Lewis Galoob Toys, Inc. V. Nintendo of America, Inc.

Lewis Galoob Toys, Inc. v. Nintendo of America, Inc. (Ninth Circuit Court of Appeals, 1992) was a court case which established the rights of users to modify copyrighted works for their own use.

Under license from UK company Codemasters, Galoob manufactured an add-on product called Game Genie, which allowed users to modify video games by entering in certain codes; for example, a code might make the player invincible by negating the programming that updates the player's health amount. Nintendo, which sold a video game system and video games that could be modified by Game Genie, sued Galoob for copyright infringement, alleging that Game Genie made a derivative work, violating Nintendo's copyright in their video games.

An earlier case on similar facts (Midway Manufacturing Co. v. Artic International, Inc.) favored the original copyright holder. Nintendo relied heavily on this case as precedent for its legal arguments.

The court battle began in May of 1990, when Galoob filed a complaint against Nintendo in U.S. District Court, seeking a declaratory judgment that the Game Genie did not violate Nintendo's copyrights, as well as an injunction preventing Nintendo from modifying their NES game system to make it incompatible with the Game Genie. Nintendo responded by filing a complaint against Galoob, seeking an injunction preventing Galoob from selling the Game Genie.

In July of 1990, the court granted Nintendo a preliminary injunction, preventing Galoob from selling the Game Genie until the court matter was resolved. It also ordered Nintendo to post a bond (initially $100,000, later increased to $15 million), in order to ensure Galoob be compensated for sales lost during the injunction, should Galoob win the case. Galoob appealed the injunction to the Ninth Circuit Court of Appeals, but lost.

After over a year of legal wrangling, the trial concluded in July of 1991, with District Judge Fern M. Smith ruling in favor of Galoob, declaring that the Game Genie did not violate Nintendo's copyrights. Smith compared usage of the Game Genie to "skipping portions of a book" or fast-forwarding through a purchased movie; thus the altered game content did not constitute the creation of a derivative work as Nintendo had argued. Smith wrote, in part, "Having paid Nintendo a fair return, the consumer may experiment with the product and create new variations of play, for personal enjoyment, without creating a derivative work." Nintendo appealed the ruling to the Ninth Circuit Court of Appeals, but lost as the Ninth Circuit affirmed the lower court's decision.

In December of 1991, a hearing was held to determine how much of the $15 million bond would be awarded to Galoob to compensate for losses during the approximately one-year period they were prohibited from selling the Game Genie. The court found that because Galoob's losses actually exceeded $15 million, that Galoob was entitled to the entire amount, plus legal fees. Nintendo appealed this decision to the Ninth Circuit, but lost again.