M. Kramer Manufacturing Co., Inc. v. Hugh Andrews, Tim Caldwell, Drew's Distributing, Inc., Drew's Distributing Co., and Lynch Enterprises, Inc.

This appeal involves a dispute over the right to manufacture and sell a computer video game — “Hi-Lo Double Up Joker Poker.” Essentially, the plaintiff claims that the defendants infringed the plaintiff’s copyright in the game by copying the computer program controlling the machinations of the video characters and by copying the audiovisual aspects of the game. In addition to its copyright infringement claim, the plaintiff asserts that the defendants falsely designated the origin of the defendants’ version of the game in violation of section 43(a) of the Federal Trademark Act, 15 U.S.C. § 1125(a), and that the defendants competed unfairly with the plaintiff in violation of the common law. 1 When the plaintiff filed its complaint, it moved for a preliminary injunction, which was granted. Prior to trial, the injunction was vacated, and the district court tried the case without a jury, finding for the defendants. The plaintiff appeals, and we reverse.

I. Factual Background

The facts of this case are quite complex and require careful explication. The plaintiff is M. Kramer Manufacturing Co., Inc., (Kramer Manufacturing), a New Jersey corporation having its principal place of business in New Jersey. Defendants Hugh Andrews, Jr. (Andrews) and Tim Caldwell (Caldwell) are citizens of the State of South Carolina. The other defendants, Drews Distributing Inc., Drews Distributing Co. (collectively Drews Distributing) and Lynch Enterprises, Inc. (Lynch Ent.) are South Carolina corporations. 2 Andrews is the president and sole shareholder of Drews Distributing; he thus controlled all Drews Distributing activities. Andrews is also the sole stockholder of Lynch Ent.

Kramer Manufacturing markets various electronic, coin-operated video games, including the game at issue here — an electronic card game based on draw poker. Lynch Ent. and Drews Distributing also manufacture and market various electronic, coin-operated video games, including games similar to those at issue here. In addition, Andrews operates a sister corporation, which is not a party to this suit, that installs and services the various video games sold by Lynch Ent. and Drews Distributing.

A. The Development of the Game

The record does not clearly indicate the facts surrounding the origin of the video game or the copyright which is in dispute here. Being bound by the factual findings of the district court unless clearly erroneous, we have reviewed the record and essentially adopt its factual findings as herein set forth with our modifications as noted. The game, Hi-Lo Double Up Joker Poker, has gone through various modifications, as is typical of video arcade games. The original version of the game, which was actually a variation of the card game blackjack that displayed five cards, was created by Kramer, Robert Battaglia, and Bill Blair in late 1979. Battaglia was then an engineer employed by UF Corporation (UF), a New Jersey corporation engaged in the engineering and manufacturing of video games. James Foy was the principal of UF, and he had hired Battaglia to engineer and Kramer to provide ideas for the development of a video arcade card game. Battaglia acted as the software designer, engineer, and programmer, while Kramer essentially provided the concepts upon *426 which the game was built. Although the game was developed by Battaglia and Kramer, the record is clear, as most noticeably evidenced by Kramer’s own testimony, that UF owned the rights to the original production model of what was eventually to become Hi-Lo Double Up Joker Poker. Despite UF’s ownership of the game from its inception, Kramer in fact marketed the game through Kramer Manufacturing.

After marketing the five card blackjack game, Kramer recognized the potential for profit in this business and entered into an arrangement with Pasquale Storino to form a New Jersey corporation called Computer Portrait Center (CPC), which marketed various electronic devices. The two of them, Storino and Kramer, were the sole owners of CPC. In addition to his association with Kramer, Storino was also a principal in Gametronics, another New Jersey corporation. UF had sold various video games to Gametronics, and Kramer and Storino met through their mutual association with UF.

Sometime prior to 27 October 1981, Battaglia, working for UF, and with the cooperation of Kramer, completed a video game called Draw Poker II which had a different printed circuit board than prior games, included an attract mode unlike prior games, and included a split screen and play mode with jokers unlike prior games. Nevertheless, the testimony and documentary evidence is clear that Draw Poker II encompassed a prior version of the same game, Draw Poker I. That is, Draw Poker II was not an independent creation of the engineers who had created Draw Poker I but resulted from various and often subtle changes in the earlier version, Draw Poker I. The changes to Draw Poker I were made slowly and over a period of time; the total result of those changes being an almost complete transformation of Draw Poker I into Draw Poker II.

