Sega Enterprises v. Maphia 857 F. Supp. 679

SEGA ENTERPRISES LTD. and SEGA OF AMERICA,
INC., Plaintiffs,

v. 

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.

   11. Third parties, known as "users," of electronic
bulletin boards can transfer information over the
telephone lines from their own computers to the
storage media on the bulletin board by a process
known as "uploading." Uploaded information is thereby
recorded on the storage media. Third party users can
also retrieve information from the electronic
bulletin board to their own computer memories by a
process known as "downloading." Video game programs,
such as Sega's video game programs, are one kind of
computer programs or information which can be
transferred by means of electronic bulletin boards.
Yang Decl. PP 18-19.

   12. Defendants MAPHIA and Chad Scherman operate an
electronic bulletin board called MAPHIA (hereinafter
"the MAPHIA bulletin board") . The MAPHIA bulletin
board is open to the public and, according to
Defendant Scherman's Opposition Memorandum, has
approximately 400  [**6]   users. Users of the MAPHIA
bulletin board communicate using aliases or
pseudonyms. "Brujjo Digital" appears as the alias
used by Defendant Chad Scherman as the system
operator of the MAPHIA bulletin board, and in
communicating with others. Keene Decl. P 2, 11; Yang
Decl. P 33.

   13. Data from the MAPHIA bulletin board indicates
that the MAPHIA bulletin board is economically linked
to another electronic bulletin board called
PSYCHOSIS. This data also indicates that Defendant
Scherman and the MAPHIA bulletin board are part of or
linked to a network of bulletin boards, called
PARSEC, for business purposes. Keene Decl. PP 12-16,
Exh. 5A.

   14. The evidence establishes that Sega's
copyrighted video games are available on and
transferred to and from the MAPHIA bulletin board by
users who upload and download games. Once a game is
uploaded to the MAPHIA bulletin board it may be
downloaded in its entirety by an unlimited number of
users. Keene Decl. PP 7, 9; Yang Decl. PP 18, 24.

   15. It appears that the copies of Sega's video
game programs on Defendants' bulletin board are
unauthorized copies of Sega's copyrighted video
games, having been uploaded there by users of
Defendant's bulletin board.   [**7]   Keene Decl. P 9.


   16. It has been shown by evidence in the form of
printouts from the data on Defendant's bulletin board
which was seized pursuant to this Court's Order and
on-line data captured from Defendant's bulletin
board, that the uploading and downloading of
unauthorized copies of Sega's copyrighted video games
is particularly known to Defendant Scherman and the
MAPHIA bulletin board. This evidence also indicates
that Defendant specifically solicited this copying
and expressed the desire that these video game
programs be placed on the MAPHIA bulletin board for
downloading purposes. Keene Decl. PP 7-16.

   17. Notwithstanding contrary assertions of
Defendant Scherman, there is evidence that MAPHIA
directly or through an affiliate sometimes charges a
direct fee for downloading privileges, or barters for
the privilege of downloading Sega's games.
Information on the MAPHIA bulletin board includes the
following passage:

Thank you for purchasing a Console Back Up Unit
[copier] from PARSEC TRADING. As a free bonus for
ordering from Dark Age, you receive a COMPLEMENTARY
Free Download Ratio on our Customer Support BBS. This
is if you cannot get a hold of SuperNintendo or Sega
Genesis  [**8]   games. You can download up to 10
megabytes, which is equal to approximately 20
normal-sized SuperNintendo or Genesis games.

After your 10 megabytes is used, you can purchase
full months of credit for only $ 35/month. You can
also prepay and order either 1 year of free downloads
for $ 200/year, or a lifetime of free downloads for
only $ 500.

Keene Decl. Exh. 5B at 2.

   18. Defendant thus provides downloading privileges
for Sega games to users in exchange   [*684]   for
the uploading of Sega games or other programs or
information or in exchange for payment for other
goods, such as copiers, or services, such as the
provision of credit card numbers to users. See Keene
Decl. PP 7-21.

   19. By utilizing the MAPHIA bulletin board, users
are able to make and distribute one or more copies of
Sega video game programs from a single copy of a Sega
video game program, and thereby obtain unauthorized
copies of Sega's copyrighted video game programs.
Yang Decl. P 24.

