PRIOR HISTORY: Appeal from the United States District Court for the Northern
  District of California. D.C. No. CV-91-3871-BAC. Barbara A. Caulfield, District Judge,
  Presiding.

  COUNSEL:

  William S. Coats, Gibson, Dunn & Crutcher, San Francisco, California, for the
  defendant-appellant.

  Joel Linzner, Crosby, Heafey, Roach & May, Oakland, California, for the plaintiff-appellee.

  Dennis S. Karjala, Arizona State University, Tempe, Arizona, for amicus curiae Copyright
  Law Professors.

  Peter M. C. Choy, American Committee for Interoperable Systems, Mountain View,
  California, for amicus curiae American Committee for Interoperable Systems.

  John Haven Chapman, Chapman, Moran, Hubbard, Glazer & Zimmerman, Stamford,
  Connecticut; Thomas N. White, Santa Clara, California, for amicus curiae Computer and
  Communications Industry Association.

  Morton David Goldberg, Schwab, Goldberg, Price & Dannay, New York, New York for
  amicus curiae Computer & Business Equipment Manufactures Association, et al.

  JUDGES: Before: William C. Canby, Jr., Stephen Reinhardt, and Edward Leavy, Circuit
  Judges.

  Opinion by Judge Reinhardt.

 OPINION: ORDER AND AMENDED  OPINION

  REINHARDT, Circuit Judge:

  This case presents several difficult questions of first impression involving our copyright
  and trademark laws. n1 We are asked to determine, first, whether the Copyright Act
  permits persons who are neither copyright holders nor licensees to disassemble a
  copyrighted computer program in order to gain an understanding of the unprotected
  functional elements of the program. In light of the public policies underlying the Act, we
  conclude that, when the person seeking the understanding has a legitimate reason for
  doing so and when no other means of access to the unprotected elements exists, such
  disassembly is as a matter of law a fair use of the copyrighted work. Second, we must
  decide the legal consequences under the Lanham Trademark Act of a computer
  manufacturer's use of a security system that affords access to its computers to software
  cartridges that include an initialization code which triggers a screen display of the
  computer manufacturer's trademark. The computer manufacturer also manufactures
  software cartridges; those cartridges all contain the initialization code. The question is
  whether the computer manufacturer may enjoin competing cartridge   manufacturers
  from gaining access to its computers through the use of the code on the ground that
  such use will result in the display of a "false" trademark. Again, our holding is based on
  the public policies underlying the statute. We hold that when there is no other method
  of access to the computer that is known or readily available to rival cartridge
  manufacturers, the use of the initialization code by a rival does not violate the Act even
  though that use triggers a misleading trademark display. Accordingly, we reverse the
  district court's grant of a preliminary injunction in favor of plaintiff-appellee Sega
  Enterprises, Ltd. on its claims of copyright and trademark infringement. We decline,
  however, to order that an injunction pendente lite issue precluding Sega from continuing
  to use its security system, even though such use may result in a certain amount of false
  labeling. We prefer to leave the decision on that question to the district court initially.

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  n1 The recent decision by the Federal Circuit in Atari Games Corp. v. Nintendo of
  America, Inc., No. 91-1293 (Fed. Cir. Sept. 10, 1992), which discusses a number of the
  issues we decide here, is consistent both with our analysis and the result we reach.

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  I. Background

  Plaintiff-appellee Sega Enterprises, Ltd. ("Sega"), a Japanese corporation, and its
  subsidiary, Sega of America, develop and market video entertainment systems, including
  the "Genesis" console (distributed in Asia under the name "Mega-Drive") and video game
  cartridges. Defendant-appellant Accolade, Inc., is an independent developer,
  manufacturer, and marketer of computer entertainment software, including game
  cartridges that are compatible with the Genesis console, as well as game cartridges that
  are compatible with other computer systems.

  Sega licenses its copyrighted computer code and its "SEGA" trademark to a number of
  independent developers of computer game software. Those licensees develop and sell
  Genesis-compatible video games in competition with Sega. Accolade is not and never
  has been a licensee of Sega. Prior to rendering its own games compatible with the
  Genesis console, Accolade explored the possibility of entering into a licensing
  agreement with Sega, but abandoned the effort because the agreement would have
  required that Sega be the exclusive manufacturer of all games produced by Accolade.

  Accolade used a two-step process to render its video games compatible  with the
  Genesis console. First, it "reverse engineered" Sega's video game programs in order to
  discover the requirements for compatibility with the Genesis console. As part of the
  reverse engineering process, Accolade transformed the machine-readable object code
  contained in commercially available copies of Sega's game cartridges into
  human-readable source code using a process called "disassembly" or "decompilation". n2
  Accolade purchased a Genesis console and three Sega game cartridges, wired a
  decompiler into the console circuitry, and generated printouts of the resulting source
  code. Accolade engineers studied and annotated the printouts in order to identify areas
  of commonality among the three game programs. They then loaded the disassembled
  code back into a computer, and experimented to discover the interface specifications for
  the Genesis console by modifying the programs and studying the results. At the end of
  the reverse engineering process, Accolade created a development manual that
  incorporated the information it had discovered about the requirements for a
  Genesis-compatible game. According to the Accolade employees who created the
  manual, the manual contained only functional  descriptions of the interface
  requirements and did not include any of Sega's code.

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  n2 Computer programs are written in specialized alphanumeric languages, or "source
  code". In order to operate a computer, source code must be translated into computer
  readable form, or "object code". Object code uses only two symbols, 0 and 1, in
  combinations which represent the alphanumeric characters of the source code. A program
  written in source code is translated into object code using a computer program called an
  "assembler" or "compiler", and then imprinted onto a silicon chip for commercial
  distribution. Devices called "disassemblers" or "decompilers" can reverse this process by
  "reading" the electronic signals for "0" and "1" that are produced while the program is
  being run, storing the resulting object code in computer memory, and translating the
  object code into source code. Both assembly and disassembly devices are commercially
  available, and both types of devices are widely used within the software industry.

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  In the second  stage, Accolade created its own games for the Genesis. According
  to Accolade, at this stage it did not copy Sega's programs, but relied only on the
  information concerning interface specifications for the Genesis that was contained in its
  development manual. Accolade maintains that with the exception of the interface
  specifications, none of the code in its own games is derived in any way from its
  examination of Sega's code. In 1990, Accolade released "Ishido", a game which it had
  originally developed and released for use with the Macintosh and IBM personal computer
  systems, for use with the Genesis console.

  Even before Accolade began to reverse engineer Sega's games, Sega had grown
  concerned about the rise of software and hardware piracy in Taiwan and other Southeast
  Asian countries to which it exported its products. Taiwan is not a signatory to the Berne
  Convention and does not recognize foreign copyrights. Taiwan does allow prosecution of
  trademark counterfeiters. However, the counterfeiters had discovered how to modify
  Sega's game programs to blank out the screen display of Sega's trademark before
  repackaging and reselling the games as their own. Accordingly, Sega began to explore
   methods of protecting its trademark rights in the Genesis and Genesis-compatible
  games. While the development of its own trademark security system (TMSS) was
  pending, Sega licensed a patented TMSS for use with the Genesis home entertainment
  system.