On 27 October 1981, UF transferred by letter and for consideration all rights to Draw Poker II as it then existed to Kramer Manufacturing. The defendants have challenged the adequacy of the consideration, premising their challenge to the validity of Kramer Manufacturing’s copyright on that challenge, among others. Kramer testified, and his testimony was not contradicted, however, that although Kramer Manufacturing did not pay the entire contract price for the rights to Draw Poker II, UF released him and his company from all obligations under the contract by accepting certain computer hardware and harnesses. In the absence of any evidence to the contrary, and doubting the standing of any of the defendants to challenge the adequacy of whatever consideration was exchanged for the rights to Draw Poker II, we find that the letter of 27 October 1981 effectively transferred all rights in Draw Poker II to Kramer Manufacturing.

Through Battaglia’s guidance, Draw Poker II went through many more modifications and eventually evolved into the game that forms the basis for this suit: Hi-Lo Double Up Joker Poker. Battaglia left UF in August, 1981, and on 31 August 1981 Battaglia became a full-time employee of Kramer Manufacturing. The revised version of Draw Poker I was then in what the parties refer to as revision G, with revisions H through K to follow. Soon after Battaglia joined Kramer Manufacturing, he completed the programming necessary to transform Draw Poker I into a marketable Draw Poker II. At the time of transfer of the rights to Draw Poker II to Kramer Manufacturing, as discussed above, Draw Poker II was not completely “integrated”; therefore, Battaglia’s modifications were necessary prior to sale of the game to the public, and he made those modifications while in Kramer Manufacturing’s employ. Draw Poker II was first manufactured in late 1981, and Kramer Manufacturing has since sold over 6,000 of the games.

The final changes to Draw Poker II, which resulted in the game Hi-Lo Double Up Joker Poker, occurred between November 1981, just after Battaglia left UF, and February 1982. Kramer Manufacturing began marketing the game with the hi-lo double up feature in February, 1982. The hi-lo double up feature allowed a player, *427 after winning a hand, to choose to play “hi-lo” and double his “credits,” or plays, if he correctly guessed whether the next card would be higher or lower than the card then appearing. On 15 April 1982, Kramer Manufacturing began marketing the final version of the game, Hi-Lo Double Up Joker Poker. This version was identical to the one marketed in February except it contained a “flashing card feature”: a series of flashing cards rather than still cards indicated the player’s hand. The audio-visual differences between Draw Poker II as of 31 August 1981, when ownership was transferred from UF to Kramer Manufacturing and Battaglia left UF for Kramer Manufacturing, and the Hi-Lo Double Up Joker Poker game sold in April, 1982 were changes in the attract mode to include the hi-lo double up feature, instructions for hi-lo double up in the play mode, the hi-lo feature itself with instructions as to which button to push to activate the optional game, and the series of flashing cards instead of still cards throughout the game.

B. The Relationship Between Andrews and Kramer

In September, 1981, Andrews incorporated Drews Distributing for the purpose of distributing and servicing video game equipment. Andrews’ association with Kramer developed out of Drews Distributing’s sales of Kramer’s video games. Drews Distributing bought various versions of Draw Poker I and II and Hi-Lo Double Up Joker Poker from Kramer Manufacturing. Andrews and Kramer often discussed the possibility, during their frequently combined vacation and business trips, of Drews Distributing becoming the exclusive licensee for the sale of Kramer Manufacturing’s video games in either South Carolina or in what Kramer and Andrews termed the southeast area. Andrews prepared several drafts of an exclusive distributorship agreement and forwarded them to Kramer. None of those agreements apparently were satisfactory to Kramer, because he did not accept them. Instead, he modified some of the terms of the agreements. The record is unclear whether Kramer returned the agreements, as modified, to Andrews or kept them in his personal files. In any event, the record is clear that, as the district court found, Andrews and Kramer never agreed on mutual terms for the exclusive distributorship agreement and never entered into any distributorship agreement whatsoever, because the changes made to Andrews’ proposal by Kramer were never accepted by Andrews. During 1982, the dealings between Kramer and Andrews amounted to approximately $1,400,000 worth of sales, about 98% of which represented sales of Hi-Lo Double Up Joker Poker.

