Nintendo released Donkey Kong in arcades across Japan and America in 1981. It became a huge hit and solidified the name Nintendo in the United States. Universal Studios, the owners of King Kong, thought Nintendo’s ape looked a bit too much like their’s and decided to file a lawsuit to stop Nintendo from selling the game and licensing it out to others. As it turns out, the judge ruled in favor of Nintendo, partly because Universal themselves had filed a lawsuit back in 1975 arguing that King Kong was in the public domain and won. Universal couldn’t have it both ways, thus the lawsuit with Nintendo was lost.
However, it didn’t end there. Nintendo countersued, arguing that as a result of Universal’s threats to other companies, Nintendo lost out on thousands of dollars of licensing fees. To make matters worse, Nintendo asserted that Universal had received almost $5 million in fees by threatening to sue licensees, such as Coleco, who Nintendo was allowing to produce Donkey Kong games. As such, Nintendo had three counterclaims to pursue:
- Misappropriation of property and unjust enrichment: Nintendo asserts that the Donkey Kong trademark is exclusive property of Nintendo and that Universal’s agreements with Coleco and others, which resulted in revenues of $4.76 million for Universal, constitute the misappropriation of Nintendo’s trademark and the unjust enrichment of Universal.
- Vicarious copyright infringement: Nintendo alleges that Tiger’s home video game, its mini-arcade tabletop game, and its hand-held game infringe Nintendo’s video arcade Donkey Kong and Coleco’s Donkey Kong games. By licensing Tiger’s use of King Kong in these games, Universal is alleged to be guilty of vicarious infringement, which is established if it is shown that a party, with knowledge of infringing activity, induces, causes, or materially contributes to the infringing conduct of another.
- Tortious interference with contract: Nintendo’s claim of tortious interference by Universal falls into three categories, relating to (1) Coleco, Atari and Ruby-Spears who breached material terms of their licensing agreements but continued to perform their other obligations; (2) Nintendo’s existing licensees who breached their licenses and refused to perform as a result of Universal’s actions; and (3) potential licensees who were dissuaded from doing business with Nintendo by Universal’s actions.
In the end, Nintendo was unable to prove Universal of misappropriation. This is mostly due to the fact that Nintendo owned the rights to Donkey Kong, not King Kong and Universal was threatening to sue companies based on King Kong’s rights. WINNER: Universal.
As for the vicarious copyright infringement, Nintendo was able to prove that Universal knew that Tiger’s King Kong game had massive similarities to Donkey Kong. WINNER: Nintendo. In fact, the court found:
On the record in this case the Tiger game infringes on the Donkey Kong arcade game. Although neither ramp and ladder motifs nor carpenters, gorilla and heroines characters are protectible in the abstract, Donkey Kong’s particular expression of a gorilla villain and a carpenter hero (with or without a fire hat) who must dodge various obstacles (whether bombs or fireballs) while climbing up ladders (whether complete or broken) and picking up prizes (umbrellas and purses) to rescue a fair-haired (whether knotted or pigtailed) hostage from the gorilla is protectible against appropriation by Universal and its licensees.
The nearly identical musical background, the nearly identical march of the hero along the girders, the similar ascent of the gorilla at the outset of the game, the nearly identical progression along girders, up ladders, across rivines, all further the similarity in playing environment encountered by a customer. The tone and feel of Donkey Kong are replicated as nearly as possible in Tiger, given the diminished clarity and sophistication of the Tiger game. The interaction of the characters, obstacles, background, and music in Donkey Kong are arbitrary, fanciful, and sufficiently distinctive such that they deserve protection from a near knock-off such as Tiger. The license termination sent by Universal to Tiger is especially relevant, because it demonstrates Universal’s own position that Tiger was substantially similar to Donkey Kong:
“The advertising, packaging and catalog material which you have prepared and distributed makes clear that the display board and concept of your “King Kong” mini-arcade tabletop electronic game is substantially similar to the display board and concept of a popular arcade game called “Donkey Kong” currently owned and marketed by another company…”
Universal’s knowledge of the similarities and its inducement of the infringement through its license agreement support a finding of vicarious infringement.
Pursuant to 17 U.S.C. § 504, Nintendo may elect at any time before judgment to choose either statutory damages or its actual damages plus Universal’s profits from the infringement. Nintendo has chosen to recover Universal’s profits, which the record establishes to total $56,689.41. Universal bears the burden of establishing that these funds were not attributable to the infringement, 17 U.S.C. § 504(b), and this burden has not been met.
Nintendo was able to prove tortious interference with contract. WINNER: Nintendo. This is because:
Throughout this litigation, Universal knew, as a result of the RKO litigation, that it had no rights to any visual image of King Kong from the classic movie or its remake. Universal understood that without this visual image it had no identifiable trademark, and when it learned of Donkey Kong and its success, it initially made the decision to cease licensing King Kong.
In an about face, Universal, fully knowledgable that a major Nintendo licensee, Coleco, was commercially vulnerable to its advances, determined to take advantage of Donkey Kong’s success. In order to make its position credible, Universal asserted broad rights in King Kong, including the visual images to which it knew it had no right. Universal refused, however, to reveal to Nintendo or Coleco the source of its claimed broad rights. Universal succeeded in inducing Coleco to enter a license agreement, but failed to secure Nintendo’s acquiesence. It then filed this complaint. Because the defense of advice of counsel does not succeed, and because this lawsuit was instituted without good faith and the requisite probable cause, the elements of tortious interference with contractual relations have been proven. Damages of $94,219.41 result.
In addition, Nintendo was awarded punitive damages equal to the amount of Nintendo’s legal fees incurred in defending against Universal’s infringement action. Let’s hope this final verdict puts Nintendo’s and Universal’s legal battles to rest once and for all.