Center for Advanced Study & Research on Intellectual Property

 

CASRIP Newsletter - Autumn 1999, Volume 6, Issue 2

Is a Video Game a Cinematographic Work? - Osaka District Court Confirms the Application of the Distribution Right for a Cinematographic Work to a Video Game.

By Masaya Uchimura

After years of litigation, the issue of whether a video game should be protected as a "cinematographic work", as well as a computer program, under Japan's Copyright Law may be headed for final resolution. This issue has been litigated in and out of court since "Pack-man" and "Donkey Kong Jr." appeared in the market. The District Courts in Tokyo and Osaka, the courts that adjudicate the majority of IP cases as an initial forum, as well as a star-studded group of IP lawyers on both sides, have grappled with the issue in an attempt to reach a final resolution. In May 1999 the Tokyo District Court held, in a declaratory judgment action, that a video game is not a "cinematographic work" under Japan's Copyright Law. Six months later, however, the Osaka District Court delivered a contrary decision. It held that the definition of "cinematographic work" is not limited to a movie for theatrical usage and thus includes plaintiffs' video games. There have been several other court decisions, a majority of which agree with the Osaka court: a video game is a cinematographic work.

The reasons that this issue remains hotly contested, both legally and economically, are twofold. First, since video games did not exist when the cinematographic work as well as its distribution right were defined in the Copyright Law, the statutory language still does not expressly provide an adequate categorization for a video game. Several judicial opinions have addressed this issue; however, most were decisions by lower courts. Faced with the rapid advancement of computer software technology, it is clear that the appellate courts must clarify whether or not these previous holdings remain valid and therefore whether or not amendment of the law will be necessary.

The second and more important reason for the repeated litigation on this issue is that the video game industry has achieved the maximum benefit from the distribution right based on the majority decisions. Japan's Copyright Law grants the distribution right only to the author of a "cinematographic work". The distribution right has been construed as inexhaustible even after the first sale, due to its legislative intent to protect the distribution systems of movies. If a video game comes under the definition of a "cinematographic work" its authors will enjoy an inexhaustible right and may prohibit the sales of secondhand video games, as they have, thereby enhancing the sales of new products. If it does not, its authors will have to be satisfied with the other rights granted upon a general computer program and allow the circulation of secondhand products, reducing the sales of new products.

As an economic matter, there might be reasonable grounds for maintaining or even furthering the prosperity of the video game industry, which is obviously one of Japan's lively businesses, particularly in light of the recent economic slow down in Japan. On the other hand, doesn't it lack balance among the authors of other kinds of works? Isn't the video game industry unfairly benefiting from the distribution right that resulted from the long efforts of the movie industry? Wouldn't it be better for consumers, if they could buy the games cheaper in the secondhand market? In his opinion, even the Osaka District Court judge implied that there must be limits under the present law and expressed the need for amendments. In dicta, the judge states "As a legislative discussion, it seems that there can be an objection to the standpoint that a copyright owner has an inexhaustible distribution right. However, this court holds that it is appropriate to construe the existing Copyright Law as previously mentioned."

The Tokyo case has already been appealed. The Osaka case will probably be appealed, too. Both cases are likely to go to the court of last resort, or at least I hope so. Here I present the translation of the holding in the Osaka District Court case.

Issues

I. Whether a video game comes under the definition of "cinematographic work" in the Copyright Law?

II. Whether the distribution right justifiably applies to the video game as well?

III. Whether the distribution right is exhausted by the first sale?

Holdings

I. Yes. Plaintiffs' video games are cinematographic works, because they are expressed by a process producing visual or audio-visual effects analogous to those of cinematography and fixed in material forms, as defined in the Copyright Law.

II. Yes. The Copyright Law prescribes that the author of a cinematographic work owns the exclusive distribution right and there is no distinction among the authors of cinematographic works.

III. No. Considering the movie distribution systems that created the background for the legislation, the distribution right cannot be construed as exhaustible with the first sale.

