SEGA vs. MAPHIA, the first ROM distributing lawsuit

SEGA ENTERPRISES LTD. and SEGA OF AMERICA,

INC., Plaintiffs,

MAPHIA, a business 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 friend 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 93-4262 CW

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

857 F. Supp. 679 (1994); 30 U.S.P.Q.2D (BNA) 1921; Copy. L. Rep. (CCH) P27,309

March 28, 1994, Decided

March 28, 1994, Filed

JUDGES:   [**1]   WILKEN

OPINIONBY: CLAUDIA WILKEN

OPINION:   [*681]   FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF PRELIMINARY INJUNCTION, AND CONFIRMATION OF SEIZURE

This is an action for copyright infringement (under 15 U.S.C. @ 101 et seq.), federal trademark infringement (under 15 U.S.C @ 1051 et seq.), federal unfair competition/false designation of origin (under 15 U.S.C. @ 1125(a)), California trade name infringement (under California Business & Professions Code @ 14400 et seq.), and California unfair competition law (under California Business and Professions Code @ 14210, 17200-17203) against Defendant Chad Scherman and several other individuals operating on-line computer bulletin boards, and the MAPHIA and other bulletin boards as businesses of unknown origin. On December 9, 1993, the Court, the Honorable Fern M. Smith presiding, issued an ex parte Temporary Restraining Order, Seizure Order, and Order to Show Cause Re Why a Preliminary   [*682] Injunction Should Not Issue enjoining Defendants’ use of Plaintiffs’ SEGA trademark and the direct and/or contributory infringement of Plaintiffs’ copyrights. [**2]

A hearing was held before Judge Smith on December 17, 1993, on Plaintiffs’ motion for a preliminary injunction, pursuant to the order to show cause. At that hearing, Judge Smith continued the temporary restraining order in effect until further order of the Court. Thereafter, Defendant Paolo Rizzi, individually, filed a written stipulation to a preliminary injunction and confirmation of the seizure. Defendants Scherman and MAPHIA filed an opposition.

Following reassignment of this action to the undersigned, a further hearing was held on February 25, 1994. The Court now determines, having considered the pleadings, all papers filed by the parties, and the parties’ oral arguments, that a preliminary injunction should issue against Defendants Scherman and MAPHIA as ordered separately. Pursuant to F.R.C.P. 65(d), the Court makes the following Findings of Fact and Conclusions of Law in support of the preliminary injunction and confirmation of the seizure order:

FINDINGS OF FACT

I. FINDINGS SUPPORTING PRELIMINARY INJUNCTIVE RELIEF

A. The parties and their activities

1. Plaintiff Sega Enterprises, Ltd. (“SEL”), is a corporation organized and existing under the laws of Japan. Compl.   [**3]   P 1.

2. Plaintiff Sega of America, Inc. (“SOA”), is a California corporation with a principal place of business in this district in San Mateo, California. SOA is a wholly-owned subsidiary of SEL. SOA and SEL are hereinafter sometimes collectively referred to as “Sega” or “Plaintiffs.” Compl. P 2.

3. Defendant MAPHIA is a business of unknown structure doing business and located in San Francisco, California, within this District, engaged in the business of running a computer bulletin board and related activities. Yang Decl. P 12.

4. Defendant Chad Scherman (aka Chad Sherman, aka “Brujjo Digital”) is an individual residing in this district in San Francisco, California. Chad Scherman is in possession and/or control of the MAPHIA Bulletin Board, which is run from his residence where the computer and memory comprising the bulletin board are located, and does business as MAPHIA or Maphia Trading Company on such bulletin board. He is also one of the “system operators” of the MAPHIA bulletin board. Keene Decl. PP 2, 11.

B. The Business of Plaintiffs

5. Sega is a major manufacturer and distributor of computer video game systems and computer video games which are sold under the SEGA trademark, [**4]  a registered trademark of Sega Enterprises, Ltd. (Federal Registration No. 1,566,116, issued November 14, 1989) owned by Sega. Yang Decl. P 3, Exh. A.

6. Sega’s computer video game programs are the subject of copyright under the laws of the United States. Yang Decl. P 5; Compl. Exh. B.

7. Sega creates and develops its games and ensures the quality and reliability of the video game programs and products sold under SEGA trademarks. Yang Decl. P 4.

 8. The Sega game system consists of two major components sold by Sega: the game console and software programs stored on video game cartridges which are inserted into the base unit. Each cartridge contains a single game program. The base unit contains a microcomputer which, when connected to a television, permits individuals to play the video game stored on the inserted cartridge. Yang Decl. P 6.

9. The computer programs for the Sega video games are stored on a cartridge in a Read-Only Memory (“ROM”) chip. Sega’s video games cannot be copied using the game console. However, as noted below, running devices, called “copiers,” are designed to copy the video game programs from a Sega game cartridge onto other magnetic media such as hard and floppy  [**5]   disks. Yang Decl. PP 6, 21, 23. [*683]   C. Defendants’ Activities on the MAPHIA Bulletin Board

10. An electronic bulletin board consists of electronic storage media, such as computer memories or hard disks, which is attached to telephone lines via modem devices, and controlled by a computer. Yang Decl. P 12.