Ninth Circuit Upholds Statutory Damages Award to Dream Games in Video Games Copyright Action Against PC Onsite

Holding:

In this copyright dispute over software upgrades to video games, the U.S. Court of Appeals for the Ninth Circuit ruled that the illegal use or operation of a work by the copyright owner does not preclude the award of actual or statutory damages for copyright infringement. According to the Ninth Circuit, because Fast Action Bingo video game has a valid copyright, and the copyright was unlawfully infringed, plaintiff-appellee Dream Games, Inc. (“Dream Games”) was entitled to damages, notwithstanding the video games’ illegal operation in the states of Wyoming and Utah. The Ninth Circuit explained that nothing in the Copyright Act suggests that a plaintiff’s statutory right to elect the type of damages it seeks is forfeited upon presentation of evidence of illegality. The Ninth Circuit also rejected defendant-appellant PC Onsite’s argument that the U.S. District Court for the District of Arizona abused its discretion in allowing the jury to see the unprotectable elements of Fast Action Bingo. The Ninth Circuit reasoned that it was appropriate for the jury to see unprotected elements of a copyrighted work so that it may assess whether the combination of such elements warrants protection. On the basis of the foregoing, the Ninth Circuit affirmed the district court’s judgment in favor of Dream Games.

Detailed Summary:

By way of background, Dream Games, a corporation that creates, designs, develops, licenses, and sells electronic video bingo games, developed an electronic video game called Fast Action Bingo. In March 2002, Dream Games entered negotiations with PC Onsite, a company that licenses, distributes, and sells computer hardware and software, regarding the possibility of PC Onsite performing software upgrade work on Fast Action Bingo.

When PC Onsite was given the original source code for Fast Action Bingo, the two companies signed a third party source code nondisclosure agreement, which listed Dream Games as the licensor and PC Onsite as the licensee, and…

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