In late 1982, recognizing the scope of the video game market as Kramer had earlier, Andrews began researching how to market and manufacture his own video poker game. First, and as a result of the lack of any definitive distributorship agreement, Andrews began marketing video poker games, similar to that produced by Kramer, from Electro Sport and Merit Industries, other video game manufacturers. In addition, Andrews began purchasing in September or October of 1982 other Hi-Lo Double Up Joker Poker games that were being sold by Hillside Gaming Corporation (Hillside) and SMS Manufacturing Corporation (SMS). The principal of SMS was Pasquale Storino, who was a co-principal with Kramer in CPC.

Thus, it is clear that the development, manufacture, and sale of the Draw Poker video game involved much shifting of alliances and business relationships. Storino and Kramer had been involved in the original development of the Draw Poker game when UF was revising the initial backjackbased game. They, in fact, formed CPC to invest in the video game market expansion. At the same time, however, they were competing with each other through their respective corporations: Kramer was selling through Kramer Manufacturing and Storino was selling through SMS.

C. The Copying of the Game

Andrews’ second step toward establishing his market position was to attempt to manufacture his own Draw Poker game. *428 Toward that end, in August, 1982, he contacted Kenneth Lynch (Lynch), an electronics engineer. It is their activities that form the basis for Kramer’s infringement claim. Lynch and Andrews formed defendant Lynch Ent. to develop a computer video game to compete with Hi-Lo Double Up Joker Poker. Andrews gave Lynch a printed circuit board containing ROMS 3 from which to create a video poker game. The board that Andrews gave Lynch for purposes of copying was marked “Copyright Applied For M. Kramer Manufacturing.” Because of this marking Lynch refused to use that board to develop the game. Andrews subsequently supplied to Lynch a printed board and ROMS from an SMS game. Lynch copied that board, which was actually a copy of the Kramer game, and produced a game substantially identical to the Kramer game.

Although the games are similar, Lynch changed portions of the SMS game, which had been previously copied from the Kramer by changing the configuration of the board that holds the ROMS, changing some words in the audiovisual display, and by changing the design on some of the cards. Specifically, he inserted the name “Lynch Enterprises” in the attract mode, inserted the insignia “LE” on the back of the playing cards, and changed some of the wording in the attract and play modes. Lynch deleted the words “Be a big winner,” “Don’t go by, give it a try,” “Take a shot” and inserted “Try your skill,” “For fun and free replays,” and “Skill points.” In December 1982, Lynch sold sixteen of his games to a distributor in Pennsylvania; thereafter he sold only to Drews Distributing.

D. Copyright Registration

Registration of the copyrights for the various games involved in this case is as convoluted as the facts surrounding the games’ development. Kramer Manufacturing’s 11 March 1983 application for registration of the audiovisual work in “Hi-Lo Double-Up Joker Poker” listed as a previous or alternate title the name “Hi-Lo Double Up Joker Poker with Flasher, Model III.” The registration application also stated that the audiovisual work for which registration was requested was a derivative work, as defined under the statute, based on a “[n]ew compilation of text, and new and revised graphics, not appearing in prior models.” The copyright was registered on 14 March 1983 as PAu 480-757. Kramer Manufacturing also submitted a copyright application for copyright of the audiovisual “Hi-Lo Double Up Joker Poker.” It listed as an alternative or previous title the name Hi-Lo Double Up Joker Poker with Flasher, Model II. After the copyright office initially rejected that application because it contained no copyrightable graphics “in view of [a] recent registration for what [was] basically the same text,” i.e., registration PAu 480-757, Kramer Manufacturing’s attorney certified that the work submitted was a new compilation of previously copyrighted material. The copyright office then registered the audiovisuals for Model II under PA 168-068. Thus Kramer registered Model III (registration PAu 480-757) first, as a compilation of Models II and I, and then registered Model II (registration PA 168-068) as a compilation of earlier works on 28 March 1983.