   20. This unauthorized copying of Sega video game
programs works to decrease Sega's sales of video game
cartridges. This unauthorized copying and
distribution further deprives Sega of control over
the quality of video games bearing its SEGA  [**9]  
and other trademarks. The effect on Sega's reputation
and market for video game cartridges may be
substantial and immeasurable. See Yang Decl. PP 4-6,
17, 30-32.

   21. Defendant has challenged the preliminary
injunction on the basis that he has not profited from
the distribution of Sega's programs. However, it
appears Defendant profits from the operation of the
MAPHIA bulletin board through direct payment and/or
barter. There are also several ways Defendant
indirectly profits. First, the existence of this
distribution network for Sega video game programs
increases the prestige of the MAPHIA bulletin board,
and Defendant's distribution of Sega games naturally
leads to an increased market for the video game
copiers and other goods or services sold by
Defendant. Keene Decl. P 9.


   22. Defendant further profits from the
distribution of Sega programs on the MAPHIA bulletin
board because the bulletin board gives rise to a need
for telephone communications which naturally leads to
an increased market for telephone calling card
numbers sold by the Defendant Scherman. Keene Decl.
PP 10-21.

   23. The copies of Sega's programs uploaded to and
downloaded from the MAPHIA Bulletin board are
substantially  [**10]   similar to Sega's video game
programs as stored in the cartridges sold by Sega.
Yang Decl. P 17.

   24. Plaintiffs' SEGA trademark appears on the
screen whenever a Sega game which has been downloaded
from the MAPHIA bulletin board is subsequently
played, and Sega's trademark is used on the file
descriptors by the MAPHIA bulletin board with the
knowledge and consent of Defendant Scherman. Yang
Decl. PP 18-19, 29.

   25. The copies of Sega's video game programs
downloaded by users from the MAPHIA bulletin board,
according to instructions and facilitated by
Defendant Scherman, are further unauthorized copies
of Sega's copyrighted video games, which, in addition
bear unauthorized use of Sega's registered trademarks.

   26. The Sega game programs maintained and
distributed through the MAPHIA bulletin board include
"pre-release" versions of games which are not
available to the public. Yang Decl. P 30.

   27. The directory of video game programs available
on MAPHIA also contain numerous references to video
game programs containing "patches," "fixes," and
problems which may have been introduced in the
copying process. Yang Decl. P 31.

   28. Bulletin board users and/or parties who may
receive copies of   [**11] Sega games from bulletin
board users are likely to confuse the unauthorized
copies downloaded and transferred from the MAPHIA
bulletin board with genuine Sega video game programs.

   29. Because Sega is unable to control the quality
of the games distributed under its trademarks on the
MAPHIA bulletin board as the MAPHIA has altered or
may have the opportunity to alter such game programs,
and the copies distributed by the MAPHIA bulletin
board do not contain the packaging and instruction
used by Sega, the Defendants' operation of the MAPHIA
bulletin board is likely to damage Sega's reputation
and the substantial goodwill which Sega has built up
in its trademarks.

D. Infringing Sales and Distribution of "Copiers"

   30. There is substantial evidence that Defendant
Scherman and the MAPHIA bulletin board are engaged in
advertising, distribution   [*685]   and selling
video game copiers, such as the so-called "Super
Magic Drive" and/or "Multi Game Hunter." See
generally, Keene Decl.

   31. Defendant's business plan as described by
Defendant Scherman's alias "Brujjo Digital," states:

As you know we have PARSEC TRADING CO. as our
business that sells everything from Copiers to Modems
to Hard Drives  [**12]   to Calling Cards (off the
record, hehe), and even Pentium Chips now. So, the
next step is a MEDIA BLITZ! Time to post
advertisements ASCIIS on every bbs you log onto! I'll
have some Advertisements ready
. . .

Also, we are selling Super Wild Cards, Pro Fighter
Q's and Super Magic Drives for AKIRA and that part of
PARSEC will be dedicated for him but me and CAFFEINE
will handle all the business side of that and paying
him the money and dealing with the customers, etc.

