SEGA ENTERPRISES LTD; SEGA OF AMERICA, INC, Plaintiffs,
v.
MAPHIA, a businsess of unknown structure; PARSAC, a business of unknown structure; PSYCHOSIS, a business of unknown structure; CHAD SCHERMAN aka CHAD SHERMAN aka “BRUJJO DIGITAL,” and DOES 2-6 aka “OPERATOR,” “FIREHEAD,”"LION,” `HARD CORE,” “CANDYMAN,” all individually and d/b/a MAPHIA and PARSAC; HOWARD SILBERG by his mother and next friedn Ilene Silberg, aka “CAFFEINE,” and DOES 14-18 aka “APACHE,” ‘MAELSTROM,”"GAZZER,” “PARANOID/CHRYSEIS,”"DOOM” all individually and d/b/a PSYCHOSIS and PARSAC; DOES 7-12; DOES 19-25, Defendants.
NO. C 93-04262 CW
ORDER GRANTING SUMMARY ADJUDICATION OF LIABILITY AND A PERMANENT INJUNCTION WITH RESPECT TO DEFENDANT SHERMAN
Plaintiffs Sega Enterprises, Ltd. and Sega of America, Inc., (collectively “Sega”) filed this action for copyright infringement under 17 U.S.C. $$ 101 et seq., federal trademark infringement under 15 U.S.C. $$1051 et seq., federal unfair competition for false designation of origin under 15 U.S.C. $1125 (a), California trade name infringement under California Business and Professions Code $$ 14401 et seq. and California unfair competition under California Business and Professions Code $$14210, 17200-17203 against Defendant Chad Sherman and several other individuals operating on-line bulletin boards, and MAPHIA and other bulletin boards as businesses of unknown structure.
[1] This Court has jurisdiction over the causes of action arising under federal law pursuant to 28 U.S.C $1338 (a), and has jurisdiction over the state causes of action pursuant to 28 U.S.C. $$ 1338(b).
Venue is proper in the federal district court where certain Defendants reside and where the alleged acts of trademark and copyright infringement occurred. 28 U.S.C.$$1391(b) and (c). Venue in the instant suit is proper in the Northern District of California.
After careful consideration of the parties’ papers and the record as a whole and good cause appearing, the Court GRANTS summary judgment regarding Sherman’s liability for copyright infringement, federal trademark infringement, federal unfair competition for false designation of origin, California trade name infringement and California unfair competition. The Court also GRANTS Sega’s request for a permanent injunction prohibiting further copying of SEGA games by way of the MAPHIA electronic bulletin board, or any bulletin board run by Sherman.
STATEMENT OF FACTS
I. Sega’s business
Sega [2] is a major manufacturer and distributor of computer video game systems and computer video game programs which are sold under the SEGA logo, its registered trademark. (Federal Registration No. 1,566,116, issued November 14, 1989). As part of its development process, Sega takes care to ensure the quality and reliability of the video game programs and products sold under SEGA trademarks.
Sega also owns the copyright for the game programs that Sega develops and has federal copyright registrations for several video games, including Jurassic Park and Sonic Spinball.
The Sega game system consists of two components, the base unit game console and software stored on video game cartridges which are inserted into the base unit. The base unit contains a microcomputer which, when connected to a cartridge and a television, permits an individual to play a video game stored on the inserted cartridge. The cartridge format is not susceptible to breakdown or erasure. Defective Sega cartridges are replaced by Sega.
Sega’s game system is designed to permit the user only to play video game programs contained in Sega cartridges. The system does not permit the copying of video game programs. Sega does not authorize the copying or distribution of its video game programs on other storage media such as floppy disks or hard disks.
Sega takes steps to keep its methods of developing video game programs, its works-in-progress, and the codes of its released products confidential, and the employees and contractors who work with Sega sign non-disclosure agreements regarding their work. Video game programs which are in development are referred to as “pre-release” programs. During the development period, pre-release software may be stored on cartridges, floppy disks or hard disks for internal use by Sega Upon completion of the program, however, the program is distributed only on cartridges.