Foy and Storino, however, had already obtained copyright registrations in the computer programs underlying the games. They had submitted an application for “Draw Poker/Joker Poker” on 19 October 1982. The copyright office registered the computer program in Draw Poker/Joker Poker, TXu 106-735, on 21 October 1982. On 19 October 1982, Foy and Storino also submitted a copyright application for Draw Poker/Joker Poker/Hi-Lo. The registration covering the computer program for Draw Poker/Joker Poker/Hi-Lo, TXu 106-736, was granted on 21 October 1982. 4

*429 Based on the copyrights they had obtained in the computer programs, Foy and Storino, now acting through SMS, sued Kramer Manufacturing, Michael Kramer, and his wife Branda Kramer for copyright infringement “by reproducing, publishing, marketing and distributing without license or consent [of SMS, Foy, Storino, or UF] certain video games ...” in the United States District Court for the District of New Jersey on 16 February 1983. 5 Two days after suit was filed against him by Foy and Storino, Kramer filed the contract assigning all rights to Kramer Manufacturing in the “hardware and software design of Draw Poker II between Kramer Manufacturing and UF,” which was signed by Foy, in the copyright office. A month later, Kramer filed and was granted his registration of the copyright in the audiovisual aspects of the games, as noted above. While being sued by Foy and Storino for copyright infringement based on registered copyrights in the computer programs that generated the audiovisual aspects of Hi-Lo Double Up Joker Poker, Kramer obtained a copyrighted registration in the audiovisual aspects of that same game. Thus, the copyright registration in the computer program was held by one party to the suit in New Jersey and the copyright registration in the audiovisual display that is generated by the computer program was held by another party to that same suit.

The result of these conflicting copyright registrations was settlement negotiations, and on 9 May 1983, a settlement agreement between Kramer Manufacturing, SMS, and UF was executed. All parties to the suit released all other parties to the suit from any possible copyright infringement claims arising out of the video arcade games listed on an attached schedule. 6 ' All parties also cross-licensed the others, a license that was termed a “nonexclusive worldwide license in perpetuity,” to use the copyrights of any of the then existing games. They further agreed not to authorize any third party to manufacture or distribute any of the games except games that the authorizing party itself manufactured. Finally and most important to this litigation, Foy and Storino, through UF and SMS, agreed not to pursue any copyright infringement claim they might have against Drews Distributing, Lynch Ent., or Andrews and agreed that Kramer Manufacturing would have the exclusive right to bring such suit. In the event Kramer or Kramer Manufacturing did not bring suit within 45 days, the right to sue would revert back to Foy and Storino or one of their related companies.

A month later, on 2 June 1983, Kramer Manufacturing brought the suit underlying this appeal against Andrews, Caldwell, Drews Distributing, and Lynch Ent. Kramer Manufacturing’s complaint alleged that the defendants, by distributing copies of the game Hi-Lo Double Up Joker Poker, had infringed upon its copyright in "[t]he computer program and the audiovisual work displayed on the screen during all modes of the [g]ame’s operation____” Complaint 11 8, Kramer Manufacturing v. Andrews, 83-1344-3 (D.S.C. filed June 6, 1983). Thus, Kramer Manufacturing alleged infringement of its copyright in both the computer program and the audiovisuals and attached a copy of copyright registration PAu 168-068, covering only the audiovisual work in Model II. The complaint also alleged that by copying Kramer Manufacturing’s “distinctive art work” on the front glass panel of the game, by copying “the configuration of the console embodying the Game,” and by copying the name Hi-Lo Double Up Joker Poker, the defendants had falsely designat *430 ed the origin of their game in violation of section 43(a) of the Federal Trademark Act of 1946, 15 U.S.C. § 1125(a) (1983), and had competed unfairly.

Two days later, the district court entered a temporary restraining order preventing the defendants from manufacturing or distributing:

(1) any video card game embodying [Kramer Manufacturing’s] copyrighted computer program and audiovisual work or any substantial copy thereof,

(2) any video card game containing all or substantially all of the features of [Kramer Manufacturing’s] Hi-Lo Double Up Joker Poker video card game, and

(c) [sic] any video card game using the original artwork and characteristic console configuration of [Kramer Manufacturing’s] Hi-Lo Double Up Joker Poker video card game or any similar artwork or configuration, or using the title “HI-LO DOUBLE UP JOKER POKER” or any similar title____

The court also ordered Kramer Manufacturing to post a bond securing the defendants for any losses incurred as a result of the temporary restraining order and scheduled a hearing for 14 June 1983. After a subsequent hearing, which had been postponed on the motion of the defendant’s counsel, the district court dissolved the temporary restraining order as improvidently granted. After trial without a jury, the district court issued an unpublished opinion finding for the defendants on all counts.