Reasons

I. Category of Video Games

1. The Copyright Law defines a work as "a production in which thoughts or sentiments are expressed in a creative way and which falls within the literary, scientific, artistic or musical domain" and illustrates "a cinematographic work" as an example. As for the "cinematographic work", the Copyright Law lays down the scope of authors (Art.16), the ownership of its copyright (Art.29), and the special rule on the period of protection (Art.54). Moreover, with respect to the right to exploit from the cinematographic work, it is prescribed that its author has the exclusive right to present publicly his work and to distribute its copies, which are not granted upon other works. Although the Copyright Law does not expressly provide the definition of "a movie", it defines "a cinematographic work" as including a work expressed by a process producing visual or audio-visual effects analogous to those of cinematography and fixed in some material form. (Art.2 (3)) Accordingly, "a cinematographic work" under the Copyright Law includes works other than a movie in its original meaning, such as a theatrical movie, and they have to satisfy the following statutory requirements in order to be protected under the Copyright Law:

(1) Expressed by a process producing visual or audio-visual effects analogous to those of cinematography (the way of expression);

(2) Fixed in some material form (the form of existence); and

(3) Is a work (the content).

Defendants contend against the game software being a cinematographic work, and primarily argue on (1) and (2).

2. "Expressed by a process producing visual or audio-visual effects analogous to those of cinematography"

(1) As mentioned above, the Copyright Law regards "a movie" as a given concept and does not have a provision on its definition. Considering the general meaning of a movie, the way of expression of a theatrical movie, which is obviously an inherent meaning of a movie, as well as the definition of "cinematographic presentation" as "the projection of a cinematographic work on the screen or other material forms, and includes such an intangible reproduction of sounds fixed in that cinematographic work as made in company with its projection", it is adequate to construe "expressed by a process producing visual or audio-visual effects analogous to those of cinematography" as the work which produces visual or audio-visual effects similar to those of a movie, namely, the material form of expression with the visual effect to show numbers of still pictures as moving pictures, using the residual phenomena in eyes, analogously to a movie, by means of rapidly projecting them in sequence on a screen, TV tube, liquid crystal display, or other media, or that of expression with an additional visual effects which synchronize the sounds and the pictures.

(2) Defendants argue that game software is not a cinematographic work. In order to be a cinematographic work, it must express "thoughts or sentiments" by "a process producing visual or audio-visual effects analogous to those of cinematography". Defendants also argue that the "thoughts and sentiments" expressed by the cinematographic work are the "thoughts and sentiments carried throughout a whole movie" thus the sequential pictures which do not convey them to a viewer are not cinematographic works, since game software shows the different sequential pictures at every play.

Admittedly it must express "thoughts or sentiments" by "a process producing visual or audio-visual effects analogous to those of cinematography" in order to be "a cinematographic work". However, it is natural to construe, from the statutory language, "expressed by a process producing visual or audio-visual effects analogous to those of cinematography (the requirement regarding the way of expression)" as referring to the visual or audio-visual aspects as "a cinematographic effects". There is no ground to construe that "a cinematographic work" must have the sequential pictures for the requirement regarding the way of expression, as interpreted by Defendants. Defendants' argument should be a matter of the requirement regarding a work rather than the way of expression. Therefore, we review it in 4.

Certainly in theatrical movies, a film is made though intellectual activities involving the devisal of camera works, techniques of montage and cutting, and film editing, by making pictures creative in composition, selecting and assorting them in certain sequence, and synchronizing them with sounds. By its cinematographic presentation, the sequential pictures are brought about as the expression of certain thoughts and sentiments. Consequently, the cinematographic presentation of multiple print films, as the reproduction of the film, at numbers of theaters makes it possible to give the same audio-visual effects as the expression of the same thoughts and sentiments to numbers of viewers beyond time and space. On the other hand, game software has a difference in that it shows different sequential pictures on a screen at every play. Nevertheless, a "cinematographic work" is not limited to a theatrical movie or the one that bears the property of the theatrical movie. There is no necessity to construe the form-of-expression requirement as to a "cinematographic work" as limited to the characteristics particular to theatrical movies.

(3) Since the game software presently manufactured and sold in Japan has various visual and audio expressions, whether the game software in question comes under a work "expressed by a process producing visual or audio-visual effects analogous to those of cinematography" should be determined upon each software.

This court finds that each game software can be referred to, without much difficulty, as being expressed by a process producing visual or audio-visual effects similar to those of an animation movie for the general theatrical or broadcasting purpose, since each game software consists of sequentially animated pictures, each has realistic sequential movement by using computer graphics, and each involves a devise to enhance a viewer's live feeling, coupled with the sound effects and background music synchronized with the pictures. Therefore, each game software is sufficiently referred to as being "expressed by a process producing visual or audio-visual effects analogous to those of cinematography."