II. MAPHIA Bulletin Board
Sherman is the system operator for MAPHIA, an electronic bulletin board. An electronic bulletin board (“BBS”) consists of electronic storage media, such as computer memories or hard disks, which are connected to telephone lines by modem devices, and are controlled by a computer. Users of BBSs can transfer information from their own computers to the storage media on the BBS by a process known as “uploading.” Users can also retrieve information from the BBS to their own computer memories by a process known as “downloading.” Video game programs, such as Sega’s video game programs, are among the kinds of information that can be transferred in these ways.
The software and computer hardware Sherman used to run MAPHIA is owned by him and located at his residence in San Francisco, California. The MAPHIA bulletin board is open to the public and has approximately 400 users who routinely download and upload files from and to the MPPHIA BBS. The users of this BBS are identified by a handle and a password. A handle is a pseudonym by which individuals are known to other users of the system. The password is not displayed to other users and is known only to the system operator and the authorized user.
The evidence shows that `Brujjo Digital” is the alias used by Sherman as the system operator of the MAPHIA BBS, and in communicating with others. For example, Sherman admitted that he was the system operator of the MAPHIA BBS, and the MAPHIA BBS indicates the Brujjo Digital is its operator.
III. Evidence collected from the seizure
This action was initiated after Sega allegedly received an anonymous tip that Sherman was a operating computer BBS which contained and distributed pirated and unauthorized versions of Sega’s video game software. Sega collected evidence of these activities by having a Sega employee gain access to the MAPHIA BBS under a pseudonym, using information supplied by an authorized user who was an informant.
Pursuant to the ex parte Temporary Restraining Order and Seizure Order issued by Judge Fern M. Smith of this Court on December 9, 1993, a search of Sherman’s premises was conducted. Pursuant to the Order, Sherman’s computer and memory devices were seized, the memory was copied, and the computers and other seized hardware were returned to Sherman, with the Sega games deleted.
Data from the MAPHIA BBS indicates that it is linked to another BBS called PSYCHOSIS, whose system operator is called Caffeine. This data also indicates that Sherman and the MAPHIA BBS are part of or linked to a network of BBSs, called PARSAC (also spelled “PARSEC” by Sherman), for business purposes. A newsletter displayed on the MAPHIA BBS refers to MAPHIA as the “WorldHeadquarters” for a group called “PARSEC” of which PSYCHOSIS is the “USHQ.” Sherman is the “acting world leader” of PARSAC. A message file located on Sherman’s computer, authored by Brujjo Digital, states:
NOTES WORTHY OF MENTION:
. . . You probably noticed that I am taking over the World Leader Position and that’s because I felt like I pulled alot of this together with ALOT ALOT of help from Caffeine …
. . .
PARSEC VOICE MAIL BOXES:
I’m setting up a VMB system at my house for PARSEC ONLY! … the kewl thing about it is that the VMB can page myself and Caffeine when an original game is ready for release or anything important comes up.
. . .
ADVERTISING CAMPAIGN:
As you know we have PARSEC TRADING CO. as our business that sells everything from Copiers to … I’ll have some Advertisements ready by the time I install Caffeine’s REXX DOOR to handle Customer’s Orders online at the !MAPHIA! like the system Caffeine runs on Psychosis . . .
. . .
NEW MEMBERS:
. . . We are selling … Super Magic Drivers … but me and Caffeine will handle all the business side of that . . .
At the time it was seized, the MAPHIA BBS contained unauthorized copies of 12 Sega games developed by Sega, ten Sega-licensed games, and six Sega pre-release or “beta” version games, developed in-house by Sega. The copies of Sega’s programs uploaded to and downloaded from the MAPHIA BBS are substantially similar to Sega’s video game programs as stored in the cartridges sold by Sega. Prior to the seizure, each of the Sega-developed and beta version games on the MAPHIA BBS was available for downloading by MAPHIA users who access the board through their own computers by modem telephone connections. Sega had U.S. copyright registration in at least two of the games found on the MAPHIA BBS, namely Jurassic Park and Sonic Spinball.
