do[] not involve accessing copies of Sony's copyrighted works or that make[] fair use of . . . works.”
The court also accepted Divineo's contention that “use of a mod chip may be the only way to play legally purchased, imported games on a United States Playstation console.”
The court, however, cited precedent stating that a consumer's “lawful or fair use of circumvention devices” will not eliminate liability for the defendant.
The court also rejected Divineo's argument that the users of its devices were “technologically sophisticated” and it was this sophistication that allowed the circumvention, not the device itself.
Finally, the court stated that the “legal notice[s]” that Divineo included with its products informing the purchaser of legal uses of the device were “not relevant to its own liability under the DMCA.”
2. Divineo's Other Key Arguments
Divineo also argued that the “Playstation authentication process is not a 'technological measure' within the meaning of the DMCA because it does not effectively protect against persons who use devices . . . to store games on a hard drive.”
The court disagreed, stating that despite the widespread availability of circumvention devices, it “does not mean that a technological measure is not, as the DMCA provides, effectively protecting the rights of copyright owners 'in the ordinary course of its operation.' ”
Citing a decision by the U.S. District Court for the Southern District of New York, the Divineo court noted that the defendant's interpretation of the statute “would have the [c]ourt construe the statute to offer protection where none is needed [and] to withhold protection precisely where protection is essential.”
In the end, the court granted Sony's summary judgment motion against Divineo for violation of the DMCA and awarded damages of more than $3.75 million.
The Divineo decision is one of several in which courts have strictly enforced the DMCA on Sony's behalf because of the circumvention aspects of mod chips and other technological innovations.
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