Keene Decl. P 15, Exh. 5A at 3.

   32. These copiers by Defendant's own admission are
used for the making of unauthorized copies of Sega's
video game programs and some purchasers thereof use
them so as to avoid purchasing Sega's game cartridges
from Sega. See generally, Def.'s Mem. in Opp. to
Prelim. Injunction. Users or others who receive
copies of the Sega video games on disk do not need to
purchase any genuine Sega games, but can play the
games directly from the disks using the copiers.

   33. The copiers sold and advertised by Defendant
come with downloading privileges to the purchaser,
giving the purchaser free Sega video game copyrighted
programs, so as to be able to duplicate, distribute
and play the games without  [**13]   purchase of Sega
game cartridges. Keene Decl. Exh. 5B.

   34. The copiers thus supplant the need to purchase
the genuine Sega video games.

   35. Defendant states without support that the
copiers are also capable of being used for other
purposes, such as game development or making back-up
copies, but such incidental capabilities have not
been shown to be the primary use of such copiers.

   36. There is no need to make archival copies of
ROM game cartridges. This is because the ROM
cartridge format is not susceptible to breakdown and
because defective cartridges are replaced by Sega.
Yang Decl. 25-28.

   37. The copiers are advertised and sold by
Defendant's MAPHIA bulletin board for $ 350. Keene
Decl. Exh. 3. The video game programs advertised by
Sega sell for between $ 30 and $ 70. Compl. P 15. It
is unlikely that customers would purchase a copier to
back-up games, which are on reliable cartridges, for
this price.

   38. The only substantial use of video game copiers
is to avoid having to buy video game cartridges from
Sega by copying the video game program.

II. FINDINGS SUPPORTING COLLECTION AND SEIZURE OF
EVIDENCE

   39. Sega undertook to collect evidence of the
above activities by having a Sega  [**14]   employee
gain access the MAPHIA bulletin board under a
pseudonym, as individuals generally do on the
bulletin board, using information supplied by an
authorized user who was an informant. Yang Decl. PP
11-13.

   40. Pursuant to the ex parte Temporary Restraining
Order and Seizure Order issued by Judge Smith on
December 9, 1993, a search of Defendant Scherman's
premises, where the computer and memory were located,
was conducted. Pursuant to the Order, Defendant
Scherman's computer and memory devices were seized,
the memory copied and returned to Defendant Scherman,
with the Sega games deleted. Keene Decl. PP 1-6.


   41. The Court made substantial findings in its
Order of December 9, 1993, in support of the
restraining and seizure order, which appear to have
been verified by the program copies and evidence
obtained from the memory devices comprising the
"MAPHIA" bulletin board, thus confirming the seizure
of such evidence. Keene Decl. PP 7-21.

   [*686]   CONCLUSIONS OF LAW

   1. To the extent facts are included in this
portion of the order, they are also deemed the
Court's findings of fact, and visa versa.

   2. This Court has jurisdiction of the causes of
action arising under copyright law (under  [**15]  
15 U.S.C. @ 101 et seq.), federal trademark law
(under 15 U.S.C @ 1051 et seq.), and federal claims
for unfair competition/false designation of origin
(under 15 U.S.C. @ 1125(a)) pursuant to 28 U.S.C. @
1338(a).

   3. This Court has jurisdiction of the causes of
action arising under California trade name law (under
California Business & Professions Code @ 14400 et
seq.), and California unfair competition law (under
California Business and Professions Code @ 14210,
17200-17203) pursuant to 28 U.S.C. 1338(b).

   4. Venue is proper in the federal district court
where certain Defendants reside and where acts of
trademark and copyright infringement occur. 28 U.S.C.
1391(b) and (c). Venue in the instant suit is proper
in the Northern District of California.