  The most recent version of the Genesis console, the "Genesis III", incorporates the
  licensed TMSS. When a game cartridge is inserted, the microprocessor contained in the
  Genesis III searches the game program for four bytes of data consisting of the letters
  "S-E-G-A" (the "TMSS initialization code"). If the Genesis III finds the TMSS initialization
  code in the right location, the game is rendered compatible and will operate on the
  console. In such case, the TMSS initialization code then prompts a visual display for
  approximately three seconds which reads "PRODUCED BY OR UNDER LICENSE FROM
  SEGA ENTERPRISES LTD" (the "Sega Message"). All of Sega's game cartridges, including
  those disassembled by Accolade, contain the TMSS initialization code.

  Accolade learned of the impending release of the Genesis III in the United States in
  January, 1991, when the Genesis III was displayed at a consumer electronics show.
  When a demonstration at the consumer  electronics show revealed that Accolade's
  "Ishido" game cartridges would not operate on the Genesis III, Accolade returned to the
  drawing board. During the reverse engineering process, Accolade engineers had
  discovered a small segment of code - the TMSS initialization code - that was included in
  the "power-up" sequence of every Sega game, but that had no identifiable function. The
  games would operate on the original Genesis console even if the code segment was
  removed. Mike Lorenzen, the Accolade engineer with primary responsibility for reverse
  engineering the interface procedures for the Genesis console, sent a memo regarding the
  code segment to Alan Miller, his supervisor and the current president of Accolade, in
  which he noted that "it is possible that some future Sega peripheral device might
  require it for proper initialization."

  In the second round of reverse engineering, Accolade engineers focused on the code
  segment identified by Lorenzen. After further study, Accolade added the code to its
  development manual in the form of a standard header file to be used in all games. The
  file contains approximately twenty to twenty-five bytes of data. Each of Accolade's
  games contains a  total of 500,000 to 1,500,000 bytes. According to Accolade
  employees, the header file is the only portion of Sega's code that Accolade copied into
  its own game programs.

  In 1991, Accolade released five more games for use with the Genesis III, "Star Control",
  "Hardball!", "Onslaught", "Turrican", and "Mike Ditka Power Football." With the exception
  of "Mike Ditka Power Football", all of those games, like "Ishido", had originally been
  developed and marketed for use with other hardware systems. All contained the
  standard header file that included the TMSS initialization code. According to Accolade, it
  did not learn until after the Genesis III was released on the market in September, 1991,
  that in addition to enabling its software to operate on the Genesis III, the header file
  caused the display of the Sega Message. All of the games except "Onslaught" operate
  on the Genesis III console; apparently, the programmer who translated "Onslaught" for
  use with the Genesis system did not place the TMSS initialization code at the correct
  location in the program.

  All of Accolade's Genesis-compatible games are packaged in a similar fashion. The front
  of the box displays Accolade's "Ballistic" trademark  and states "for use with
  Sega Genesis and Mega Drive Systems." The back of the box contains the following
  statement: "Sega and Genesis are registered trademarks of Sega Enterprises, Ltd.
  Game 1991 Accolade, Inc. All rights reserved. Ballistic is a trademark of Accolade, Inc.
  Accolade, Inc. is not associated with Sega Enterprises, Ltd. All product and corporate
  names are trademarks and registered trademarks of their respective owners."

  Sega filed suit against Accolade on October 31, 1991, alleging trademark infringement
  and false designation of origin in violation of sections 32(1) and 43(a) of the Lanham
  Act, 15 U.S.C. §§ 1114(a)(1), 1125(a). n3 On November 29, 1991, Sega amended its
  complaint to include a claim for copyright infringement. Accolade filed a counterclaim
  against Sega for false designation of origin under section 43(a) of the Lanham Act, 15
  U.S.C. § 1125(a). n4 The parties filed cross-motions for preliminary injunctions on their
  respective claims.

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  n3 The complaint also included state law claims for common law trademark infringement,
  dilution, unfair competition, and false or misleading statements. None of the state law
  claims are at issue in this appeal.

  n4 Accolade also asserted state law counterclaims for unfair competition, false or
  misleading statements, and intentional interference with prospective economic
  advantage. Again, the state law counterclaims are not at issue here.

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  After expedited discovery and a hearing, the district court granted Sega's motion. Prior
  to the hearing, Sega introduced the declaration of Takeshi Nagashima, an employee of
  Sega. Nagashima stated that it was possible either to create a game program which did
  not contain the TMSS code but would still operate on the Genesis III, or to modify a
  game program so that the Sega Message would not appear when the game cartridge
  was inserted. Nagashima stated that he had been able to make both modifications using
  standard components, at a total extra cost of approximately fifty cents. At the hearing,
  counsel for Sega produced two game cartridges which, he represented, contained the
  modifications made by Nagashima, and demonstrated to the district judge that the Sega
  Message did not appear when the cartridges were inserted into a Genesis III console.
  Sega offered to make the cartridges available for inspection by Accolade's
  counsel, but declined to let Accolade's software engineers examine the cartridges or to
  reveal the manner in which the cartridges had been modified. The district court
  concluded that the TMSS code was not functional and that Accolade could not assert a
  functionality defense to Sega's claim of trademark infringement.

  With respect to Sega's copyright claim, the district court rejected Accolade's contention
  that intermediate copying of computer object code does not constitute infringement
  under the Copyright Act. It found that Accolade had disassembled Sega's code for a
  commercial purpose, and that Sega had likely lost sales of its games as a result of
  Accolade's copying. The court further found that there were alternatives to disassembly
  that Accolade could have used in order to study the functional requirements for Genesis
  compatibility. Accordingly, it also rejected Accolade's fair use defense to Sega's
  copyright infringement claim.

  Based on its conclusion that Sega is likely to succeed on the merits of its claims for
  copyright and trademark infringement, on April 3, 1992, the district court enjoined
  Accolade from: (1) disassembling Sega's copyrighted code; (2) using or
  modifying Sega's copyrighted code; (3) developing, manufacturing, distributing, or
  selling Genesis-compatible games that were created in whole or in part by means that
  included disassembly; and (4) manufacturing, distributing, or selling any
  Genesis-compatible game that prompts the Sega Message. On April 9, 1992, in response
  to a request from Sega, the district court modified the preliminary injunction order to
  require the recall of Accolade's infringing games within ten business days.

  On April 14, 1992, Accolade filed a motion in the district court for a stay of the
  preliminary injunction pending appeal. When the district court failed to rule on the
  motion for a stay by April 21, ten business days after the April 9 recall order, Accolade
  filed a motion for an emergency stay in this court pursuant to 9th Cir. R. 27-3, together
  with its notice of appeal. On April 23, we stayed the April 9 recall order. The April 3
  preliminary injunction order remained in effect until August 28, when we ordered it
  dissolved and announced that this opinion would follow.

