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The case Micro Star v. FormGen Inc. 154 F.3d 1107 (9th Cir. 1998) is a California court case in which United States Court of Appeals for the Ninth Circuit overruled the district court's decision in favor of the defendant, FormGen Inc. against the plaintiff, Micro Star on the issue of the fair use of the user-created levels for the video game Duke Nukem 3D, which is owned by FormGen Inc.. This case established that audiovisual display can be copyrightable in certain circumstances.

Background
FormGen Inc, GT Interactive Software Corp. and Apogee Software, Ltd. (collectively FormGen) made Duke Nukem 3D (D/N-3D), a 3D first-person perspective video game. A build editor was shipped along with the game, which enables players to design and build their own levels, and then share those levels with others through the internet. FormGen encouraged people to make levels, and did not consider this user-created content to be a copyright infringement.

Micro Star collected 300 of these user-generated levels, packaged them onto a CD. Then Micro Star sold it commercially known as Nuke It (N/I). N/I packaging is decorated with numerous screen shots of the user-created levels.

Micro Star went to court and asked for a declaratory judgment that what they were doing was not copyright infringement. FormGen Inc. countersued, claiming that the levels were derivative works, and as the copyright holder, only they had the right to license derivative works.

Procedural History
After Micro Star started to seek a declaratory judgement from the district court for free of copyright infringement from FormGen, FormGen countersued for a preliminary injunction for further production and distribution of N/I. Upheld on Lewis Galoob Toys, Inc. v. Nintendo of America, Inc., 964 F.2d 965(9th Cir.1992), the district court held that N/I was not a derivative work, and hence the content itself did not violate FormGen's copyright. However, the district court found that N/I's packaging infringe FormGen's copyright on the D/N-3D characters, since it reproduced the art without licensing from FormGen. The court also turned down Micro Star's fair use claims. Both sides filed appeals with United States Court of Appeals for the Ninth Circuit which were granted.

FormGen
FormGen claimed that Micro Star infringed its copyright through exploiting the unauthorized user-created content. Also, FormGen noted that based on (2)(1994), a copyright holder enjoys the exclusive right to prepare derivative work based on D/N-3D. Therefore, they argued the audiovisual displays from D/N-3D with the N/I MAP files are derivative works that infringe its right.

Micro Star
Micro Star tried to relate to with Game Genie, by arguing both of them replaced old values (in the case of N/I, the MAP files in the original game) with new values (N/I's MAP files). In the process, the audiovisual display is described by the N/I MAP files. Micro Star further argued that the MAP files are not derivative works, since it only referred but never contain any art files from D/N-3D, therefore, nothing of D/N-3D's is reproduced. Nonetheless, Micro Star also claimed for fair use of D/n-3D's protected expression. Micro Star suggested the court to focus on player's use of the N/I CD in evaluating the fair use claim since it s the player who creates the derivative work. Finally, Micro Star argued that FormGen implicitly forfeited its rights on the user-created levels by authorizing users to create new levels.

Court's Finding
A party asking for a preliminary injunction must demonstrate "'either a likelihood of success on the merits and the possibility of irreparable injury, or that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor .'" In this case, Formgen only need to demonstrate a likelihood of success on the merits to get the preliminary injunction it seeks in preventing N/I from manufacturing and distribution as well as to preserve the preliminary injunction it already won on the barring N/I package with D/N-3D screenshots.

Derivative Work
The Copyright Act defines a derivative work as "'a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications, which, as a whole, represent an original work of authorship, is a 'derivative work .' '"