3. Fixation

(1) The Copyright Law requires only a cinematographic work to "be fixed in a material form." This is considered to correspond to the Berne Convention Article 2(2) "it shall, however, be a matter for legislation in the countries of the Union to prescribe that works in general or any specified categories of works shall not be protected unless they have been fixed in some material form."

Here we consider the meaning of this fixation requirement: The Fourth Sub-Committee, responsible for cinematographic works, reviewed the fixation requirement in light of the treatment of live broadcasting programs on TV in the Copyright System Council, which deliberated the amendment of the copyright system from 1962 to 1966. In May 1965, the Sub-Committee determined that it was problematic at the time to grasp a cinematographic work only by its function, namely the function as a work to make it perceivable a sequence of pictures. It then stated "we decided to consider a cinematographic work as well as a work obtained by means analogous to cinematography to be the fixed form of visual or audio-visual source by which the sequential pictures can be replayed in a plane medium" in the final report published. Based on this, the Copyright Law, requiring the fixation of a cinematographic work, was drafted and enacted as the existing Copyright Law. In the Stockholm Conference on Amendment of the Berne Convention, there was discussion, along with the treatment of broadcasting movies, on whether to require the fixation of a cinematographic work, and it was eventually entrusted to the legislation in each nation. Our Copyright Law does not require the fixation of works in general, but only of a cinematographic work. In view of this, it is unreasonable to consider the fixation, the requirement of the cinematographic work under Copyright Law, to be related the nature of the work. Rather, we should consider that the fixation was required simply in order not to include a live broadcasting program of movies in cinematographic works. Consequently, it is reasonable to construe the fixation requirement simply as a function to exclude the sequential pictures, which vanish at the time of formation, from the cinematographic works, and to construe the requirement as fulfilled if a work is fixed in some material form clarifying its existence and ownership.

(2) Defendants assert that "being fixed in a material form" means the situation where a work continues to exist, regardless of its identity, by linking itself to a material form and the work, being a specific expression, is available to reproduce. However, the Berne Convention does not require a cinematographic work to be fixed in order to be copyrightable, and it is legislatively possible to adopt the protection for cinematographic works not fixed in a material form. The fixation requirement was discussed in relation to the treatment of live broadcasting program in the deliberation of the legislative process. In addition, we can not find any particular ground to construe the existing Copyright Law as having the fixation requirement carry the meaning Defendants assert. Therefore, we cannot accept Defendant's assertion.

(3) Considering the fixation of each game software, they do not lack the fixation requirement, since they express the sequential pictures by showing the picture data, which are extracted by the program stored in the CD-ROM, at the designated position in a screen, and such data are recorded on the CD-ROM.

(4) Video games do no fix the content or sequence of the concrete pictures which appear on a screen, since the they differ at every play by a player's operation of a controller, even using the same software. However, these changes of pictures and sounds are within the range preset by the program. Therefore, it does not mean that the games are not fixed because the same series of pictures and sounds do not always appear. It should not be construed that only the work that always plays the same sequential pictures, such as movies, is "fixed in a material form."

4. Work

Considering the content of each video game in question, we can affirm that they are works, since they all concretely express the product of intellectual, creative mental activities by the authors. Although the game software changes the actual sequential pictures displayed in a screen at every play, video games inherently assume different sequential pictures by different plays thus are useful for playing. Video game authors, taking into account the range of the pictures by a player's operation, set the game's theme and story, use various visual or audio-visual effects, and make a game as a unified work. Therefore, game software expresses the unified thoughts and sentiments of the authors in a creative way, and the eligibility of game software for "work" can not be negated by the fact that the content or sequence of the concrete pictures differ at every play. The sequential pictures of the game software in question, which appear at every play, should fall under "the sequential pictures which convey thoughts and sentiments carried throughout the whole movie to a viewer", the requirement asserted by Defendants.

In addition, based on the above nature of game software, it is inadequate to regard the game software as the same as an unedited film, since the game software is apparently a work completed before a play.

