ACCOLADE APPLAUDS APPELLATE COURT VALIDATION OF SOFTWARE REVERSE
ENGINEERING 

Sega's Actions Ruled "Clearly Unlawful"

SAN JOSE,CA-October 21, 1992--Accolade Chairman Alan R. Miller today
applauded the opinion handed down yesterday by the Ninth Circuit Court of
Appeals in the landmark case of Sega vs. Accolade. "This decision is
everything we had expected," he said. The opinion explained the reasons
for the appellate court's order, issued on August 28, which dissolved the
district court's injunction against Accolade.

The court examined the copyright issues in the case and held:

"..we conclude, based on the policies underlying the Copyright Act that
disassembly of copyrighted object code is, as a matter of law, a fair use
of copyrighted work if such disassembly provides the only means of access
to those elements of the code that are not protected by copyright and the
copier has a legitimate reason for seeking such access."

"...in the case before us, disassembly is the only means of gaining to
those unprotected aspects of the program, and ... Accolade has a
legitimate interest in gaining such access (in order to determine how to
make its cartridges compatible with the Genesis console)...."

"...Accolade's identification of the functional requirements for Genesis
compatibility has led to an increase in the number of independently
designed video game programs offered for use with the Genesis console. It
is precisely this growth in creative expression, based on the
dissemination of other creative works and the unprotected ideas contained
in those works, that the Copyright Act was intended to promote."

"In any event, an attempt to monopolize the market by making it impossible
for others to compete runs counter to the statutory purpose of promoting
creative expression and cannot constitute a strong equitable basis for
resisting the invocation of the fair use doctrine."

On the trademark issues relating to Sega's so-called "Trademark Security
System" (TMSS), the court held that:

"Sega (in employing the TMSS) knowingly risked two significant
consequences: the false labeling of some competitors' products and the
discouraging of other competitors from manufacturing Genesis-compatible
games. Under the Lanham Act, the former conduct, at least, is clearly
unlawful."

"Trademark policies are designed (1) to protect consumers from being
misled... (2) to prevent an impairment of the value of the enterprise
which owns the trademark; and (3) to achieve these ends in a manner
consistent with the objectives of free competition {citations omitted}.
Sega violated the first and third of these principles."

"With respect to Accolade, we emphasize that the record clearly establishes
that it had only one objective in this matter: to make its video game
programs compatible with the Genesis III console. That objective was a
legitimate and a lawful one."

"We were confident that the court would strike down Sega's claims,"
observed Miller. "Neither copyrights nor trademarks are intended to
provide a 'lock-out' device to prevent the development and sale of
compatible software for any computer-based system, including the Genesis
video game system."

"This decision is very important," Miller continued, "because every
consumer of software and hardware products will benefit. This ruling will
promote competition and result in a greater diversity of product offerings
and lower prices in the future, throughout the computer software and
hardware industry. It encourages continuation of the open systems movement
in the information technology industries and strongly suggests that
high-priced proprietary systems are not about to become the wave of the
future."

"The stakes in this case were very high. If the decision had gone the other
way, it could have eradicated the jobs of thousands of software developers
and hardware engineers in the United States, along with many thousands of
other people whose jobs are directly or indirectly related to the computer
industry. That's because if it ever becomes illegal in this country to
study and understand the ideas and functionality of a software program, in
order to achieve interoperability with it, many companies could be forced
by competitive pressures to move their software development operations to
other countries where decompilation and reverse engineering are expressly
permitted."

Miller further commented that, "The record at the district court shows that
Accolade's video games are not substantially similar to any of Sega's
video games, an essential element to a copyright claim relating to
Accolade's finished products. In fact, Sega has never previously claimed
that any of our games are substantially similar to any of theirs."

Peter M.C. Choy, Deputy General Counsel of Sun Microsystems and Chairman of
the American Committee for Interoperable Systems (ACIS), a group of
hardware and software companies which make or depend upon the availability
of products which communicate with the products of other manufacturers,
stated, "On behalf of open-systems vendors in the computer industry, ACIS
welcomes the court's endorsement of sound public policy in arriving at a
balance between the rewards for authors and the public's interest in
competition."

Edward J. Black, Vice President and General Counsel of the Computer and
Communications Industry Association (CCIA), whose members have aggregate
annual sales of $200 billion, stated, "The court's ruling will guarantee a
bright future for innovative independent software vendors and smaller
hardware companies who need to ensure that their independently developed
software is interoperable with the products of large computer vendors that
control many of the de facto hardware and software standards in our
industry."

In its lawsuit, Sega alleged that its copyrights were infringed when
Accolade studied a Sega Genesis game system and several game cartridges to
learn how to make Accolade games compatible with the Genesis game system.
Specifically, Sega claimed that Accolade illegally copied its software
during the course of its reverse engineering, which starts with a finished
products and works backward. Sega also alleged that Accolade violated its
trademarks as a result of the TMSS message briefly appearing on the screen
of the Genesis game machine when an Accolade cartridge was inserted in the
machine.

"Accolade will now seek to recover millions of dollars in damages caused by
the erroneous injunction," said Miller." Accolade will also seek summary
judgment for dismissal of all of Sega's claims, and aggressively pursue
its countersuit against Sega for unfair business practices and misuse of
trademark."

Accolade, with headquarters in San Jose, California, is a leading developer
and marketer of entertainment software for IBM-compatible, Macintosh and
Amiga personal computers and is a licensed developer and marketer of video
game software for Nintendo and NEC video game systems.

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