I. PRELIMINARY INJUNCTION

A. Legal standard

   5. Plaintiffs must demonstrate the following to be
entitled to preliminary injunctive relief: (1) a
combination of probable success on the merits and the
possibility  [**16]   of irreparable harm, or (2)
that there exist serious questions regarding the
merits and the balance of hardships tips sharply in
their favor. Rodeo Collection, Ltd. v. West Seventh,
812 F.2d 1215, 1217 (9th Cir. 1987); Apple Computer,
Inc. v. Formula Intern., Inc., 725 F.2d 521, 523 (9th
Cir. 1984)

B. Probable Success on the Merits

   Copyright Infringement

   6. To establish a prima facie case of copyright
infringement, Plaintiffs must prove (1) ownership of
a valid copyright in the infringed work, and (2)
"copying" by the Defendants. See Sid & Marty Krofft
Television Productions, Inc. v. McDonald's Corp., 562
F.2d 1157, 1162 (9th Cir. 1977); Original Appalachian
Artworks, Inc. v. Toy Loft, Inc., 684 F.2d 821, 824
(11th Cir. 1982); 3 Nimmer on Copyright, @ 13.01
(1985).


   7. Sega's certificates of registration establish a
prima facie valid copyright in its video game
programs. 17 U.S.C. @ 410(c); Apple Computer, Inc. v.
Formula Int'l Inc., 725 F.2d 521, 523 (9th Cir.
1984). Although  [**17]   the complaint and
declaration of Jack Yang list specific copyrights
infringed by Defendants, Plaintiffs seek and are
entitled to an order with respect to all of their
copyrighted video games. See Encyclopaedia Britannica
Educational Corp. v. Crooks, 542 F. Supp. 1156,
1187-88 & n.2 (W.D.N.Y. 1982).

   8. The unauthorized copying of copyrighted
computer programs is prima facie an infringement of
the copyright. See Mai Systems Corp. v. Peak
Computer, Inc., 991 F.2d 511, 518 (9th Cir. 1993),
cert. dismissed, 114 S. Ct. 671 (1994).

   9. Sega has established a prima facie case of
direct copyright infringement under 17 U.S.C. @ 501.
Sega has established that unauthorized copies of its
games are made when such games are uploaded to the
MAPHIA bulletin board, here with the knowledge of
Defendant Scherman. These copied games are thereby
placed on the storage media of the electronic
bulletin board by unknown users.

   10. Sega has established that unauthorized copies
of these games are also made when they are downloaded
to make additional copiers by users, which copying
[**18]   is facilitated and encouraged by the MAPHIA
bulletin board. See Mai Systems, supra, 991 F.2d at
519.

   11. "One who, with knowledge of the infringing
activity, induces, causes or materially contributes
to the infringing conduct of another," may be held
liable as a contributory infringer. Casella v.
Morris, 820 F.2d 362, 365 (11th Cir. 1987) (quoting
Gershwin Publishing Corp. v. Columbia Artists
Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)).

   12. Even if Defendants do not know exactly when
games will be uploaded to or [*687]   downloaded from
the MAPHIA bulletin board, their role in the copying,
including provision of facilities, direction,
knowledge and encouragement, amounts to contributory
copyright infringement. Id.; see also Playboy
Enterprises, Inc. v. Frena, 839 F. Supp. 1552, 1993
WL 522892 at p. 3. (M.D. Fla. 1993).

   13. Sega has established a likelihood of success
on the merits of showing a prima facie case of direct
and contributory infringement by Defendants'
operation of the MAPHIA bulletin board.

   14. Sega has also established a strong likelihood 
[**19]   of success on the merits of showing a prima
facie case of contributory infringement by
Defendants' advertising, sale and distribution,
directly or through its affiliated PARSEC bulletin
board network, of video game copiers. See Atari, Inc.
v. JS&A Group, Inc., 597 F. Supp. 5 (N.D. Ill. 1983).

   15. Because of the large number of users of the
MAPHIA bulletin board, and the potential of each user
to download an unknown number of copies of Sega video
game programs through the MAPHIA bulletin board,
Defendants' infringement cannot be viewed as a de
minimus circumstance. See Fisher v. Dees, 794 F.2d
432, 434-35 (9th Cir. 1986); Playboy v. Frena, supra,
1993 WL 522892 at p. 5.