5. We find that a theatrical film called "interactive film", which is not a fixed series of moving pictures but which changes the movement on the screen, facial expression, and its plot, based on the response of the audience, and changes its story by selecting one from multiple pictures prepared, has appeared experimentally. In this view, the work whose expression form is different from the cinematographic presentation of a movie or from the public transmission of a movie by means of one-way transmission by a broadcasting medium, as presumed in the legislation of the existing Copyright Law, has already appeared. There seems to be no reasonable ground or necessity to exclude it from the concept of cinematographic work.

6. Consequently, each of the video games in question shall fall under the category of the cinematographic work under the Copyright Law.

II. Applicability of Distribution Right to Video Games

1. The Copyright Law defines "distribution" as "the transfer and lending of copies of a work to the public, whether with or without payment, and in the case of a cinematographic work or a work reproduced therein, it includes the transfer and lending of copies of such work for the purpose of making the cinematographic work available to the public." It also provides that the copyright owner of a cinematographic work has the exclusive distribution right, but does not distinguish between those eligible and those ineligible for the right among the authors of cinematographic works. Therefore, as held in section I, Plaintiffs own the distribution rights on each of the game software in question, once each of them comes under the cinematographic work.

2. (1) Defendants argue that the exceptional granting of the distribution right to cinematographic works resulted from the uniqueness of cinematographic works, particularly from the demands for protection of their distribution systems, as well as from the implementation to fulfill the Berne Convention.

(2) A distribution right enables control over the distribution of copies, and it is granted only for cinematographic works under the existing Copyright Law. When examining the legislative intent which granted the distribution right only for cinematographic works, the following facts can be found as to the legislative history of the existing Copyright Law, enacted in 1970: Since the old Copyright Law of 1899 did not provide the distribution right as the substance of cinematographic copyright, it needed an amendment to grant the distribution right for cinematographic works due to the obligation in a treaty to implement the Brussels Amendment (1948) of the Berne Convention which granted the distribution right for cinematographic works. In the process of deliberation by the Copyright System Council, there were two theories regarding the definition of a cinematographic work: (a) a cinematographic work should include the work whose visual or audio-visual expression is analogous to theatre movies'; (b) a cinematographic work should exclude the work whose production purpose or usage is different from theatre movies'. The Council's report in April 1966 adopted standpoint (b), and intended to exclude the works made by broadcasting businesses as a means to broadcast. "The Bill of Copyrights and Neighboring Rights" of October 1966, by the Agency of Cultural Affairs, Ministry of Education, provided that "a cinematographic work includes a work expressed by a process producing visual or audio-visual effects analogous to those of cinematography and fixed in some material form, but excludes a work made by a broadcasting organization as a technical means exclusively for the broadcasting purpose. However, based on the Stockholm Conference on Amendment of the Berne Convention in 1967, films and video tapes made by broadcasting organizations became protectable as a cinematographic work, and the articles on the exclusion of movies for the broadcasting purpose was deleted. It was submitted as such to the Diet as the Copyright Law Bill, which was approved intact.

(3) On the other hand, at that time when the Copyright Law adopted the distribution right for a cinematographic work, there existed, as an accepted fact, the use of a distribution system where film makers and distributors only loaned the printed films of a theatrical movie and had them returned or handed over to a designated theatre, when the presentation period was over. The reason the distribution right was adopted only for cinematographic works was that the granting of the distribution right, which would have great impact on distribution systems, would cause little confusion with respect to the printed films of theatrical movies traded in the above system.

(4) However, it is inadequate to construe the cinematographic work as limited to the theatrical movie which uses the distribution systems or to the other works which bear the characteristics analogous to the theatrical movie, because, obviously from the above found legislative process, the existing Copyright Law was formed in expectation that movies for the broadcasting purpose, which are not related to the distribution system, would be included in the cinematographic work. In addition, the Copyright System Council discussed that the distribution right also applies to a videotape which is not related to the distribution systems either. Moreover, the Council defined the concept of "distribution", which shall be the basis of the distribution right, not only as " the transfer and lending of copies of a cinematographic work for the purpose of making the cinematographic work available to the public" but also as "the transfer and lending of such copies to the public, whether with or without payment."

3. As mentioned above, the Copyright Law granted the distribution right on the premise of the accepted fact that there was the existing use of the distribution system for theatrical movies. Theatrical movies are presented at theaters with the print films reproduced from the original one to entertain large numbers of viewers at the same time. Each copy has high economic value in that it produces a large amount of profit, and its distribution has not taken the form of direct sale to public consumers, but of the above mentioned special trade system.