  II. Standard of Review

  In order to obtain a preliminary injunction, the movant must demonstrate "either a
  likelihood of success on the merits and the possibility of irreparable injury, or
  that serious questions going to the merits were raised and the balance of hardships tips
  sharply in its favor." Johnson Controls, Inc. v. Phoenix Control Systems, Inc., 886 F.2d
  1173, 1174 (9th Cir. 1989). We may reverse the district court's grant of a preliminary
  injunction to Sega if the district court abused its discretion, made an error of law, or
  based its decision on an erroneous legal standard or on clearly erroneous findings of
  fact. Religious Technology Ctr. v. Scott, 869 F.2d 1306, 1309 (9th Cir. 1989); Lou v.
  Belzberg, 834 F.2d 730, 733 (9th Cir. 1987), cert. denied, 485 U.S. 993, 99 L. Ed. 2d 512,
  108 S. Ct. 1302 (1988).

  III. Copyright Issues

  Accolade raises four arguments in support of its position that disassembly of the object
  code in a copyrighted computer program does not constitute copyright infringement.
  First, it maintains that intermediate copying does not infringe the exclusive rights
  granted to copyright owners in section 106 of the Copyright Act unless the end product
  of the copying is substantially similar to the copyrighted work. Second, it argues
  that disassembly of object code in order to gain an understanding of the ideas and
  functional concepts embodied in the code is lawful under section 102(b) of the Act, which
  exempts ideas and functional concepts from copyright protection. Third, it suggests that
  disassembly is authorized by section 117 of the Act, which entitles the lawful owner of a
  copy of a computer program to load the program into a computer. Finally, Accolade
  contends that disassembly of object code in order to gain an understanding of the ideas
  and functional concepts embodied in the code is a fair use that is privileged by section
  107 of the Act.

  Neither the language of the Act nor the law of this circuit supports Accolade's first three
  arguments. Accolade's fourth argument, however, has merit. Although the question is
  fairly debatable, 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 the
  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. Accordingly, we hold that Sega has failed to
  demonstrate a likelihood of success on the merits of its copyright claim. Because on the
  record before us the hardships do not tip sharply (or at all) in Sega's favor, the
  preliminary injunction issued in its favor must be dissolved, at least with respect to that
  claim.

  A. Intermediate Copying

  We have previously held that the Copyright Act does not distinguish between
  unauthorized copies of a copyrighted work on the basis of what stage of the alleged
  infringer's work the unauthorized copies represent. Walker v. University Books, 602 F.2d
  859, 864 (9th Cir. 1979) ("The fact that an allegedly infringing copy of a protected work
  may itself be only an inchoate representation of some final product to be marketed
  commercially does not in itself negate the possibility of infringement."). Our holding in
  Walker was based on the plain language of the Act. Section 106 grants to the copyright
  owner the exclusive rights "to reproduce the work in copies", "to prepare derivative works
  based upon the copyrighted work", and to authorize the preparation of copies and
  derivative works. 17 U.S.C. § 106  (1)-(2). Section 501 provides that "anyone who
  violates any of the exclusive rights of the copyright owner as provided by sections 106
  through 118 . . . is an infringer of the copyright." Id. § 501(a). On its face, that language
  unambiguously encompasses and proscribes "intermediate copying". Walker, 602 F.2d at
  863-64; see also Walt Disney Productions v. Filmation Associates, 628 F. Supp. 871,
  875-76 (C.D. Cal. 1986).

  In order to constitute a "copy" for purposes of the Act, the allegedly infringing work must
  be fixed in some tangible form, "from which the work can be perceived, reproduced, or
  otherwise communicated, either directly or with the aid of a machine or device." 17
  U.S.C. § 101. The computer file generated by the disassembly program, the printouts of
  the disassembled code, and the computer files containing Accolade's modifications of
  the code that were generated during the reverse engineering process all satisfy that
  requirement. The intermediate copying done by Accolade therefore falls squarely within
  the category of acts that are prohibited by the statute.

  Accolade points to a  number of cases that it argues establish the lawfulness of
  intermediate copying. Most of the cases involved the alleged copying of books, scripts,
  or literary characters. See v. Durang, 711 F.2d 141 (9th Cir. 1983); Warner Bros. v. ABC,
  654 F.2d 204 (2d Cir. 1981); Miller v. Universal City Studios, Inc., 650 F.2d 1365 (5th Cir.
  1981); Walker v. Time Life Films, Inc., 615 F. Supp. 430 (S.D.N.Y. 1985), aff'd, 784 F.2d
  44 (2d Cir.), cert. denied, 476 U.S. 1159, 90 L. Ed. 2d 721, 106 S. Ct. 2278 (1986); Davis
  v. United Artists, Inc., 547 F. Supp. 722 (S.D.N.Y. 1982); Fuld v. NBC, 390 F. Supp. 877
  (S.D.N.Y. 1975); Cain v. Universal Pictures Co., 47 F. Supp. 1013 (S.D. Cal. 1942). In
  each case, however, the eventual lawsuit alleged infringement only as to the final work
  of the defendants. We conclude that this group of cases does not alter or limit the
  holding of Walker.

  The remaining cases cited by Accolade, like the case before us, involved intermediate
  copying of computer code as an initial step in the development of a competing
  product. Computer Assoc. Int'l v. Altai, Inc., 1992 U.S. App. LEXIS 14305, 23 U.S.P.Q.2D
  (BNA) 1241 (2d Cir. 1992) ("CAI"); NEC Corp. v. Intel Corp., 1989 U.S. Dist. LEXIS 1409,
  10 U.S.P.Q.2D (BNA) 1177 (N.D. Cal. 1989); E.F. Johnson Co. v. Uniden Corp., 623 F.
  Supp. 1485 (D. Minn. 1985). In each case, the court based its determination regarding
  infringement solely on the degree of similarity between the allegedly infringed work and
  the defendant's final product. A close reading of those cases, however, reveals that in
  none of them was the legality of the intermediate copying at issue. Sega cites an equal
  number of cases involving intermediate copying of copyrighted computer code to support
  its assertion that such copying is prohibited. Atari Games Corp. v. Nintendo of America,
  Inc., 18 U.S.P.Q.2D (BNA) 1935 (N.D. Cal. 1991); SAS Institute, Inc. v. S&H Computer
  Systems, Inc., 605 F. Supp. 816 (M.D. Tenn. 1985); S&H Computer Systems, Inc. v. SAS
  Institute, Inc., 568 F. Supp. 416 (M.D. Tenn. 1983);  Hubco Data Products v.
  Management Assistance, Inc., 219 U.S.P.Q. (BNA) 450 (D. Idaho 1983). Again, however,
  it appears that the question of the lawfulness of intermediate copying was not raised in
  any of those cases.

  In summary, the question whether intermediate copying of computer object code
  infringes the exclusive rights granted to the copyright owner in section 106 of the
  Copyright Act is a question of first impression. In light of the unambiguous language of
  the Act, we decline to depart from the rule set forth in Walker for copyrighted works
  generally. Accordingly, we hold that intermediate copying of computer object code may
  infringe the exclusive rights granted to the copyright owner in section 106 of the
  Copyright Act regardless of whether the end product of the copying also infringes those
  rights. If intermediate copying is permissible under the Act, authority for such copying
  must be found in one of the statutory provisions to which the rights granted in section
  106 are subject.