Sega games are generally listed on the MAPHIA BBS in a file area entitled “<<< !MAPHIA! >>> SEGA CONSOLES <<<” The games are identified by a “file descriptor” which includes the title of the game, the manufacturer, and either the word “SEGA” or “Sega,” the same word that is in the SEGA registered trademark. Additionally, the SEGA trademark appears on the screen whenever a Sega game which has been downloaded from the MAPHIA BBS is subsequently played. Sherman acknowledged that the SEGA trademark is displayed when the downloaded games are played.
The directory of video game programs available on MAPHIA also contains numerous references to video game programs containing “patches” or “fixes.” These words refer to user to user-introduced changes to problems which may have been introduced in the copying process or which existed in beta version games.
Printouts of the data on Sherman’s BBS seized pursuant to this Court’s Order and on-line data captured from Sherman’s BBS show that the uploading and downloading of unauthorized copies of Sega’s copyrighted video games was known to Sherman. Sherman acknowledges that users of the MAPHIA bulletin board were allowed to upload and download Sega games with the authorized password. A screen printout of user uploading and downloading statistics from his MAPHIA BBS shows that Sherman tracked, or at least had the ability to track, user uploads and downloads. Additionally, another message authored by Brujjo Digital and located on Sherman’s BBS states:
Please UPLOAD *ALL* the missing CONSOLE Files NOT HERE from the time I closed the !MAPHIA! Oct 17th until up to now!! Time to get some free credits for someone if you get them all in here and get me caught up.
Sherman also sold video game copiers, referred to as “Super Magic Drives” (“copiers”), through the MAPHIA BBS in collaboration with the PSYCHOSIS BBS, collectively known as PARSAC. Sherman’s business plan as described by his alias “Brujjo Digital,” states:
As you know we have PARSEC TRADING CO. as our business that sells everything from Copiers to Modems to Hard Drives to Calling Cards (off the record, hehe), and even Pentium Chips now. So, the next step is a MEDIA BLITZ! … I’ll have some Advertisements ready …
Also, we are selling Super Wild Cards, Pro Fighter Q’s and Super Magic Drives for AKIRA and that part of PARSEC will be dedicated for him but me and CAFFEINE will handle all the business side of that and paying him the money and dealing with the customers, etc.
According to a data file found on Howard Silberg’s computer, Parsec Trading has the following policy:
As You know, if you read the policies of PARSEC TRADING, each customer receives free-downloads up to ten (10) megabytes. This is so you can use your back-up unit and enjoy it! After your ten megabytes has been used up, you can donate $35 per month for a month of free-downloads, $200 for a year of free-downloads, or $500 for unlimited free-downloads.
A copier is necessary to play games which have been downloaded from the BBSs. The Super Magic Drive copier consists of a connector which plugs into the video game console, a receptacle which accepts video game cartridges, a main unit which contains a random access memory (RAM) to store games, and a floppy disk drive. A MAPHIA BBS user can download video programs through his or her computer onto a floppy disk and make copies with his or her computer or play those game programs through the adaptor drive. To play a downloaded game, the user can choose the “run program” option and run the video game program from the floppy disk without a video game cartridge.
The adaptor drive also allows the user to copy the contents of a game cartridge onto a floppy disk. The user plugs the video game copier into the game console and places a video game cartridge into the receptacle of the video game copier. The user then turns on the adaptor drive. Through a menu screen, the user can select the “dump” option which will permit the user to copy the contents of the cartridge to a floppy disk.
Sega has attempted to obtain additional information from Sherman through deposition and discovery. Sherman was deposed on March 1, 1994, at which time he refused to answer substantive questions by invoking his Fifth Amendment privilege.
EVIDENTIARY OBJECTIONS
I. Sega’s Motion to Strike Peterson’s First Declaration