II. District Court Opinion

The trial court opinion found for the defendants on the copyright claim by resolving several alternative holdings in their favor. First, the court examined the audiovisual content of Kramer Manufacturing’s Hi-Lo Double Up Joker Poker to determine whether it contained any copyrightable material. Stating the law to be that “the registration for a compilation of derivative work only covers the copyrightable new material and not elements found in pre-existing published versions,” the district court held Kramer Manufacturing’s registration PA 168-068 covered only those copyrightable audiovisual elements that were not contained in the audiovisuals of any previously published version of the game. After reviewing Draw Poker Model I with attract mode, Joker Poker Model II with attract mode, and Hi-Lo Double Up Joker Poker with Still Card and comparing those previously published games with Hi-Lo Double Up Joker Poker with Flashing Card, for which registration PA 168-068 was obtained, the court found that “there is no copyrightable [sic] material which was not in pre-existing works, therefore, PA 168-068 is invalid____” That is, the district court excluded from any possible copyright protection all material that had been published in prior works, thus limiting protection to those elements that were added in the latest revision. Specifically, the court found that the only difference between Hi-Lo Double Up Joker Poker with Still Card and Hi-Lo Double Up Joker Poker with Flashing Card was, as the names suggest, the addition of the flashing card feature, which is a series of cards with faces and symbols that flash rapidly in succession. Because it said all but the flashing card feature was contained in a prior published work, the district court excluded that pre-existing portion from copyright protection. The court further held that the flashing card feature was not copyrightable, because it amounted to only “an idea, concept or system of flashing cards,” to which copyright protection is not extended under 17 U.S.C. § 102(b) (1983).

Although the above reasoning resolved the case in favor of the defendants, the district court also addressed whether any copyright that might exist was forfeited and whether any valid, non-forfeited copyright was infringed. The court held that, assuming Kramer Manufacturing possessed a valid copyright in the audiovisual aspects of the game, Kramer Manufacturing had forfeited that copyright by failing to affix a proper copyright notice on works distributed to the public. In addition, assuming that Kramer Manufacturing had a valid copyright, which had not been forfeit *431 ed, the district court held that the defendants had not infringed that copyright. Finally, the district court found that any infringement that might have occurred was innocent.

The owner of a copyright forfeits that copyright by failing to affix proper notice, which consists of the symbol ©, the word copyright, or the abbreviation copy; the year the work was first published; and the name of the copyright holder. The plaintiff admitted that it did not affix a proper notice when the game was first published, but argued that the failure had been cured under 17 U.S.C. § 405 by its “reasonable efforts” to add copyright notice to the game. The district court rejected that argument by finding that

there was no effort made to apply a proper notice to Plaintiffs games located in its regional warehouses; to add proper notices to games in the possession of distributors; nor to send out replacement programs that included a proper notice____ Kramer took corrective measures only with the new games and with circuit boards returned for servicing or replacement.

The district court reasoned that because “reasonable efforts” “should include the addition of notices on copies in the hands of a distributor” and because in those cases finding a reasonable effort, the individual provided to distributors stickers or labels for affixation to previously delivered copies, Kramer Manufacturing’s efforts were not reasonable.

Addressing whether the defendants had infringed Kramer Manufacturing’s copyright, assuming that copyright not to have been forfeited, the court analyzed the audiovisuals of the plaintiff’s and the defendant’s games and stated “there is a lack of substantial similarity between the Plaintiff’s audio visual ... and Defendant’s game____” The district court’s analysis or comparison of the games is contained in one sentence of the opinion:

“Here, Defendants used

different phraseology in its audio visual presentation, modified the playing cards, added ‘LE’ to the back of the cards, and inserted ‘Lynch Enterprises, Inc.’ into the attract mode of the game.”

