Attack of the Mod Squads

On September 16, 2002, Microsoft, Sony and Nintendo filed a lawsuit against Hong Kong distributor Lik Sang International Ltd, in the High Court of Hong Kong, alleging that the company had infringed copyrights associated with their various gaming systems.

In response, the company shut down, and when it came back up three weeks later, it was no longer selling mod chips. The affair is the strongest demonstration yet of how gaming manufacturers -- with the cooperation of various government agencies -- are cracking down not just on copyright infringement, but also on basic technology itself.

Teams of Microsoft and Sony engineers, investigators, and of course lawyers are descending on chip manufacturers and distributors armed with seizure orders, restraining orders, and in many cases, police armed with arrest warrants. Not only are "pirates" who are violating software license agreements in legal jeopardy, but manufacturers and distributors of certain hardware and software risk injunction, damage awards, and jail as a result of the actions of these "mod squads."

What's all the fuss about? When manufacturers make gaming consoles, they design them to work only with software that has been pre-approved. Mod chips allow these gaming consoles to run software other than the pre-approved software, including programs designed to work only in a different regional location, home-grown gaming software, gaming programs that may have been altered (to add hacks or cheats), backup or archived copies of software, or, significantly, software that may have been copied without permission.

Many mod chip manufacturers tout their chips as being "perfectly legal." Others disclaim any responsibility for their use in furtherance of copyright infringement. Meanwhile, companies like Sony and Microsoft have accelerated their efforts not only to shut down mod chip distributors, but also to incarcerate them.

So who is right? Are mod chip distributors simply trying to help users make the fullest use of their lawfully obtained products, or are they contributing to copyright infringements, piracy, and the end of the world as we know it? The lawyer's answer here is, of course, it depends.

DMCA villainy

Mod chips clearly can be used both for non-infringing and infringing purposes -- like many other technologies. My Xerox machine can equally make copies of my as-yet-unproduced screenplay (any directors out there?) as well as the most recent Tom Clancy novel -- but only one use infringes. My VCR can copy my home movies, time shift the West Wing, or make copies of my rented blockbuster version of the Lord of the Rings.

Under U.S. and international law, a distributor of such technology has contributory copyright liability only when they know, or should have known, that the product is being used to infringe a copyright. The manufacturer of the device is liable if the product has "no substantial non-infringing use."

Because VCRs can be used both for unlawfully copying copyrighted works and for copying non-copyrighted works, or for time shifting, the United States Supreme Court has held that the manufacturers of VCRs are not liable for any infringement.

Sony used a theory of contributory copyright infringement in 1999 Sony, when they went after a small San Leandro, California retail store "Gamemasters" for selling "game enhancers." While the case was ultimately settled, the trial court refused to rule in Sony's favor regarding the game enhancers, stating that "it is not clear that the Game Enhancer facilitates the use of games that are truly counterfeit" and that "the record is grossly lacking in evidence of defendant's actual knowledge of ... infringement by third parties, or of facts sufficient to prove constructive knowledge."

The defendants in that case successfully employed the Sgt. Schultz defense to contributory infringement, claiming that, while they knew the chips could be use to both play imported games, and introduce "cheats," when it came to playing pirated disks, they ... knew.... nothing... Nothing!

But that case was before the Digital Millennium Copyright Act, and its clones around the world, took full force.

Under the DMCA, if Sony or Microsoft uses a "technological measure" to protect a copyrighted work, it is illegal to attempt to circumvent the measure -- even if the purpose of the circumvention is not to infringe the copyright.

Under the statute, it would appear that distributors of mod chips would have clear liability. The chips clearly "circumvent" a technological measure designed to protect copyrighted works.

Muddy waters

It's hard to find decisions that say otherwise, but there's some cause for hope. Earlier this summer Play Station-maker Sony filed a lawsuit against an Australian mod chip distributor under that country's version of the DMCA. An Australian court held that, because the chips could be used for non-infringing uses (like playing home grown games), the copy protection was not a "technological measure" designed to "protect a copyrighted work" and therefore the circumvention was not unlawful.

While the case has no precedential value in the United States, it represents a willingness on the part of some independent judicial authorities to reign in unlimited copyright protection.

There are many non-infringing possible uses of mod chips. I can use a mod chip to run my own games on my console, or the alter the gaming software to let me play at different levels. I may be able to copy parts of the code in a manner that would constitute a non-commercial "fair use" of the copyrighted product. I could potentially run games written for one platform on another platform, or use the mod chips to play a single "backup" copy of lawfully-purchased software.

I can use mod chips to defeat a regional restriction and play games coded for one region in another. You can play video CDs, MP3s or DIVX video on an X-Box with a mod chip. Thanks to some ambitious open-source hackers, a mod chip can even allow you to run Linux on a Microsoft X-box.

But all these potential non-infringing uses of mod chips probably aren't enough to make them legal because most people are likely using them to pirate games. And under the perverse calculus of the loathsome DMCA, that's enough to make all the legal uses irrelevant.

Just as Napster could be used to distribute non-copyrighted works, the fact is that the vast majority used it to obtain copyrighted work. Just as DeCSS could be used to make archival copies of DVDs, or to play DVDs on Linux, it infringed the DMCA because for the most part that's not really what it was being used for.

So what's a well meaning mod chip distributor to do to make a buck? The short answer is, if you are distributing devices that are primarily used to make illegal copies of something, and you know it or should know it, you do so at your own peril. Yes, the legal waters are muddy. But when you lie in muddy waters, you're likely to get dirty.

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