   16. Defendants raise fair use as a defense to
copyright infringement. 17 U.S.C. @ 107 states:


Notwithstanding the provisions of sections 106 and
106A, the fair use of a copyrighted work, including
such use by reproduction in copies or phonorecords or
by any other means specified in that section, for
purposes such as criticism, comment, news reporting,
teaching . . . , scholarship,   [**20]   or research
is not an infringement of copyright. In determining
whether the use made of a work in any particular case
is a fair use the factors to be considered shall
include--

(1) the purpose and character of the use . . .;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used
in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market
for or the value of the copyrighted work.

   17. "To invoke the fair use exception, an
individual must possess an authorized copy of a
literary work." Atari Games Corp. v. Nintendo of
America, Inc., 975 F.2d 832, 843 (Fed. Cir. 1993).
Defendant Scherman has stated that he does not own
any Sega game cartridges. Scherman Decl. at 1.

   18. When copying is for the purpose of making
multiple copies of the original, and thereby saving
users the expense of purchasing additional authorized
copies, this militates against a finding of fair use
under the purpose of the use factor. American
Geophysical Union v. Texaco, Inc., 802 F. Supp. 1,
14-16 (S.D.N.Y. 1992).

   19. Because users of the MAPHIA bulletin board are
likely  [**21]   and encouraged to download Sega
games therefrom to avoid having to buy video game
cartridges from Sega, by which avoidance such users
and Defendants both profit, the commercial purpose
and character of the unauthorized copying weighs
against a finding of fair use. See Atari, Inc. v.
JS&A Group, Inc., 597 F. Supp. 5, 8 (N.D. Ill. 1983);
c.f. Lewis Galoob Toys, Inc. v. Nintendo of America,
Inc., 964 F.2d 965, 971 (9th Cir. 1992), cert.
denied, 123 L. Ed. 2d 149, 113 S. Ct. 1582 (1993).

   20. Because Sega video game programs are for
entertainment uses and involve fiction and fantasy,
consideration of the nature of the copyrighted work
weighs against a finding of fair use. Harper & Row
Publishers, Inc. v. Nation Enterprises, 471 U.S. 539,
563, 85 L. Ed. 2d 588, 105 S. Ct. 2218 (1985);
Playboy, supra, 1993 WL 522892 at p. 4.

   21. Because it appears that the entire game
programs are copied when Sega video game programs are
transferred over the MAPHIA bulletin board,
consideration of the amount  [**22]   and
substantiality of the portion copied weighs against a
finding of fair use. Id. at 5; 3 Nimmer @ 13.05
[A][3]; see also American Geophysical Union, supra,
802 F. Supp. at 17.

   22. "The fourth factor, the effect of the use upon
the market for or value of the   [*688]   copyrighted
work, 'is undoubtedly the single most important
element of fair use.'" Los Angeles News Service v.
Tullo, 973 F.2d 791, 798 (9th Cir. 1992) (quoting
Harper & Row, supra, 471 U.S. at 566).


   23. "To negate fair use one need only show that if
the challenged use 'should become widespread, it
would adversely affect the potential market for the
copyrighted work.'" Harper & Row, supra, 471 U.S. at
568 (quoting Sony Corp. of America v. Universal City
Studios, Inc., 464 U.S. 417, 451, 78 L. Ed. 2d 574,
104 S. Ct. 774 (1984)) (emphasis in original);
Playboy, supra, 1993 WL 522892 at 5; Lotus Dev. Corp.
v. Borland Int'l Inc., 831 F. Supp. 223, 243 (D.Mass.
1993).  [**23]

   24. Based on Defendants' own statement that 45,000
bulletin boards like MAPHIA operate in this country,
it is obvious that should the unauthorized copying of
Sega's video games by Defendants and others become
widespread, there would be a substantial and
immeasurable adverse effect on the market for Sega's
copyrighted video game programs. Consideration of the
effect on the market for Sega's copyrighted works
weighs heavily against a finding of fair use. See
Def.'s Opp. at 7.

   25. Accordingly, it is unlikely that Defendants
will be able to establish a fair use defense at
trial, and Sega is likely to succeed in establishing
that Defendant's MAPHIA bulletin board activities
represent direct and contributory infringement under
the Copyright Law.