To narrow the statue to a manageable level, the court developed certain criteria to decide if a work can be qualified as a derivative work. One of these is that a derivative work must exist in a "concrete or permananet form ," and must substantially incorporate protected material from the preexisting work. The court noted that all the Copyright Act's examples of derivative works share the traits that they all "took some definite, physical form ," and there concluded that this was a requirement of the Act. N/I's MAP files with no doubt exist in a concrete or permanent form, as they are saved on a CD. However the same doesn't hold for the audiovisual displays generated during the gaming experience, as it didn't meet the "concrete or permanent form " requirement. To resolve this issue, the court compared it with Galoob v. Nintendo. In Galoob v. Nintendo, the court rejected Nintendo's request of a preliminary injunction because "[a] derivative work must incorporate a protected work in some concrete or permanent form, and the audiovisual displays generated in the process were not contained in any permanent form. However, the audiovisual displays generated from D/N-3D with N/I MAP files are contained in the MAP files. The court also noted that description of an audiovisual display counts as a permanent or concrete form for purposes of Galoob . The court then went on to compare it with the case of sheet music. Pantomimes and dances may be "described in sufficient detail to enable the work to be performed from the description " to be copyrighted. Similarly, the audiovisual displays associate with the N/I's MAP files assume a concrete or permanent form, as it is burn onto a CD. To prove copyright infringement, FormGen must demonstrate that there are significant similarities between D/N-3D's and N/I's audiovisual displays in both ideas and expressions. The court considered that FormGen would succeed without a doubt because D/N-3D and N/I share the same source of art library. Even though N/I MAP files only refer to the source art library, but not contain any part of it, nevertheless the court ruled that "the work that Micro Star infringes is the D/N-3D story itself" - a maculate hero figure fighting alien enemies on the a post-Apocalypse environment. Only a copyright holder are entitled to create sequels, and the stories embedded in the N/I MAP files are "surely sequels, telling new tales of Duke's fabulous adventures ."

Fair Use
The doctrine of fair use allows for unauthorized use of copyrighted works "for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research ." Section 107 provides instructions to the courts to evaluate for fair use under four factors : In the issue of [fair use], the court re-investigated the issue in Galoob from the players' point of view. In the case of Galoob, and it concluded that "the fair use analysis in Baloob was not necessary and therefore is clearly dicta ." Also, the court noted that Micro Star used FormGen's protected work for financial gain. Moreover, Micro Star use of FormGen's work are quite substantial from both the quantity and importance perspective, since the MAP files are all expression specific to the D/N-3D unique story setting and plot. Finally, the court considered that N/I harmed the market for the sequels of D/N-3D, where only FormGen has the right to produce a sequel or not. In conclusion, the court found that "[N/I] neither falls into any of the categories enumerated in section 107 nor meets the four criteria set forth in section 107
 * 1)  the purpose and character of the use, including whether it is commercial in nature
 * 2)  the nature of the copyrighted work
 * 3)  the amount and substantiality of the copied material in relation to the copyrighted work as a whole
 * 4)  the effect of the use on the potential market for the copyrighted work

Towards Micro Star's argument on the implicit license FormGen granted to its customers to create user-defined content, the court noted that the only written license FormGen granted to players comes with a significant limitation which demands all user-created content must be free. The court also pointed out that whether this license is valid, it doesn't matter, since if it is valid, then it bars all commercial distribution, on the other end, FormGen hasn't provided any licenses at all. The court also went further in the case if FormGen didn't license at all, by noting that FormGen might abandoned its exclusive right on the user-created content, but it never abandoned its rights to profit commercially from new levels.

The court found a likelihood of FormGen succeeding on its claim of copyright infringement and so reversed the district court's order denying a preliminary injunction and remand for entry of such an injunction, and affirmed the grant of the preliminary injunction preventing Micro Star from selling N/I in the package with screen shots of the game.

Impacts
In this case, ninth circuit remanded the ruling on the Galoob v. Nintendo case, as it concluded the fair use analysis for Galoob was "not necessary and therefore is clearly dicta ." Also, this case was later used as precedent in the high-profile case A&M Records, Inc. v. Napster, Inc. and even in Pickett v. Prince regarding derivative use of the ankh-like glyph the pop star was employing as a name.

The map files in Micro Star, in contrast, could not be separated into original creative material and compatibility code. This suggests that separability plays a role in the derivative work analysis. In distinguishing original material from added material in derivative works, the Copyright Act supports this focus on separability. Where elements of the original work “pervade” a derivative work and are inseparable, the derivative author can claim no copyright protection at all.' Also, the court's decision suggests that audiovisual display is "separately copyrightable as an audiovisual work," which raise some doubts as to whether the audiovisual display is original or fixed because user can alter, to some extent, display'