  B. The Idea/Expression Distinction

  Accolade next contends that disassembly of computer  object code does not
  violate the Copyright Act because it is necessary in order to gain access to the ideas and
  functional concepts embodied in the code, which are not protected by copyright. 17
  U.S.C. § 102(b). Because humans cannot comprehend object code, it reasons,
  disassembly of a commercially available computer program into human-readable form
  should not be considered an infringement of the owner's copyright. Insofar as Accolade
  suggests that disassembly of object code is lawful per se, it seeks to overturn settled
  law.

  Accolade's argument regarding access to ideas is, in essence, an argument that object
  code is not eligible for the full range of copyright protection. Although some scholarly
  authority supports that view, we have previously rejected it based on the language and
  legislative history of the Copyright Act. Johnson Controls, Inc. v. Phoenix Control Sys.,
  Inc., 886 F.2d 1173, 1175 (9th Cir. 1989); Apple Computer, Inc. v. Formula Int'l Inc.,
  725 F.2d 521, 524-25 (9th Cir. 1984); see also Apple Computer, Inc. v. Franklin
  Computer Corp., 714 F.2d 1240, 1246-48 (3d Cir. 1983),    cert. dismissed, 464 U.S.
  1033 (1984).

  As recommended by the National Commission on New Technological Uses of Copyrighted
  Works (CONTU), the 1980 amendments to the Copyright Act unambiguously extended
  copyright protection to computer programs. Pub. L. 96-517, sec. 10, 94 Stat. 3028 (1980)
  (codified at 17 U.S.C. §§ 101, 117); see National Commission on New Technological Uses
  of Copyrighted Works, Final Report 1 (1979) [CONTU Report]. n5 "The Act makes no
  distinction between the copyrightability of those programs which directly interact with
  the computer user and those which simply manage the computer system." Formula, 725
  F.2d at 525. Nor does the Act require that a work be directly accessible to humans in
  order to be eligible for copyright protection. Rather, it extends protection to all original
  works "which . . . can be perceived, reproduced, or otherwise communicated, either
  directly or with the aid of a machine or device." 17 U.S.C. § 102(a); see Formula, 725
  F.2d at 525. The statutory language, read together with the CONTU report, leads
  inexorably to the  conclusion that the copyright in a computer program extends to
  the object code version of the program. Formula, 725 F.2d at 525; Franklin, 714 F.2d at
  1248; CONTU Report at 21.

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  n5 Congress adopted all of the statutory changes recommended by CONTU verbatim.
  Subsequent Congresses, the courts, and commentators have regarded the CONTU Report
  as the authoritative guide to congressional intent.

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  Nor does a refusal to recognize a per se right to disassemble object code lead to an
  absurd result. The ideas and functional concepts underlying many types of computer
  programs, including word processing programs, spreadsheets, and video game displays,
  are readily discernible without the need for disassembly, because the operation of such
  programs is visible on the computer screen. The need to disassemble object code arises,
  if at all, only in connection with operations systems, system interface procedures, and
  other programs that are not visible to the user when operating - and then only
  when no alternative means of gaining an understanding of those ideas and functional
  concepts exists. In our view, consideration of the unique nature of computer object code
  thus is more appropriate as part of the case-by-case, equitable "fair use" analysis
  authorized by section 107 of the Act. See infra Part III(D). Accordingly, we reject
  Accolade's second argument.

  C. Section 117

  Section 117 of the Copyright Act allows the lawful owner of a copy of a computer
  program to copy or adapt the program if the new copy or adaptation "is created as an
  essential step in the utilization of the computer program in conjunction with a machine
  and . . . is used in no other manner." 17 U.S.C. § 117(1). Accolade contends that
  section 117 authorizes disassembly of the object code in a copyrighted computer
  program.

  Section 117 was enacted on the recommendation of CONTU, which noted that "because
  the placement of any copyrighted work into a computer is the preparation of a copy
  [since the program is loaded into the computer's memory], the law should
  provide that persons in rightful possession of copies of programs be able to use them
  freely without fear of exposure to copyright liability." CONTU Report at 13. We think it is
  clear that Accolade's use went far beyond that contemplated by CONTU and authorized
  by section 117. Section 117 does not purport to protect a user who disassembles object
  code, converts it from assembly into source code, and makes printouts and photocopies
  of the refined source code version. n6

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  n6 We need not decide whether section 117 protects only the use intended by the
  copyright owner, as Sega argues. See Vault Corp. v. Quaid Software Ltd., 847 F.2d 255,
  261 (5th Cir. 1988) (authorization of section 117(1) not limited to use intended by
  copyright owner).

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  D. Fair Use

  Accolade contends, finally, that its disassembly of copyrighted object code as a
  necessary step in its examination of the unprotected ideas and functional
  concepts embodied in the code is a fair use that is privileged by section 107 of the Act.
  Because, in the case before us, disassembly is the only means of gaining access to
  those unprotected aspects of the program, and because Accolade has a legitimate
  interest in gaining such access (in order to determine how to make its cartridges
  compatible with the Genesis console), we agree with Accolade. Where there is good
  reason for studying or examining the unprotected aspects of a copyrighted computer
  program, disassembly for purposes of such study or examination constitutes a fair use.

  1.

  As a preliminary matter, we reject Sega's contention that the assertion of a fair use
  defense in connection with the disassembly of object code is precluded by statute. First,
  Sega argues that not only does section 117 of the Act not authorize disassembly of
  object code, but it also constitutes a legislative determination that any copying of a
  computer program other than that authorized by section 117 cannot be considered a fair
  use of that program under section 107. That argument verges on the frivolous. Each of
  the exclusive  rights created by section 106 of the Copyright Act is expressly
  made subject to all of the limitations contained in sections 107 through 120. 17 U.S.C. §
  106. Nothing in the language or the legislative history of section 117, or in the CONTU
  Report, suggests that section 117 was intended to preclude the assertion of a fair use
  defense with respect to uses of computer programs that are not covered by section 117,
  nor has section 107 been amended to exclude computer programs from its ambit.

  Moreover, sections 107 and 117 serve entirely different functions. Section 117 defines a
  narrow category of copying that is lawful per se. 17 U.S.C. § 117. Section 107, by
  contrast, establishes a defense to an otherwise valid claim of copyright infringement. It
  provides that particular instances of copying that otherwise would be actionable are
  lawful, and sets forth the factors to be considered in determining whether the defense
  applies. Id. § 107. The fact that Congress has not chosen to provide a per se exemption
  to section 106 for disassembly does not mean that particular instances of
  disassembly may not constitute fair use.