   Federal Trademark Infringement

   26. A prima facie case for trademark infringement
under the Lanham Act is established by a showing that
(1) the mark is owned by or associated with a
particular plaintiff and (2) that the Defendants' use
of the mark is likely to cause confusion or mistake
among the public. See Jockey Club, Inc. v. Jockey
Club of Las Vegas, 595 F.2d 1167 (9th Cir. 1979).

   27. There is no question  [**24]   that the
trademarks at issue are owned by Sega. See Compl.
Exhs. A, F. Sega's federal trademark registration is
conclusive evidence of Sega's exclusive right to use
the registered marks in commerce. 15 U.S.C. @ 1115(a).

   28. Plaintiffs need not prove that any person
actually has been mistaken because of Defendants'
use; all that is required is "likelihood" of
confusion, mistake or deception. New West Corp. v.
NYM Co. of California, Inc., 595 F.2d 1194, 1201-02
(9th Cir. 1979). Plaintiffs need not show that users
of the bulletin boards are likely to be confused.
Once a product is put into commerce, confusion,
mistake, or deception occurring at some future time
is sufficient to establish liability for trademark
infringement. Rolex Watch, U.S.A., Inc. v. Canner,
645 F. Supp. 484, 492 (S.D.Fla. 1986).

   29. When a game copied from Defendants' bulletin
board is played, that game begins with a screen
showing the federally registered SEGA trademark and
the Sega logo. Confusion, if not on the part of
bulletin board users, is inevitable on the part of
third parties who may see the copied games  [**25]  
after they enter the stream of commerce.

   30. Accordingly, Sega is likely to prevail on the
merits in establishing that Defendant's use of Sega's
trademark on its files sections and file descriptors,
and on programs made available and encouraged for
downloading from Defendant's MAPHIA bulletin board,
constitutes trademark infringement under the Lanham
Act.

   False Designation of Origin

   31. To prevail on its unfair competition claims
under the Lanham Act, Sega must similarly establish
that the public is likely to be deceived or confused
by the similarity of the marks. New West Corp.,
supra, 595 F.2d at 1201.


   32. Sega has established a prima facie case of
federal unfair competition and false designation of
origin. 15 U.S.C @ 1125(a).

C. Irreparable Harm

   33. A showing of reasonable likelihood of success
on the merits of a copyright infringement claim
raises a presumption of irreparable harm. Apple
Computer, supra, 725 F.2d at 525.

   [*689]   34. Damages occasioned by trademark
infringement are by their very nature irreparable and
not susceptible of adequate measurement for remedy at
law.   [**26]   International Jensen, Inc. v.
Metrosound U.S.A., Inc., 4 F.3d 819, 827 (9th Cir.
1993); Processed Plastic Co. v. Warner
Communications, 675 F.2d 852, 858 (7th Cir. 1982).

   35. Accordingly, Plaintiffs need not make a
detailed showing of irreparable injury since they
have demonstrated a prima facie case of copyright and
trademark infringement. Apple Computer, supra, 725
F.2d at 525; Processed Plastic, supra, 675 F.2d at
858.

   36. It is clear that Defendants' activities
subject Sega to the possibility of irreparable harm.
Each illegal copy of a Sega game which Defendants
distribute deprives Sega of revenue. Moreover,
distribution of altered, inferior copies of Sega
games and of confidential, pre-release unperfected
games subjects Sega to damage to its business and
reputation. See Franklin Mint, Inc. v. Franklin Mint,
Ltd., 331 F. Supp. 827, 830 (E.D.Pa. 1971); Consumers
Union of U.S., Inc. v. Theodore Hamm Brewing Co., 314
F. Supp. 697, 700 (D.Conn. 1970).

   37. Accordingly, Sega has established that
Defendants'   [**27]   operation of the MAPHIA
bulletin board and sale of video game copiers as
above described have caused and are likely to
continue to cause irreparable harm to Sega.

D. Conclusion

   38. Sega has shown a high probability of success
on the merits at trial, and a likelihood of
irreparable injury to Plaintiffs, Plaintiffs' market
and reputation.

   39. Accordingly, Sega has established that it is
entitled to preliminary injunctive relief under 15
U.S.C. @ 1116 and under principles of equity.

