Circumvention of TPMs—should PC Box play the long game with Nintendo?

What technical protection measures featured in this case?

Case C-355/12 Nintendo and Others v PC Box 

Under the Information Society Directive, companies’ technical protection measures (TPMs) employed to protect against acts unauthorised by copyright and database right owners are legally protected. The scope of that protection and the actual use of devices, products or components capable of circumventing effective TPMs was put under the spotlight in this case.

Loosely, the factual matrix was this—Nintendo companies have adopted TPMs whereby their portable consoles contain a recognition system and their video games, encrypted code. Provided together, these measures prevent the use of illegal copies of video games but also of programs, games and multimedia content that does not originate from Nintendo. PC Box markets original Nintendo consoles with additional software from independent manufacturers. These ‘homebrew applications’, created specifically for the Nintendo consoles, result in circumvention of the TPM.

Unsurprisingly, Nintendo sued PC Box. The Tribunale di Milano referred a couple of questions to the CJEU.

What clarification did the Tribunale di Milano seek from the CJEU?

The court wanted to know, in essence:

• whether an effective TPM, under the Information Society Directive, covered measures comprising equipping not only the housing system containing the protected work, such as the videogame, with a recognition device, but also portable equipment or consoles intended to ensure access to those games and their use

• what criteria should  be used to assess the scope of legal protection against circumvention of TPMs—in particular whether it was correct to examine:

  • the particular intended use attributed by the rightholder to the product (here the Nintendo consoles) in which the protected content is inserted
  • the scope, nature and use of the devices products or components capable of circumventing TPMs

What did the CJEU clarify in relation to TPMs?

The CJEU decided:

• technological measures such as those partly incorporated in the physical housing of videogames and partly in consoles and which require interaction between them, fall within the concept of ‘effective technological measures’ if their objective is to prevent or to limit acts adversely affecting the rightholder

• criteria for examining the scope of legal protection against circumventing TPMs should include the principle of proportionality and should not prohibit devices or activities which have a commercially significant purpose or use other than to circumvent the technical protection

• it is necessary to examine whether other measures or measures which are not installed in consoles could have caused less interference with the activities of third parties not requiring authorisation by the rightholder of copyright or fewer limitations to those activities, while still providing comparable protection of that rightholder’s rights

• it is relevant to take account of the relative costs of different types of technological measures, of technological and practical aspects of their implementation, and of a comparison of the effectiveness of those different types of technological measures as regards the protection of rightholder’s rights

• the assessment of the scope of the legal protection at issue would not be carried out by reference to the particular use of consoles, as envisaged by the copyright holder—the evidence of actual use which is made of them by third parties will, in the light of the circumstances at issue, be particularly relevant

What does Nintendo mean for rightsholders?

On the plus side, manufacturers of consoles have clarification that they may remain protected when they employ TPMs partly installed in consoles and partly in videogames. This is, however, subject to factors that may influence whether legal protections apply to such TPMs.

This case has highlighted factors that now have a part to play in determining whether TPMs are protected when companies like PC Box produce devices capable of circumventing them. In this case, the CJEU stated that the referring court may, in particular, examine how often PC Box’s devices are in fact used in order to allow unauthorised copies of Nintendo and Nintendo-licensed games to be used on Nintendo consoles and how often that equipment is used for purposes which do not infringe copyright in Nintendo and Nintendo-licensed games. As with most things European, this is going to be a balancing act.

Many tests (and definitions) have been drawn together in this case, such as proportionality, ‘commercially significant purpose’, taking account of relative costs of different measures and actual use. These are likely to require further clarification at national court level in order to iron out some parameters and the weight that will be given to each. For example, it is not immediately obvious what kind or level of factual evidence will be acceptable on actual use. Practically, acquiring evidence of this kind may not prove to be particularly straightforward and may add a layer of cost to these disputes.

Manufacturers of consoles and videogames are probably going to end up spending more time in research and development of the TPMs they intend to implement. This is likely to increase costs for manufacturers like Nintendo, although technology may provide a more inexpensive solution where devices can delineate between different types of circumventing use.

What does Nintendo say about exhaustion of rights of distribution of videogames?

In UsedSoft GmbH v Oracle International Corp: Case C-128/11 [2012] All ER (EC) 1220 Directive 2009/24/EC (the Computer Program Directive) was interpreted as meaning that the right of distribution of a copy of a computer program is exhausted if the copyright holder authorises the downloading of that copy from the internet. There was speculation at the time as to whether exhaustion of the distribution right would be extended beyond computer programs to other digital works.

In Nintendo, the CJEU indicated that computer programs would remain under the protection of the Computer Program Directive, while videogames would be protected under the Information Society Directive because they:

‘constitute complex matter comprising not only a computer program but also graphic and sound elements, which…have a unique creative value which cannot be reduced to that encryption…parts of a videogame, in this case, the graphic and sound elements, are part of its originality, are protected, together with the entire work, by copyright in the context of the system established by Directive 2001/29/EC.’

Lawyers will be looking for further clarification of this indication that videogames are not likely to be subject to the UsedSoft decision on exhaustion of the right of distribution.

Joshy Thomas, solicitor in the Lexis®PSL IP & IT analysis.

Area of Interest