For the foregoing reasons, SEL has demonstrated a likelihood of success on the merits of its trademark claim.
In order to prevail on its motion for preliminary injunction, SEL must also demonstrate the possibility of irreparable harm. A showing of a prima facie case of copyright infringement or a showing of reasonable likelihood of success on the merits raises a presumption of irreparable harm. Johnson Controls, 886 F.2d at 1174; Atari Games Corp., 18 U.S.P.Q.2D (BNA) at 1940 . Moreover, "The jeopardy to [the copyright holder's] investment and competitive position caused by [the defendant's] wholesale copying of many of its key operating programs would satisfy the requirement of irreparable harm . . . ." Apple Computer, Inc., 714 F.2d at 1254, quoted in Atari, 18 U.S.P.Q.2D (BNA) at 1940 .
Similarly, in trademark cases irreparable injury follows trademark infringement. As stated by Chief Judge Henderson:
The fact that plaintiff has had the symbol of its reputation placed in the hands of another is irreparable injury. 'The injury is to plaintiff's interest in having exclusive control over the symbol of its own reputation . . . . The irreparable harm is the damage which will be done to plaintiff's mark itself.'
Visa International Service Association v. Bank Card Holders of America, 211 U.S.P.Q. (BNA) 28, 39 (N.D. Cal 1981) (quoting Louis Rich, Inc. v. Horace W. Longacre, Inc., 423 F. Supp. 1327, 1335, 195 U.S.P.Q. (BNA) 308 (E.D. Pa. 1976)). There is no adequate remedy at law for any damage to SEL's goodwill and business reputation by Accolade's alleged copyright and trademark infringement.
DELAY OR LACHES
The argument that SEL is guilty of laches or that it delayed in seeking injunctive relief thereby "neutralizing" the presumption of irreparable harm is without basis. SEL did not learn that Accolade's games prompted the false Sega Message until September of 1991, when the Genesis III was released. The initial complaint for trademark infringement was filed on October 31, 1991 and amended on November 29, 1991 to include copyright infringement. On November 19, 1991, Judge Peckham issued an order which expedited discovery on SEL's trademark claim and further ordered that preliminary depositions be taken before a motion for preliminary injunction was filed. Transcripts for the depositions were completed on January 21, 1992, and SEL filed its motion for preliminary injunction on February 7, 1991. Thus, SEL has acted promptly in seeking injunctive relief.
ACCOLADE'S CLAIM FOR FALSE DESIGNATION OF ORIGIN
Accolade alleges that SEL and SOA are liable for false designation of origin under 15 U.S.C. § 1125(a), because the false Sega Message applied the Sega trademark to Accolades' goods against the will of Accolade. Accolade claims that nothing in the Accolade game cartridges causes the false Sega Message to appear, but rather the Genesis III console itself causes the alleged "reverse palming off." As stated above, both parties agree that the false Sega Message is likely to cause confusion.
Accolade has not satisfied its burden of demonstrating serious questions going to the merits much less a likelihood of success on the merits. The evidence presented indicates that the TMSS searches a game cartridge for the "SEGA" trademark which is in the object code; if the code is found the Sega message is displayed on the monitor. Accolade admits that it copied the code and inserted it into its game cartridges, thinking such code was functional. Thus, it is Accolade's actions that are responsible for the displaying of the false Sega Message when its game cartridges are played on the Genesis III.
Moreover, the court is not persuaded that SEL "calculatingly chose to market the modified Genesis console" knowing that Accolades' games were compatible and that the false Sega Message would appear when an Accolade game was inserted. SEL began working on a trademark security system for its coin-operated arcade machines in 1986, and filed its patent application for the TMSS in March 1990. Accolade did not begin distributing Genesis compatible games until December 1990. In addition, SEL has demonstrated the need to develop its TMSS to prevent piracy. The suggestion that SEL was instead motivated by a desire to cause apparent trademark infringement "as an attempt to create litigation such as this" is not convincing.
It is therefore ORDERED that Accolade, Inc. its officers, directors, employees, and agents, and all persons in active concert and participation with them who receive actual notice of this order by personal service or otherwise, are enjoined from:
1. Disassembling, translating, converting or adapting the copyrighted object code in SEL's game programs in any manner whatsoever;
2. Using, modifying, enhancing or embellishing SEL's disassembled code in any manner whatsoever;
3. Developing, manufacturing, shipping, distributing or selling any Genesis-compatible video game programs that were derived from, based upon or otherwise created -- in whole or in part -- by means which included the disassembly, translation, transformation or enhancement of the copyrighted object code in SEL's game programs;
4. Manufacturing, shipping, distributing or selling any Genesis-compatible video game program which prompts the message "PRODUCED BY OR UNDER LICENCE FOR SEGA ENTERPRISES LTD." when inserted in a Genesis console.
IT IS SO ORDERED.
Dated: April 2, 1992
Barbara A. Caulfield
United States District Judge