  Second, Sega maintains that the language and legislative history of section 906 of the
  Semiconductor Chip Protection Act of 1984 (SCPA) establish that Congress did not intend
  that disassembly of object code be considered a fair use. Section 906 of the SCPA
  authorizes the copying of the "mask work" on a silicon chip in the course of reverse
  engineering the chip. 17 U.S.C. § 906. The mask work in a standard ROM chip, such as
  those used in the Genesis console and in Genesis-compatible cartridges, is a physical
  representation of the computer program that is embedded in the chip. The zeros and
  ones of binary object code are represented in the circuitry of the mask work by open and
  closed switches. Sega contends that Congress's express authorization of copying in the
  particular circumstances set forth in section 906 constitutes a determination that other
  forms of copying of computer programs are prohibited.

  The legislative history of the SCPA reveals, however, that Congress passed a separate
  statute to protect semiconductor chip products  because it believed that
  semiconductor chips were intrinsically utilitarian articles that were not protected under
  the Copyright Act. H.R. Rep. No. 781, 98th Cong., 2d Sess. 8-10, reprinted in 1984
  U.S.C.C.A.N. 5750, 5757-59. Accordingly, rather than amend the Copyright Act to extend
  traditional copyright protection to chips, it enacted "a sui generis form of protection,
  apart from and independent of the copyright laws." Id. at 10, 1984 U.S.C.C.A.N. at 5759.
  Because Congress did not believe that semiconductor chips were eligible for copyright
  protection in the first instance, the fact that it included an exception for reverse
  engineering of mask work in the SCPA says nothing about its intent with respect to the
  lawfulness of disassembly of computer programs under the Copyright Act. Nor is the fact
  that Congress did not contemporaneously amend the Copyright Act to permit
  disassembly significant, since it was focusing on the protection to be afforded to
  semiconductor chips. Here we are dealing not with an alleged violation of the SCPA, but
  with the copying of a computer program, which is governed by the Copyright Act.
  Moreover, Congress expressly stated that it did not intend  to "limit, enlarge or
  otherwise affect the scope, duration, ownership or subsistence of copyright protection . .
  . in computer programs, data bases, or any other copyrightable works embodied in
  semiconductor chip products." Id. at 28, 1984 U.S.C.C.A.N. at 5777. Accordingly, Sega's
  second statutory argument also fails. We proceed to consider Accolade's fair use
  defense.

  2.

  Section 107 lists the factors to be considered in determining whether a particular use is
  a fair one. Those factors include:

  (1) the purpose and character of the use, including whether such use is of a commercial
  nature or is for nonprofit educational purposes;

  (2) the nature of the copyrighted work;

  (3) the amount and substantiality of the portion used in relation to the copyrighted work
  as a whole; and

  (4) the effect of the use upon the potential market for or value of the copyrighted work.

  17 U.S.C. § 107. The statutory factors are not exclusive. Rather, the doctrine of fair use
  is in essence "an equitable rule of reason." Harper & Row, Publishers, Inc. v. Nation
  Enterprises, 471 U.S. 539, 560, 85 L. Ed. 2d 588, 105 S. Ct. 2218 (1985) (quoting H.R.
  Rep. No. 1476, 94th  Cong., 2d Sess. 65, reprinted in 1976 U.S.C.C.A.N. 5659,
  5679). Fair use is a mixed question of law and fact. Id. "Where the district court has
  found facts sufficient to evaluate each of the statutory factors," an appellate court may
  resolve the fair use question as a matter of law. Id.

  In determining that Accolade's disassembly of Sega's object code did not constitute a
  fair use, the district court treated the first and fourth statutory factors as dispositive,
  and ignored the second factor entirely. Given the nature and characteristics of
  Accolade's direct use of the copied works, the ultimate use to which Accolade put the
  functional information it obtained, and the nature of the market for home video
  entertainment systems, we conclude that neither the first nor the fourth factor weighs in
  Sega's favor. In fact, we conclude that both factors support Accolade's fair use
  defense, as does the second factor, a factor which is important to the resolution of
  cases such as the one before us.

  (a)

  With respect to the first statutory factor, we observe initially that the fact that copying
  is for a commercial purpose weighs against a finding of fair use. Harper & Row, 471 U.S.
  at 562. However, the presumption of unfairness that arises in such cases can be
  rebutted by the characteristics of a particular commercial use. Hustler Magazine, Inc. v.
  Moral Majority, Inc., 796 F.2d 1148, 1152 (9th Cir. 1986); see also Maxtone-Graham v.
  Burtchaell, 803 F.2d 1253, 1262 (2d Cir. 1986), cert. denied, 481 U.S. 1059, 95 L. Ed. 2d
  856, 107 S. Ct. 2201 (1987). Further "the commercial nature of a use is a matter of
  degree, not an absolute . . . ." Maxtone-Graham, 803 F.2d at 1262.

  Sega argues that because Accolade copied its object code in order to produce a
  competing product, the Harper & Row presumption applies and precludes a finding of fair
  use. That analysis is far too simple and ignores a number of important considerations.
  We must consider other aspects of "the purpose and character of the use" as well. As we
  have noted, the use at issue was an intermediate one only and thus any commercial
  "exploitation" was indirect or derivative.

  The declarations of Accolade's employees indicate, and the district court found, that
  Accolade copied Sega's software solely in order to discover the   functional
  requirements for compatibility with the Genesis console - aspects of Sega's programs
  that are not protected by copyright. 17 U.S.C. § 102(b). With respect to the video game
  programs contained in Accolade's game cartridges, there is no evidence in the record
  that Accolade sought to avoid performing its own creative work. Indeed, most of the
  games that Accolade released for use with the Genesis console were originally
  developed for other hardware systems. Moreover, with respect to the interface
  procedures for the Genesis console, Accolade did not seek to avoid paying a customarily
  charged fee for use of those procedures, nor did it simply copy Sega's code; rather, it
  wrote its own procedures based on what it had learned through disassembly. Taken
  together, these facts indicate that although Accolade's ultimate purpose was the
  release of Genesis-compatible games for sale, its direct purpose in copying Sega's code,
  and thus its direct use of the copyrighted material, was simply to study the functional
  requirements for Genesis compatibility so that it could modify existing games and make
  them usable with the Genesis console. Moreover, as we discuss   below, no other
  method of studying those requirements was available to Accolade. On these facts, we
  conclude that Accolade copied Sega's code for a legitimate, essentially non-exploitative
  purpose, and that the commercial aspect of its use can best be described as of minimal
  significance.

  We further note that we are free to consider the public benefit resulting from a particular
  use notwithstanding the fact that the alleged infringer may gain commercially. See
  Hustler, 796 F.2d at 1153 (quoting MCA, Inc. v. Wilson, 677 F.2d 180, 182 (2d Cir.
  1981)). Public benefit need not be direct or tangible, but may arise because the
  challenged use serves a public interest. Id. In the case before us, 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. See Feist Publications,
  Inc. v. Rural Tel. Serv. Co., ___ U.S. ___, 111 S. Ct. 1282, 1290 (1991) (citing Harper &
  Row, 471 U.S. at 556-57). The fact that Genesis-compatible video games are not
  scholarly works, but works offered for sale on the market, does not alter our judgment in
  this regard. We conclude that given the purpose and character of Accolade's use of
  Sega's video game programs, the presumption of unfairness has been overcome and the
  first statutory factor weighs in favor of Accolade.

