Lawsuit:
ATARI GAMES CORP. and TENGEN, INC. (Plantiff) V. NINTENDO OF AMERICA
INC. AND NINTENDO CO., LTD., (Defendant) - Security Code
Introduction
Nintendo set
up strict guidelines to third-party companies wanting licenses
to distribute their games on the NES. Two of the most promiment
aspects of these guidelines were (1) only release 5 titles per
year - to avoid Atari's mistake of an overcrowded copy cat market
- and (2) for these titles to remain NES-exclusive for two years.
Masaya Nakamura,
founder of Namco and later owner of Atari, created a sub-company
of Atari called Tengen because of the corporation rights to the
name Atari. Nakamura met with Nintendo to offer a licensee deal
minus the above limitations. When Nintendo refused, he signed
under the limitations.
During this
period they began attempts to break the NES's security code, which
allowed only software with a special chip to communicate with
the console hardware. To break the "10NES" security
code, Tengen signed a fraudulent affidavit to get the source code
from a copyright office. Once they had the code, it was easy to
understand the technology behind it. Tengen created their own
copy program called "The Rabbit".
In December
12, 1988, Tengen filed suit for $100 million against Nintendo
claiming that they held a monopoly over the game industry. Nintendo
waited months before responding. When they did, droves of statements
in Nintendo Power and to retail stores like Toys R Us warned about
the usuage of unlicensed cartridges like Tengen's. TRU was threatened
to remove all Tengen software.
Court
Summary
Atari's main
argument was that the "10NES" security code made it
impossible for competitors to compete with Nintendo. They would
have to literally copy the code for their games to work. And
that's exactly what screwed Tengen in the end.
Judge Fern
Smith found that "The Rabbit" was nothing more but a
cloned copy of the "10NES" code.
Conclusion
The court
favored Nintendo.