Based on that analysis, the court concluded that there was insufficient similarity between the two games to warrant a finding of infringement.

The court next concluded that any infringement which might have occurred was innocent infringement under 17 U.S.C. § 405(b), and thus, not actionable. The court reasoned that any infringement was innocent because when the defendants began to manufacture the game, none of plaintiff’s games exhibited proper notice and Storino, Foy, and Kramer were all claiming rights to the game. Furthermore, Andrews had received an attorney’s opinion letter indicating that Kramer did not possess copyrights in the game.

On the basis of these conclusions the district court dismissed Kramer’s claims. From such decision, Kramer has appealed. We reverse.

III. Position of the Plaintiff

Kramer Manufacturing raises several issues on appeal. It argues that because a registered copyright covers previous versions of the work that were completed by the same author, the district court erroneously excluded any copyrightable features of the predecessor games to Hi-Lo Double Up Joker Poker with Flashing Card when determining whether that game contained any copyrightable elements. Second, Kramer Manufacturing argues that because the record reflects that it added proper copyright notice to every game manufactured and sold after the omission of a proper notice had been discovered, the trial judge erroneously concluded that no reasonable effort had been made to attach a proper copyright notice to Kramer Manufacturing’s game. Third, the plaintiff complains that the trial court should not have excluded the computer program that runs the video card game and produces the audiovisuals, but should have permitted Kramer Manufacturing to introduce the *432 computer program and compare its program with the program for the Drews Distributing game for the purpose of proving copying of the audiovisuals. Finally, the plaintiff contends that non-innocent infringement was established as a matter of law by Andrews’ admission of copying a copy of plaintiff’s computer program.

IV. Summary of Conclusions

We find that Kramer Manufacturing did possess a valid copyright in the audiovisuals of the game, that the district court erred by not permitting the plaintiff to introduce the computer program for Hi-Lo Double Up Joker Poker for the purpose of proving copying, and that Kramer Manufacturing did expend a reasonable effort in attempting to attach a proper copyright notice to its games after discovering the omission of proper notice. Furthermore, we find error in the district court’s determination as to innocent infringement. We first address the question of the copyright-ability of plaintiff’s audiovisuals.

V. Copy righ tabi li ty

We begin with a general review of the law of' copyright as it has developed over the' years. The right of copyright is a creature of federal statute, with its constitutional base in Article I, § 8, cl. 8. The first copyright statute under this constitutional grant was enacted in 1790. Since that time there have been a number of revisions or amendments, both by Congress and in judicial decisions, in order to keep the Act in step with technological developments. For example, photographs received copyright recognition in 1884 (Burrow-Giles Lithographic Company v. Sarony, 111 U.S. 53, 4 S.Ct. 279, 28 L.Ed. 349), and sound recordings in 1973 (Goldstein v. California, 412 U.S. 546, 93 S.Ct. 2303, 37 L.Ed.2d 163). In 1976, after a period of gestation over some twenty years, the Congress enacted a complete revision of copyright law which represented Congress’ response at the time to the startling developments recently made in technology and science. 7 This new Act, known as the Copyright Act of 1976 and codified in 17 U.S.C. § 101, et seq. represents the existing statutory authority for copyright. Subsequently, in 1980, that Act was amended to include expressly what had been generally assumed as implicit in the Act of 1976 itself that computer programs were proper subjects of copyright. The Amendment did this by including in the definitional section of copyrightable subject matter a definition of “computer program.” 8 This Amendment also replaced section 117 of the 1976 Act with a new section limiting the exclusive rights given “authors” in copies of computer programs. 9 Accordingly, it is the Act of 1976 as so amended in 1980 which is controlling in this case.

