Last year, in an article (brilliantly, we think) entitled 'Maybe Modding Isn't So Marvellous"?) we reported that Marvel Comics had sued the publisher and developer of City of Heros. Marvel claimed that the character customization functionality in the game allows players to create superheroes that closely resemble trade-marked Marvel comic characters like "The Incredible Hulk" and the "X-Men".
Marvel's lawsuit recently suffered a major setback more than half of Marvel's claims were dismissed"?including Marvel's claim that the defendants had directly infringed Marvel's registered trade-marks.
On the copyright issue, the judge concluded that the character customization feature has a substantial non-infringing use (for example, making superheros who look like lawyers). This meant that the defendants shouldn't be held liable for contributory copyright infringement.