  (b)

  As applied, the fourth statutory factor, effect on the potential market for the copyrighted
  work, bears a close relationship to the "purpose and character" inquiry in that it, too,
  accommodates the distinction between the copying of works in order to make
  independent creative expression possible and the simple exploitation of another's
  creative efforts. We must, of course, inquire whether, "if [the challenged use] should
  become widespread, it would adversely affect the potential market for the copyrighted
  work," Sony Corp. v. Universal City Studios, 464 U.S. 417, 451, 78 L. Ed. 2d 574, 104 S.
  Ct. 774 (1984), by diminishing potential sales, interfering with   marketability, or
  usurping the market, Hustler, 796 F.2d at 1155-56. If the copying resulted in the latter
  effect, all other considerations might be irrelevant. The Harper & Row Court found a use
  that effectively usurped the market for the copyrighted work by supplanting that work to
  be dispositive. 471 U.S. at 567-69. However, the same consequences do not and could
  not attach to a use which simply enables the copier to enter the market for works of the
  same type as the copied work.

  Unlike the defendant in Harper & Row, which printed excerpts from President Ford's
  memoirs verbatim with the stated purpose of "scooping" a Time magazine review of the
  book, 471 U.S. at 562, Accolade did not attempt to "scoop" Sega's release of any
  particular game or games, but sought only to become a legitimate competitor in the field
  of Genesis-compatible video games. Within that market, it is the characteristics of the
  game program as experienced by the user that determine the program's commercial
  success. As we have noted, there is nothing in the record that suggests that Accolade
  copied any of those elements.

  By facilitating the entry of a new competitor, the first lawful one that is not a Sega
  licensee, Accolade's disassembly of Sega's software undoubtedly "affected" the market
  for Genesis-compatible games in an indirect fashion. We note, however, that while no
  consumer except the most avid devotee of President Ford's regime might be expected to
  buy more than one version of the President's memoirs, video game users typically
  purchase more than one game. There is no basis for assuming that Accolade's "Ishido"
  has significantly affected the market for Sega's "Altered Beast", since a consumer might
  easily purchase both; nor does it seem unlikely that a consumer particularly interested in
  sports might purchase both Accolade's "Mike Ditka Power Football" and Sega's "Joe
  Montana Football", particularly if the games are, as Accolade contends, not substantially
  similar. 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. Thus, we conclude that the fourth statutory factor weighs in
  Accolade's, not Sega's, favor, notwithstanding the minor economic loss Sega may
  suffer.

  (c)

  The second statutory factor, the nature of the copyrighted work, reflects the fact that
  not all copyrighted works are entitled to the same level of protection. The protection
  established by the Copyright Act for original works of authorship does not extend to the
  ideas underlying a work or to the functional or factual aspects of the work. 17 U.S.C. §
  102(b). To the extent that a work is functional or factual, it may be copied, Baker v.
  Selden, 101 U.S. 99, 102-04, 25 L. Ed. 841 (1879), as may those expressive elements of
  the work that "must necessarily be used as incident to" expression of the underlying
  ideas, functional concepts, or facts, id. at 104. Works of fiction receive greater
  protection than works that have strong factual elements, such as historical or
  biographical works, Maxtone-Graham, 803 F.2d at 1263 (citing Rosemont Enterprises,
  Inc. v. Random House, Inc., 366 F.2d 303, 307 (2d Cir. 1966), cert. denied, 385 U.S.
  1009, 17 L. Ed. 2d 546, 87 S. Ct. 714 (1967)),   or works that have strong
  functional elements, such as accounting textbooks, Baker, 101 U.S. at 104. Works that
  are merely compilations of fact are copyrightable, but the copyright in such a work is
  "thin." Feist Publications, 111 S. Ct. at 1289.

  Computer programs pose unique problems for the application of the "idea/expression
  distinction" that determines the extent of copyright protection. To the extent that there
  are many possible ways of accomplishing a given task or fulfilling a particular market
  demand, the programmer's choice of program structure and design may be highly creative
  and idiosyncratic. However, computer programs are, in essence, utilitarian articles -
  articles that accomplish tasks. As such, they contain many logical, structural, and visual
  display elements that are dictated by the function to be performed, by considerations of
  efficiency, or by external factors such as compatibility requirements and industry
  demands. Computer Assoc. Int'l, Inc. v. Altai, Inc., 1992 U.S. App. LEXIS 14305, 23
  U.S.P.Q.2D (BNA) 1241, 1253-56 (2d Cir. 1992) ("CAI"). In some circumstances, even the
  exact set of commands  used by the programmer is deemed functional rather than
  creative for purposes of copyright. "When specific instructions, even though previously
  copyrighted, are the only and essential means of accomplishing a given task, their later
  use by another will not amount to infringement." CONTU Report at 20; see CAI, 23
  U.S.P.Q. 2d at 1254. n7

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  n7 We therefore reject Sega's belated suggestion that Accolade's incorporation of the
  code which "unlocks" the Genesis III console is not a fair use. Our decision on this point
  is entirely consistent with Atari v. Nintendo, 975 F.2d 832 (Fed. Cir. 1992). Although
  Nintendo extended copyright protection to Nintendo's 10NES security system, that
  system consisted of an original program which generates an arbitrary data stream "key"
  which unlocks the NES console. Creativity and originality went into the design of that
  program. See id. at 840. Moreover, the federal circuit concluded that there is a
  "multitude of different ways to generate a data stream which unlocks the NES console."
  Atari, 975 F.2d at 839. The circumstances are clearly different here. Sega's key appears
  to be functional. It consists merely of 20 bytes of initialization code plus the letters
  S-E-G-A. There is no showing that there is a multitude of different ways to unlock the
  Genesis III console. Finally, we note that Sega's security code is of such de minimis
  length that it is probably unprotected under the words and short phrases doctrine. 37
  C.F.R. § 202.1(a).

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  Because of the hybrid nature of computer programs, there is no settled standard for
  identifying what is protected expression and what is unprotected idea in a case involving
  the alleged infringement of a copyright in computer software. We are in wholehearted
  agreement with the Second Circuit's recent observation that "thus far, many of the
  decisions in this area reflect the courts' attempt to fit the proverbial square peg in a
  round hole." CAI, 23 U.S.P.Q. 2d at 1257. In 1986, the Third Circuit attempted to resolve
  the dilemma by suggesting that the idea or function of a computer program is the idea
  of the program as a whole, and "everything that is not necessary to that purpose or
  function [is] part of the expression of that idea." Whelan Assoc., Inc. v. Jaslow Dental
  Laboratory, Inc., 797 F.2d 1222, 1236 (3d Cir. 1986) (emphasis omitted). The Whelan
  rule, however, has been widely - and soundly - criticized as simplistic and overbroad. See
  CAI, 23 U.S.P.Q. 2d at 1252 (citing cases, treatises, and articles). In reality, "a computer
  program's ultimate function or purpose is the composite   result of interacting
  subroutines. Since each subroutine is itself a program, and thus, may be said to have its
  own 'idea,' Whelan's general formulation . . . is descriptively inadequate." Id.. For
  example, the computer program at issue in the case before us, a video game program,
  contains at least two such subroutines - the subroutine that allows the user to interact
  with the video game and the subroutine that allows the game cartridge to interact with
  the console. Under a test that breaks down a computer program into its component
  subroutines and sub-subroutines and then identifies the idea or core functional element
  of each, such as the test recently adopted by the Second Circuit in CAI, 23 U.S.P.Q. 2d
  at 1252-53, many aspects of the program are not protected by copyright. In our view, in
  light of the essentially utilitarian nature of computer programs, the Second Circuit's
  approach is an appropriate one.

