MONKEY BUSINESS

(This is an archived case summary)

This was an appeal from a judgment of the United States District Court for the Southern District of New York in favour of counterclaims brought by the defendants, Nintendo Co., Ltd. and Nintendo of America, Inc. (Nintendo), against plaintiff Universal City Studios, Inc. (Universal).

This case represents the last round of dispute between Universal and Nintendo over whether Nintendo had infringed Universal's “King Kong” trade-mark by marketing its popular video game ”Donkey Kong”. The District Court, in 1983, on motions for summary judgment, dismissed Universal's complaint of trade-mark infringement and unfair competition against Nintendo (Universal City Studios v. Nintendo Co., 578 F.Supp. 911 (S.D.N.Y.1983)). The Court of Appeals later affirmed that judgment in Universal Studios v. Nintendo Co., 746 F.2d 112 (2d Cir.1984).

The District Court then proceeded to try Nintendo's counterclaims against Universal. On July 29, 1985, the District Court ruled for Nintendo on part of its tortious interference counterclaim; for Nintendo on its vicarious copyright infringement counterclaim; and against Nintendo on its unjust enrichment counterclaim (Universal City Studios v. Nintendo Co., 615 F.Supp. 838 (S.D.N.Y.1985)). The court also awarded Nintendo punitive damages for tortious interference, attorney's fees for successfully defending against Universal's trade-mark infringement claim, and attorney's fees for successfully prosecuting its vicarious copyright infringement counterclaim. Both parties then appealed on each of the claims it lost.

In this appeal, the Court of Appeal upheld the lower court’s ruling that (1) Universal tortiously interfered with contractual relations by sending “cease and desist” letters to Nintendo's “Donkey Kong” licensees; (2) an award of attorney's fees was proper; (3) the award of punitive damages on tortious interference counterclaim was appropriate; (4) Universal had vicariously infringed “Donkey Kong” copyright by licensing a competing King Kong game; and (5) the “Donkey Kong” copyright holder was not entitled to damages for alleged tortious interference with license agreements.

Tortious Interference with Contractual Relations
Universal did not have a good-faith basis for sending “cease and desist” letters to Nintendo's “Donkey Kong” licensees alleging infringement of Universal's trade-mark rights. The Court found that Nintendo was entitled to damages for tortious interference with contractual relations because, in a suit against the maker of the original King Kong movie, Universal had successfully argued that the name ”King Kong” was in the public domain.

Punitive Damages for Tortious Interference
The Court also held that punitive damages were appropriate for Nintendo's tortious interference counterclaim. Universal had tried to enforce trade-mark rights that the studio knew it did not have. Moreover, Universal did not stop at asserting its rights against Nintendo, but embarked on a deliberate and systematic campaign to coerce third-party licensees to either stop marketing “Donkey Kong” products or to pay royalties to Universal. The Court held that Universal had engaged in conduct which amounted to abuse of judicial process by arguing in prior litigation that ”King Kong” was part of public domain, and then asserting against Nintendo that ”King Kong” was not part of public domain, and that Universal possessed rights in that mark.

Vicarious Infringement
The District Court found that Universal had vicariously infringed Nintendo's copyright in “Donkey Kong” by licensing the competing King Kong game. The Court found that Universal knowingly contributed to this infringement, and awarded Nintendo the profits Universal accrued on the Tiger licence.

On appeal, Universal argued that the District Court erred by failing to specify which part of Nintendo's arcade game represented protectable expression as distinguished from the underlying and unprotectable idea. Universal also argued that the characters involved in “Donkey Kong” are not protectable because they are not “wholly fanciful.”
The Court of Appeal agreed with the court below and recognised that though the game characters themselves were not protectable, the “interaction” of the characters, obstacles, background and music were “arbitrary, fanciful, and sufficiently distinctive such that they deserve protection.”

An overview of this series of cases is available at GameSpy.com’s Universal Goes Ape The 25 Dumbest Moments in Gaming.”

Universal City Studios, Inc. v. Nintendo Company Ltd. and Nintendo of America, Inc.
1986, US Ct of Appeals, 2nd Cir.
797 F.2d 70
KEYWORDS: trademark infringement unjust enrichment - contributory copyright infringement - contractual interference - Nintendo - King Kong - counterclaim - appeal
SUMMARY BY: Arsen Krekovic