The characteristics of cinematographic works appear to have been the background regarding the above distribution systems: While their production takes great costs, time and labor, the audience is satisfied with one view and relatively unlikely to view the same film again and again. Namely, by granting the distribution right and presentation right for cinematographic works, which bears such characteristics, we established the system by which copyright owners can collect compensation, in order to give them various chances to get return on their investment.

Since video games did not exist as of the time when the existing Copyright Law was enacted, it was not foreseen that a work like a video game would come under a "cinematographic work". However, this new type of media should not be excluded because it was not conceived at the time of the enactment. Whether it is worth granting protection as a cinematographic work under the Copyright Law should be judged from the substantive aspects as well as objective elements. It is natural that the advancement of technologies, the development of media, and the change of society after the enactment have incubated such a new medium, which should be protectable as a cinematographic work.

Video game software is analogous to a theatrical movie in that it is produced with large amount of costs and time and by the systematic participation of a producer, a director, character designers, image experts, sound experts, programmers, scenario writers, and so on. This trend has become even more remarkable when coupled with the enhanced performance of game machines. The audio-visual expression of games has also been significantly improved due to technical progress of images and music, which has reduced the gap from movies. We have found that each of Plaintiffs' video games required considerable costs, time, and labor. In addition, video games are not much different from theatrical movies in that they both give a viewer the feeling of satisfaction in a short time. Especially with respect to popular games, it is usual that the sales of second hand products exceed those of brand-new ones in a few months after the publication. Thus it is reasonable to give various chances to get return on the investment on video games. It is not unreasonable, in comparison with the theatrical movies, to grant the distribution right to video games. In view of the legislative intent that granted the distribution right to a cinematographic work, we cannot find that they lack substantial ground to be worth protection as a cinematographic work that is entitled to the distribution right.

4. In 1984, when the Copyright Law was amended to establish an article to grant the distribution right in order to deal with the development of rental businesses, cinematographic works were excluded from the application of the rental right due to the existence of the distribution right. However, the legislators obviously thought that they could regulate videotapes as well by means of the distribution right for cinematographic works, since video rental businesses already existed at that time. Therefore, we must construe the existing Copyright Law as premised on the idea that a cinematographic work includes a work of which a large numbers of copies are sold to the public without the distribution system. In this view as well, it is not inconsistent to construe the video games as included in the cinematographic work which is entitled to the distribution right.

5.  Thus, we cannot adopt Defendants' argument that each video game in question does not come under the cinematographic work which is entitled to the distribution right.

III. Exhaustion of Distribution Right

1. Defendants argue that the distribution right shall not be construed as applicable to a once lawfully produced copy after it was legally transferred.

However, originally the background, at the time that the distribution right was enacted, included an aspect that there was a custom regarding the distribution systems as to theatrical movies. In this respect, because the distribution right has not been construed as exhausted, even after the first transfer, we cannot adopt the construction that the distribution right for a cinematographic work, not limited to theatre movies, is exhausted with the first sale, as provided under the Copyright Law.

(1) The Copyright Law does not grant the distribution right to works in general, but it provides that the distribution of objects made by an act infringing a copyright, by a person who is aware of such infringement, be considered to constitute infringements. Art.113 (1)(ii). It also grants the distribution right only for a cinematographic work, among other kinds of works, and its author shall have the exclusive right to distribute its copies, whether or not the copy was made by an act infringing a copyright. Art.26 (1). Moreover, the "distribution" herein is defined as "the transfer and lending of copies of a work to the public, whether with or without payment, and in the case of a cinematographic work or a work reproduced therein, it includes the transfer and lending of copies of such work for the purpose of making the cinematographic work available to the public." Art.2 (1)(xix). The Copyright Law does not prescribe anything about the exhaustion of the distribution right. In accordance with these provisions, we cannot construe the distribution right for a cinematographic work as limited to the first transfer. Neither is there ground to find that the distribution right is exhausted after the first transfer.