  Sega argues that even if many elements of its video game programs are properly
  characterized as functional and therefore not protected by copyright, Accolade copied
  protected expression. Sega is correct. The record makes clear that disassembly is
  wholesale copying. Because computer programs are also unique among copyrighted
  works in the form in which they are distributed for public use, however, Sega's
  observation does not bring us much closer to a resolution of the dispute.

  The unprotected aspects of most functional works are readily accessible to the human
  eye. The systems described in accounting textbooks or the basic structural concepts
  embodied in architectural plans, to give two examples, can be easily copied without also
  copying any of the protected, expressive aspects of the original works. Computer
  programs, however, are typically distributed for public use in object code form,
  embedded in a silicon chip or on a floppy disk. For that reason, humans often cannot
  gain access to the unprotected ideas and functional concepts contained in object code
  without disassembling that code - i.e., making copies. n8 Atari Games Corp. v. Nintendo
  of America, No. 91-1293, slip op. at 22 (Fed. Cir. Sept. 10, 1992).

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  n8 We do not intend to suggest that disassembly is always the only available means of
  access to those aspects of a computer program that are unprotected by copyright. As we
  noted in Part III(B), supra, in many cases the operation of a program is directly reflected
  on the screen display and therefore visible to the human eye. In those cases, it is likely
  that a reverse engineer would not need to examine the code in order to understand what
  the program does.

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  Sega argues that the record does not establish that disassembly of its object code is
  the only available method for gaining access to the interface specifications for the
  Genesis console, and the district court agreed. An independent examination of the record
  reveals that Sega misstates its contents, and demonstrates that the district court
  committed clear error in this respect.

  First, the record clearly establishes that humans cannot read object code. Sega makes
  much of Mike Lorenzen's statement that a reverse engineer can work directly from the
  zeros and ones of object code but "it's not as fun." In full, Lorenzen's statements
  establish only that the use of an electronic decompiler is not absolutely necessary.
  Trained programmers can disassemble object code by hand. Because even a trained
  programmer cannot possibly remember the millions of zeros and ones that make up a
  program, however, he must make a written or computerized copy of the disassembled
  code in order to keep track of his work. See generally Johnson-Laird, Technical
  Demonstration of "Decompilation", reprinted in Reverse Engineering: Legal and Business
  Strategies for Competitive Design in the 1990's 102   (Prentice Hall Law &
  Business ed. 1992). The relevant fact for purposes of Sega's copyright infringement
  claim and Accolade's fair use defense is that translation of a program from object code
  into source code cannot be accomplished without making copies of the code.

  Second, the record provides no support for a conclusion that a viable alternative to
  disassembly exists. The district court found that Accolade could have avoided a
  copyright infringement claim by "peeling" the chips contained in Sega's games or in the
  Genesis console, as authorized by section 906 of the SCPA, 17 U.S.C. § 906. Even
  Sega's amici agree that this finding was clear error. The declaration of Dr. Harry
  Tredennick, an expert witness for Accolade, establishes that chip peeling yields only a
  physical diagram of the object code embedded in a ROM chip. It does not obviate the
  need to translate object code into source code. Atari Games Corp., slip op. at 22.

  The district court also suggested that Accolade could have avoided a copyright
  infringement suit by programming in a "clean room". That finding too is clearly
  erroneous. A "clean room" is a procedure used in the computer   industry in order
  to prevent direct copying of a competitor's code during the development of a competing
  product. Programmers in clean rooms are provided only with the functional specifications
  for the desired program. As Dr. Tredennick explained, the use of a clean room would not
  have avoided the need for disassembly because disassembly was necessary in order to
  discover the functional specifications for a Genesis-compatible game.

  In summary, the record clearly establishes that disassembly of the object code in Sega's
  video game cartridges was necessary in order to understand the functional requirements
  for Genesis compatibility. The interface procedures for the Genesis console are
  distributed for public use only in object code form, and are not visible to the user during
  operation of the video game program. Because object code cannot be read by humans, it
  must be disassembled, either by hand or by machine. Disassembly of object code
  necessarily entails copying. Those facts dictate our analysis of the second statutory fair
  use factor. If disassembly of copyrighted object code is per se an unfair use, the owner
  of the copyright gains a de facto monopoly over the functional aspects of his
  work - aspects that were expressly denied copyright protection by Congress. 17 U.S.C. §
  102(b). In order to enjoy a lawful monopoly over the idea or functional principle
  underlying a work, the creator of the work must satisfy the more stringent standards
  imposed by the patent laws. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S.
  141, 159-64, 103 L. Ed. 2d 118, 109 S. Ct. 971 (1989). Sega does not hold a patent on
  the Genesis console.

  Because Sega's video game programs contain unprotected aspects that cannot be
  examined without copying, we afford them a lower degree of protection than more
  traditional literary works. See CAI, 23 U.S.P.Q. 2d at 1257. In light of all the
  considerations discussed above, we conclude that the second statutory factor also
  weighs in favor of Accolade. n9

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  n9 Sega argues that its programs are unpublished works and that therefore, under
  Harper & Row, the second statutory factor weighs in its favor. 471 U.S. at 553-55.
  Recently, however, this court affirmed a district court holding that computer game
  cartridges that are held out to the public for sale are published works for purposes of
  copyright. Lewis Galoob Toys, Inc. v. Nintendo of America, Inc., No. 91-16205, slip op.
  9345, 9356 (9th Cir. May 21, 1992, as amended August 5, 1992) (affirming 780 F. Supp.
  1283, 1293 (N.D. Cal. 1991). The decision in Association of Am. Medical Colleges v.
  Cuomo, 928 F.2d 519 (2d Cir. 1991), cert. denied, 112 U.S. 184 (1991), is not to the
  contrary. The Medical College Admission Test is not held out to the public for sale, but
  rather is distributed on a highly restricted basis.

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  (d)

  As to the third statutory factor, Accolade disassembled entire programs written by
  Sega. Accordingly, the third factor weighs against Accolade. The fact that an entire
  work was copied does not, however, preclude a finding a fair use. Sony Corp., 464 U.S.
  at 449-50; Hustler, 795 F.2d at 1155 ("Sony Corp. teaches us that the copying of an
  entire work does not preclude fair use per se."). In fact, where the ultimate (as opposed
  to direct) use is as limited as it was here, the factor is of very little weight. Cf. Wright v.
  Warner Books, Inc., 953 F.2d 731, 738 (2d Cir. 1991).

