Nintendo Reaches $2.4 Million Settlement against Emulator Company

Nintendo quickly reached a settlement with the maker of a Switch game emulator that will result in a payout of $2.4 million to Nintendo and the defendant company shutting down.

As Ars Technica reported, Nintendo is "basically taking the position that emulation itself is unlawful." Thus,

If successful, the arguments in the case could help overturn years of legal precedent that have protected emulator software itself, even as using those emulators for software piracy has remained illegal.

According to an earlier Ars Technica article,

For years now, "emulation" has been a dirty word in the video game industry, regarded by many companies as nothing more than an illegal, piracy-fueling technology that represents an existential threat to the gaming business.

Back in 1999, Steve Jobs himself introduced the Connectix Virtual Game Station, $49 third-party software that "turns your Mac into a Sony PlayStation."

Connectix made $3 million from selling the first commercial console emulator. Sony sued, backed by Nintendo and Sega, but a court ruled that reverse engineering the Sony PlayStation didn’t violate Sega’s intellectual property (IP) rights.

Nintendo sued Tropic Haze, maker of the Switch game emulator called Yuzu. According to the complaint,

With Yuzu in hand, nothing stops a user from obtaining and playing unlawful copies of virtually any game made for the Nintendo Switch, all without paying a dime to Nintendo or to any of the hundreds of other game developers and publishers making and selling games for the Nintendo Switch…

Nintendo alleged that Yuzu violated the anti-circumvention and anti-trafficking provisions of the Digital Millennium Copyright Act (DMCA).

As Engadget reported,

Nintendo explained that it protects its games with encryption and other security features meant to prevent people from playing pirated copies. Yuzu has the capability to defeat those security measures and to decrypt Nintendo games. "[W]ithout Yuzu's decryption of Nintendo's encryption, unauthorized copies of games could not be played on PCs or Android devices," the company wrote in its complaint.

Under the DMCA, it's illegal to "circumvent technological measures put into place by copyright owners to protect against unlawful access to and copying of copyrighted works."

Distributing "software primarily designed to circumvent technological measures" also constitutes unlawful trafficking under the DMCA.

As Ars Technica explained,

The bulk of Nintendo's legal argument rests on Yuzu's ability to break the many layers of encryption that protect Switch software from being copied and/or played by unauthorized users. By using so-called "prod.keys" obtained from legitimate Switch hardware, Yuzu can dynamically decrypt an encrypted Switch game ROM at runtime, which Nintendo argues falls afoul of the Digital Millennium Copyright Act's prohibition against circumvention of software protections.

Crucially, though, the open source Yuzu emulator itself does not contain a copy of those "prod.keys," which Nintendo's lawsuit acknowledges that users need to supply themselves.

The settlement includes a permanent injunction that will prohibit Tropic Haze from distributing Yuzu or any other software that circumvents Nintendo’s anti-piracy technology.

Tropic Haze has also been ordered to destroy any materials related to Yuzu and to stop using the Yuzu domain name.

As Sports Illustrated reported, Nintendo’s game The Legend of Zelda: Tears of the Kingdom “was playable on Yuzu a week before the game officially launched and was downloaded over 1 million times on the emulator.”