II. COLLECTION AND SEIZURE OF EVIDENCE

   40. Defendants allege that Sega's access to the
MAPHIA bulletin board through use of a pseudonym
constituted a violation of the Electronic
Communications and Transactional Records Act, and
maintains that the Seizure Order was thereby
inappropriate. The Electronic Communications and
Transactional Records Act makes it illegal to
"intentionally access without authorization a
facility through which an electronic communication
service is provided." 18 U.S.C. @ 2701(a).


   41. Because the MAPHIA bulletin board is open to
the public, and normally accessed by use of an alias
or pseudonym, it would  [**28]   appear that Sega's
employee's pseudonymous access was authorized.
Furthermore, the Act contains an exception for access
which is authorized by a user of an electronic
service with respect to a communication for that
user. 18 U.S.C. 2701(c)(2). The Sega employee's
access appears to have been authorized directly or
indirectly by a MAPHIA user whose authorized status
is not disputed. Therefore, no violation of 18 U.S.C.
@ 2701(a) took place.

   42. Moreover, the fact that a plaintiff's
employee, in the course of investigating a copyright
or trademark infringement, fails to identify herself
as such to the defendant does not provide a defense
to the infringement when such identification would
have defeated the investigation. Reebok International
Ltd. v. Jemmett, 1988 U.S. Dist. LEXIS 16504, 6
U.S.P.Q.2D (BNA) 1715 (S.D. Cal. 1988); Olan Mills,
Inc. v. Linn Photo Co., 795 F. Supp. 1423 (N.D. Iowa
1991).

   43. Defendant Scherman challenges the description
of his copies of Sega's programs as "counterfeit" and
maintains that the Seizure Order is thereby
inappropriate.   [**29]

   44. There is support for the characterization of
the Sega games transferred over the MAPHIA bulletin
board as "counterfeit" under the Lanham Act. See 15
U.S.C. @ 1127.

   45. As stated by Judge Smith at the hearing on
December 17, 1993, the temporary restraining and
seizure order was issued on December 9, 1993 in
compliance with the Lanham Act and not in violation
of the Fourth Amendment. Dealer Advertising
Development, Inc. v. Barbara Allan Financial
Advertising, 197 U.S.P.Q. (BNA) 611, 614 (W.D. Mich.
1977).

   [*690]   46. The ex parte temporary restraining
order and seizure order issued by Judge Smith on
December 9, 1993, is confirmed as appropriate
procedure here for Defendant's computer bulletin
board. The counterfeit and unauthorized copies of
Sega's video game programs were believed to be, and
found to be, located on Defendant Scherman's
premises, and such items were found on that
Defendant's computer and memory.

Dated: March 28, 1994

   CLAUDIA WILKEN

   UNITED STATES DISTRICT JUDGE

   PRELIMINARY INJUNCTION AND ORDER CONFIRMING SEIZURE

   The Court hereby enters an Order confirming
seizure and for Preliminary Injunction   [**30]   as
follows:


   1. The seizure executed on December 11, 1993, at
Defendant Chad Scherman's address, pursuant to the
Court's Order dated December 9, 1993 is hereby
confirmed. During the pendency of this action, the
software, programs, data, memory, duplicating and
decoding and computing machines, and other infringing
merchandise seized pursuant to the provisions of that
Order shall be impounded in the custody of
Plaintiffs' counsel, a Special Master or other
substitute custodian to be agreed upon by the
parties. If the parties cannot agree upon a
custodian, they shall bring an appropriate motion
before Magistrate Judge Woodruff;
   2. Defendants Chad Scherman and the computer
bulletin board Maphia and d/b/a MAPHIA, MAPHIA
TRADING COMPANY, their directors, principals,
officers, agents, servants, employees, systems
operators, successors and assigns, and all those in
active concert or participation with them, are hereby
enjoined, during the pendency of this action, from
engaging in any of the following:

(a) (i) imitating, copying or making unauthorized use
of Plaintiffs' registered and unregistered
trademarks, including but not limited to the SEGA
trademark or the works protected by Plaintiffs'  
[**31]   copyrights or which are confidential and
proprietary to Plaintiffs;

