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Mod Chip Sellers Sentenced to Pay Over 9 Million in Damages

by Rainier on Oct. 5, 2006 @ 9:42 a.m. PDT

The Entertainment Software Association (ESA) announced today that a federal court in California recently ordered a group of defendants, representing console mod chip seller Divineo, to pay over $9 million in damages for violations of the Digital Millennium Copyright Act (DMCA).

On September 11, 2006, Judge Claudia Wilken, U.S. District Court, Northern District of California, awarded $3,750,200.00 in damages against corporate defendant Divineo, Inc., and Canadian resident Frederic Legault. She also awarded $5,791,400.00 in damages against corporate defendants Divineo U.K. and Divineo SARL, and French resident Max Louarn. The Court’s order related to violations of the DMCA described in the complaint as involving defendants’ trafficking of modification chips (or “mod chips” as they are commonly called), and a software application circumvention device called HDLoader that allows copies of videogames to be downloaded directly onto the hard drive of a game console. Mod chips and the HDLoader are devices that circumvent the copyright protection technology built into video game consoles and video game software. Once installed in a game console, mod chips enable the console to play illegal copies of video games.

“Mod chips and HDLoaders are key elements in facilitating video game piracy because they allow people to play illegally copied games on illegally modified video game consoles,” said Ric Hirsch, Senior Vice President of Intellectual Property Enforcement for the ESA, the trade group representing U.S. computer and video game publishers. “This Court order is very important because it recognizes the significant damage that mod chips and HDLoaders cause the entertainment software industry and delivers the clear message that trafficking in circumvention devices that enable game piracy will result in heavy penalties.”

This ruling follows the December 2005 decision by the US District Court, Northern District of California, that ordered Ohio resident Steven Filipiak to pay over $6 million in fees for violating the DMCA. In that ruling, which was the first published decision to apply the statutory damages provision of the DMCA, the Court stated that the ”substantial” damage award of over $6 million was appropriate because of Filipiak’s willful conduct and the need “to discourage wrongful conduct by other potential retailers who might be tempted to engage in what might otherwise appear to be a lucrative business selling illegal contravention devices.”

Trafficking in a technology that circumvents the copyright protection technology used by video game publishers and console manufacturers to protect their intellectual property rights violates the DMCA. The DMCA, which was enacted in 1998, prohibits the manufacture, distribution and sale of products or services that circumvent technological protection measures designed to prevent unauthorized access to, and copying of, copyrighted materials.

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