Under the 1976 Act, copyright protection is granted “in original works of authorship *433 fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” Section 102(a). One of the important purposes of this section, as declared in the legislative history, was to broaden the scope of fixation, an essential requirement for copyright medium of expression and, specifically to abrogate the “artificial” rule enunciated in White-Smith Co. v. Apollo Co., 209 U.S. 1, 28 S.Ct. 319, 52 L.Ed. 655 (1908), which precluded protection for works not embodied in human-readable medium. The House Report, in explication of this purpose, said that this section “makes no difference [in determining the existence of the required element of fixation] what the form, manner, or medium of fixation may be — whether it is in words, numbers, notes, sounds, pictures, or any other graphic or symbolic indicia, whether embodied in a physical object in written, printed, photographic, sculptural, punched, magnetic, or any other stable form, and whether it is capable of perception directly or by means of any machine or device ‘now known or later developed.’ ” 1976 U.S.Code Cong. & Ad.News at 5665. The new section also declares in section 102(a) that “[w]orks of authorship [shall] include the following categories: ... (6) motion pictures and other audiovisual works;____” (Italics added) Finally, the traditional rule declared in Mazer v. Stein, 347 U.S. 201, 217, 74 S.Ct. 460, 470, 98 L.Ed.2d 630 (1954) that copyright protection extended “only to the expression of the idea — not the idea itself” was codified in section 102(b) of the Act.

In section 101 Congress, inter alia, defined the term “audiovisual works” which had been identified in section 102(a) as a proper subject of copyright protection, thus:

“Audiovisual works” are works that consist of a series of related images which are intrinsically intended to be shown by the use of machines or devices such as projectors, viewers, or electronic equipment, together with accompanying sounds, if any, regardless of the nature of the material objects, such as films or tapes, in which the works are embodied. (Emphasis added) 17 U.S.C. § 101.

The definition demonstrates that “audiovisual works” inherently requires some type of machine or device and that such machine shall embody as a “copy” such work. The Act also provided that compilations and “derivative works,” terms later defined, were proper subjects of copyright.

Even though “audiovisual works” are proper subjects for copyright, the actual copyrighting of such audiovisual works and their qualifying for copyright protection depends on whether the works meet the tests for originality and fixation, which are declared to be “[t]he two fundamental criteria of copyright protection” for any work. House Report at 5664. “Fixation,” is defined in the definitional section of the Act thus:

A work is “fixed” in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration. A work consisting of sounds, images, or both, that are being transmitted, is “fixed” for purposes of this title ... if a fixation of the work is being made simultaneously with its transmission.

The term “fixation in tangible form,” as thus defined, is restated in the statutory definition in the Act of “copies” as “material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term ‘copies’ includes the material object, other than a phonorecord, in which the work is first fixed.”

There is no definition for “originality” comparable to that for “fixation,” in the Act. The legislative history, however, demonstrates that Congress purposely *434 omitted any such definition because it accepted the standards as “established [for originality] by the courts under the present copyright law [i.e., the Act of 1909],” though it did explain in that connection that “[t]his standard [did] not include requirements of novelty, ingenuity, or esthetic merit” and added that “there [was] no intention to enlarge the standard of copyright protection to require them.” House Report at 5664.

As we indicated in the statement of facts, the plaintiff had applied for and had been granted a certification of copyright of its video game Hi-Lo Double-Up Joker Poker with Flasher, Model II, as a derivative work under the category of “audiovisual works.” It is that copyright which it claims the defendants have infringed. Such copyright, thus granted by the Copyright Office, is prima facie proof of the validity of plaintiffs copyright, including the existence of the elements of originality and fixation. The defendants, in response to the plaintiff’s charge of infringement raise a number of defenses challenging the qualifications of Kramer’s work for copyright. The initial defense (1) was that plaintiff’s work was not copyrightable because it was a “process,” “system,” “game,” or “idea,” and, therefore, not copyrightable under section 102(b), (2) it lacked originality, and (3) that, though not directly stated, there was a want of fixation. The defendants, in disputing the validity of such copyright on those grounds, have the burden of overcoming the presumption arising out of the granting of the copyright by the Copyright Office. 17 U.S.C. § 410(c); Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1019 (9th Cir.1985); Murray v. Gelderman, 566 F.2d 1307, 1311 (5th Cir.1978); Atari, Inc. v. Amusement World, Inc., 547 F.Supp. 222, 225 (D.Md.1981). The district court sustained all the claims of the defendants and found the presumption of validity rebutted. We examine the soundness of the grounds on which the district court rested its decision that the plaintiff’s work was not copyrightable.