   (ii) manufacturing, producing, distributing,
circulating, selling or bartering, offering for sale,
advertising, promoting, displaying or transferring or
facilitating the transfer of, any computer video
games bearing any simulation, reproduction,
counterfeit, copy or colorable imitation of
Plaintiffs' SEGA trademark or Plaintiffs' copyrighted
works, including Sega's video game titles, or video
game copiers which are designed to copy computer
video games bearing the SEGA trademark or Plaintiff's
copyrighted works;

   (iii) using any simulation, reproduction,
counterfeit, copy or colorable imitation of
Plaintiffs' trademarks or of Plaintiffs' copyrighted
works in connection with the promotion,
advertisement, display, barter, sale, offering for
sale or barter, manufacture, production, circulation,
transfer or distribution, by any electronic,
computer, or other means, of any product or computer
game;

   (iv) engaging in any other activity constituting
an infringement of Plaintiffs' trademarks or
copyrights, or any other activity causing unfair
competition with Plaintiffs;

   (v) using any false designation of origin or false
description  [**32]   or representation which is
likely to lead the public erroneously to believe that
computer video games or other products maintained,
distributed, transferred, made available for
transfer, offered for sale, sold, displayed or
advertised by Defendants or made accessible in any
manner to users of The Sewer Line, MAPHIA, PSYCHOSIS,
or other computer bulletin boards, is in any manner
associated or connected with Plaintiffs or
Plaintiffs' genuine products, or is sold,
manufactured, licensed, sponsored, approved, or
authorized by Plaintiffs, when such is not true;

   (vi) otherwise displaying, transferring or making
available for downloading or transfer any computer
video games or other software or data products
containing unauthorized duplications or copies of
Plaintiffs' copyrighted computer video games or
bearing Plaintiffs' registered SEGA or other
trademarks;

   (vii) assisting, aiding or abetting any other
person or business entity in engaging in or
performing any of the activities   [*691]   referred
to in subparagraphs (i) through (vi) above; and


   (viii) maintaining, retaining or allowing others
to maintain or retain in any file or other format
accessible to users or subscribers of MAPHIA,
PSYCHOSIS, [**33]   or any bulletin board, any
version of Plaintiffs' trademarks or Plaintiffs'
copyrighted works, whether in any computer, computer
memory, magnetic storage device, disk, tape, or
otherwise -- including without limitation, retention
in any manner that can be accessed, copied,
distributed or counterfeited by others;

   (b) moving, (except to deliver to Plaintiffs'
counsel or the substitute custodian), destroying,
erasing or otherwise disposing of, any video games,
data or indexes or directories embodying any
unauthorized duplications of Plaintiffs' copyrighted
video games or any video games, tapes, memory media,
or other merchandise or data, games, indexes or
directories, bearing Plaintiff's trademarks or trade
names;

   (c) removing (except to deliver to Plaintiff's
counsel or the substitute custodian), erasing,
destroying, or otherwise disposing of any
manufacturing, copying or duplicating or decoding
apparatus or any databases, directories or business
records or documents relating in any way to MAPHIA or
any other bulletin boards operated by Defendants, or
the manufacture, duplication, acquisition, transfer,
downloading, uploading, purchase, distribution,
renting, or sale of copiers or  [**34]   computer
video games embodying duplications of Plaintiffs'
copyrighted game programs and/or bearing Plaintiffs'
SEGA or other trademarks or trade names;

   3. Defendants shall deliver up to Plaintiffs'
counsel, Neil A. Smith, Limbach & Limbach, 2001 Ferry
Building, San Francisco, California 94111, or to the
substitute custodian, for impoundment any
unauthorized copies of Plaintiffs' copyrighted video
games or video games bearing the SEGA trademark and
video game copiers, remaining in their possession,
custody or control;

   4. Plaintiffs shall maintain the bond surety
previously posted in the amount of $ 50,000.00 for
this Preliminary Injunction as security determined
adequate for this Preliminary Injunction.

   IT IS SO ORDERED.

Dated: March 28, 1994

   CLAUDIA WILKEN

   UNITED STATES DISTRICT JUDGE

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