(2) The Copyright Law defines "distribution" as including both transfer and lending, and it grants the distribution right to the copyright owners of a cinematographic work, without distinguishing between transfer and lending. Thus, it is difficult, in construction, to distinguish between transfer from lending as to whether the distribution right is exhausted with the first transfer. On the other hand, the rental right, which was enacted by the 1984's amendment of the Copyright Law, to provide that the author of a work in general has the exclusive right to lend the work, is justifiably construed as exercisable even after its lawful transfer, according to the legislative intent. Also, Article 26bis2 expressly exempts a cinematographic work from the works eligible for the rental right. The reason why the cinematographic work was excluded from the rental right was because it was obviously unnecessary to provide the rental right for a cinematographic work, since the right to distribute, including lending, was granted to the cinematographic work. This made the understanding that the distribution right, including the rental right, for a cinematographic work would not be exhausted with the first transfer, a natural premise.

(3) Moreover, 1999 amendments newly established, for the copyright owners of works in general, the exclusive right to provide the work by the transfer of its original form or of its copy to the public (the so-called transfer right). However, it excludes the cinematographic work from the eligible subject matter, and does not apply to the copy which is transferred by the right owner. This clarifies that the transfer right is exhausted with the first transfer. This transfer right was established because Japan considered it necessary to grant the distribution right for works in general, in accordance with the WIPO Copyright Treaty which grants the distribution right for such works. While this amendment provides that the transfer right be exhausted with the first transfer, it exempts cinematographic works from the application of the transfer right, without modifying Article 26 on the distribution right for a cinematographic work. Accordingly, the distribution right for the cinematographic work obviously remains inexhaustible in the amendment.

2. The Berne Convention grants the distribution right for cinematographic works. It however does not prescribe whether the distribution right is exhausted after the first transfer or not. It is entrusted to the legislation of member nations. The member nations are free to empower copyrights by the law or its interpretation within the scope of the convention.

While the WIPO Copyright Treaty also grants the distribution right for works in general, its exhaustion is entrusted to the legislation of the member nations by allowing them the freedom to prescribe the conditions where the distribution right is exhausted.

Additionally, when we look at the legislation of each country, many countries where the distribution right is granted to works in general have certainly adopted the system to exhaust the right with the first transfer, or after the first provision to the public, generally by stipulating it in the law. Although Japan, which grants the inexhaustible distribution right for a cinematographic work, is an exception, it is the matter of legislative policy, and we do not necessarily have to construe our Copyright Law in accordance with the legislation of other countries. Consequently, we cannot construe the distribution right for a cinematographic work under our Copyright Law as exhausted with the first transfer and as not applicable for non-cinematographic-presentation purposes, based on the above treaties and the legislation in other countries.

3. Defendants assert that the first-sale doctrine of patents also justifiably applies to copyrights. We cannot adopt this position for the following reasons. First, we cannot discuss patents and copyrights as analogous instantly, since, different from patents, the transfer of a copy can obviously infringe on the divisional rights of a copyright, such as the public transmission right and rental right, depending upon the form of usage, even if the copy was produced with the permission of the copyright owner. Second, we have to construe the distribution right regarding the cinematographic work as not exhausted with the first transfer under the provisions of the Copyright Law.

4. Video games, including each video game in question, are neither transferred for cinematographic presentation purposes nor traded through the distribution systems like theatrical movies, but a large number of their copies are sold to consumers. It may appears to be excessive protection for the copyright owners, as well as impediment to the free trade of goods, to put them in a position to control over the distribution systems by excising their inexhaustible right, even after the transfer of a video game to the public through the distribution channel, because it comes under a cinematographic work. However, we cannot adopt this view, because, as shown in II, it is not unreasonable to secure the chance to obtain return on investment in a video game by granting the distribution right. Also, there is no sufficient interpretative ground to admit the exhaustion after the first transfer only for a video game among other cinematographic works which must have the inexhaustible distribution right.

IV. Conclusion

In conclusion, Defendants' conduct of selling used video game software infringes on Plaintiffs' distribution rights because each video game in question should come under the definition of a cinematographic work, because Plaintiffs, as the copyright right owners, should have the distribution rights on each video game, and because the distribution rights should not be exhausted even after the first sale to the public.

As a legislative discussion, it seems that there can be an objection to the standpoint that a copyright owner has the unexhaustible distribution right. However, this court holds that it is appropriate to construe the existing Copyright Law as previously mentioned.

Therefore, we admit that Plaintiffs' claims have merits thus hold as the text.

Last updated 4/27/2012