The district court found that the video game in this case was not copyrightable because it was a “system or manner of playing a game” or “description of a game” and was simply an “idea,” and “game.” It predicates this conclusion basically on subsection (b) of section 102. 10 We find such reliance unwarranted. We base this determination on the limited purpose of the subsection itself as stated in its legislative history. The Committee Notes accompanying such subsection recognized this limited scope of the subsection, declaring that, “Section 102(b) ... in no way enlarges or contracts the scope of copyright protection under the present law. Its purpose is to restate, in the context of the new single Federal system of copyright, that the basic dichotomy between expression and idea remains unchanged.” In effect, what Congress intended in this subsection was simply a codification of the statement made by the Supreme Court in Mazer v. Stein, 347 U.S. at 207, 74 S.Ct. at 465; 11 that copyright protection extended “only to the expression of the idea — not the idea,” thus distinguishing between “idea” and “expression,” between “methodology or processes” and “writings,” and, in effect, between patentability and copyright-ability. That this is the proper construction of the subsection is manifest from the language of the House Report (p. 5670): “Section 102(b) is intended, among other things, to make clear that the expression adopted by the programmer is the copyrightable element in a computer pro *435 gram, and that the actual processes or methods embodied in the program are not within the scope of the copyright law.” (Emphasis added) The legislative purpose thus declared was to accord copyrightability to such of the computer program, whether represented in a video game or otherwise, as might be considered “expression” under the enlarged definition given such term in the fixation clause of the Act. And that is the construction which has been given the subsection in all the recent decisions.

Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1250-51 (3d Cir.), cert. denied, 464 U.S. 1033, 104 S.Ct. 690, 79 L.Ed.2d 158 (1984) is illustrative of these recent cases, which have held that computer programs 12 are not to be denied copyrightability as a “process,” or “system,” precluded from registration under section 102(b). In that case, the court, reversing a district court which had ruled similarly to the district judge in this case, 545 F.Supp. 812 (E.D.Pa.1982), said:

Franklin [the defendant] argues that an operating system program is either a “process,” “system”, or “method of operation” and hence uncopyrightable. Franklin correctly notes that underlying section 102(b) and many of the statements for which Baker v. Selden is cited is the distinction which must be made between property subject to the patent law, which protects discoveries, and that subject to copyright law, which protects the writings describing such discoveries. However, Franklin’s argument misapplies that distinction in this case. Apple does not seek to copyright the method which instructs the computer to perform its operating functions but only the instructions themselves____

Since it is only the instructions which are protected, a “process” is no more involved because the instructions in an operating system program may be used to activate the operation of the computer than it would be if instructions were written in ordinary English in a manual which described the necessary steps to activate an intricate complicated machine.

After all, as the court in Apple Computer, Inc. v. Formula Int'l, Inc., 562 F.Supp. 775, 780 (C.D.Cal.1983), aff'd., 725 F.2d 521 (9th Cir.1984), stated “all computer programs [whether in a video game or other work] as embodied in ROMs and diskettes are designed to operate a machine in such a way as to ultimately produce some useful communication to the user — that is their purpose,” i.e., to express. (Emphasis in text) Because of this, the fact that “the words of a program [as expressed through the computer program] are used ultimately in the implementation of a process should in no way affect their copyrightability.” 725 F.2d at 524. That the method of expression is by way of a computer “device” or “machine” is immaterial in view of the revised language in the 1976 Act, which expressly brings within the standards of copyrightability communications made “with the aid of a machine.” We find the plaintiff’s work is not precluded from copyright under the provisions of section 102(b).

The district court, also, suggests that, “video games” are never copyrightable and that for this reason the plaintiff’s copyright which in effect covers a video game is invalid. Strictly speaking the game, the idea of the game, itself is not protected but the shape and characteristics of the cards and the “shapes, sizes, colors, sequences, arrangements and sounds [that] provides something ‘new or additional over the idea’ ” are protected. Atari, Inc. v. North American Phillips Consumer Electronics, Corp., 672 F.2d at 617. The decisions to this effect are so numerous that video games 13 may be validly copyrighted *436 as “audiovisual works” under this reasoning that the court in Midway Mfg. Co. v. Bandai-America, Inc., 546 F.Supp. 125, 139 (D.N.J.1982), 14 said: “It is also unquestionable that video games in general are entitled to copyright protections as audiovisual works,” and the court in Midway Mfg. Co. v. A