  (e)

  In summary, careful analysis of the purpose and characteristics of Accolade's use of
  Sega's video game programs, the nature of the computer programs involved, and the
  nature of the market for video game cartridges yields the conclusion that the first,
  second, and fourth statutory fair use factors weigh in favor of Accolade, while only the
  third weighs in favor of Sega, and even then only slightly. Accordingly, Accolade clearly
  has by far the better case on the fair use issue.

  We are not unaware of the fact  that to those used to considering copyright
  issues in more traditional contexts, our result may seem incongruous at first blush. To
  oversimplify, the record establishes that Accolade, a commercial competitor of Sega,
  engaged in wholesale copying of Sega's copyrighted code as a preliminary step in the
  development of a competing product. However, the key to this case is that we are
  dealing with computer software, a relatively unexplored area in the world of copyright
  law. We must avoid the temptation of trying to force "the proverbial square peg into a
  round hole." CAI, 23 U.S.P.Q. 2d at 1257.

  In determining whether a challenged use of copyrighted material is fair, a court must
  keep in mind the public policy underlying the Copyright Act. "'The immediate effect of our
  copyright law is to secure a fair return for an "author's" creative labor. But the ultimate
  aim is, by this incentive, to stimulate artistic creativity for the general public good.'"
  Sony Corp., 464 U.S. at 432 (quoting Twentieth Century Music Corp. v. Aiken, 422 U.S.
  151, 156, 45 L. Ed. 2d 84, 95 S. Ct. 2040 (1975)). When technological change has
  rendered an aspect  or application of the Copyright Act ambiguous, "'the Copyright
  Act must be construed in light of this basic purpose.'" Id. As discussed above, the fact
  that computer programs are distributed for public use in object code form often precludes
  public access to the ideas and functional concepts contained in those programs, and thus
  confers on the copyright owner a de facto monopoly over those ideas and functional
  concepts. That result defeats the fundamental purpose of the Copyright Act - to
  encourage the production of original works by protecting the expressive elements of
  those works while leaving the ideas, facts, and functional concepts in the public domain
  for others to build on. Feist Publications, 111 S. Ct. at 1290; see also Atari Games Corp.,
  slip op. at 18-20.

  Sega argues that the considerable time, effort, and money that went into development
  of the Genesis and Genesis-compatible video games militate against a finding of fair
  use. Borrowing from antitrust principles, Sega attempts to label Accolade a "free rider"
  on its product development efforts. In Feist Publications, however, the Court
  unequivocally rejected the "sweat of the brow" rationale for copyright protection.
  111 S. Ct. at 1290-95. Under the Copyright Act, if a work is largely functional, it receives
  only weak protection. "This result is neither unfair nor unfortunate. It is the means by
  which copyright advances the progress of science and art." Id. at 1290; see also id. at
  1292 ("In truth, 'it is just such wasted effort that the proscription against the copyright
  of ideas and facts . . . [is] designed to prevent.'") (quoting Rosemont Enterprises, Inc. v.
  Random House, Inc., 366 F.2d 303, 310 (2d Cir. 1966), cert. denied 305 U.S. 1009
  (1967)); CAI, 23 U.S.P.Q. 2d at 1257. Here, while the work may not be largely
  functional, it incorporates functional elements which do not merit protection. The
  equitable considerations involved weigh on the side of public access. Accordingly, we
  reject Sega's argument.

  (f)

  We conclude that where disassembly is the only way to gain access to the ideas and
  functional elements embodied in a copyrighted computer program and where there
   is a legitimate reason for seeking such access, disassembly is a fair use of the
  copyrighted work, as a matter of law. Our conclusion does not, of course, insulate
  Accolade from a claim of copyright infringement with respect to its finished products.
  Sega has reserved the right to raise such a claim, and it may do so on remand.

  IV. Trademark Issues

  Ordinarily in a trademark case, a trademark holder contends that another party is
  misusing the holder's mark or is attempting to pass off goods or services as those of the
  trademark holder. The other party usually protests that the mark is not being misused,
  that there is no actual confusion, or that for some other reason no violation has
  occurred. This case is different. Here, both parties agree that there is a misuse of a
  trademark, both agree that there is unlawful mislabeling, and both agree that confusion
  may result. The issue, here, is - which party is primarily responsible? Which is the
  wrongdoer - the violator? Is it Sega, which has adopted a security system governing
  access to its Genesis III console that displays its trademark and message whenever the
  initialization code for the security system is utilized, even when the video   game
  program was manufactured by a Sega competitor? Or is it Accolade, which, having
  discovered how to gain access to the Genesis III through the initialization code, uses
  that code even though doing so triggers the display of Sega's trademark and message in
  a manner that leads observers to believe that Sega manufactured the Accolade game
  cartridge? In other words, is Sega the injured party because its mark is wrongfully
  attached to an Accolade video game by Accolade? Or is Accolade wronged because its
  game is mislabeled as a Sega product by Sega? The facts are relatively straightforward
  and we have little difficulty answering the question.

  Sega's trademark security system (TMSS) initialization code not only enables video
  game programs to operate on the Genesis III console, but also prompts a screen display
  of the SEGA trademark and message. As a result, Accolade's inclusion of the TMSS
  initialization code in its video game programs has an effect ultimately beneficial neither
  to Sega nor to Accolade. A Genesis III owner who purchases a video game made by
  Accolade sees Sega's trademark associated with Accolade's product each time he
  inserts the game cartridge into the console. Sega   claims that Accolade's
  inclusion of the TMSS initialization code in its games constitutes trademark infringement
  and false designation of origin in violation of sections 32(1)(a) and 43(a) of the Lanham
  Trademark Act, 15 U.S.C. §§ 1114(1)(a), 1125(a), respectively. Accolade counterclaims
  that Sega's use of the TMSS to prompt a screen display of its trademark constitutes
  false designation of origin under Lanham Act section 43(a), 15 U.S.C. § 1125(a).

  Because the TMSS has the effect of regulating access to the Genesis III console, and
  because there is no indication in the record of any public or industry awareness of any
  feasible alternate method of gaining access to the Genesis III, we hold that Sega is
  primarily responsible for any resultant confusion. Thus, it has not demonstrated a
  likelihood of success on the merits of its Lanham Act claims. Accordingly, the preliminary
  injunction it obtained must be dissolved with respect to the trademark claim also.
  However, we decline to instruct the district court to grant Accolade's request for
  preliminary injunctive relief at this time. The decision whether to grant such relief
  requires the making of factual and   equitable determinations in light of the legal
  conclusions we express here. Such determinations are best left in the first instance to
  the district court.

  A. False Labeling

  Section 32(1)(a) of the Lanham Act creates a cause of action for trademark infringement
  against any person who, without the consent of the trademark owner, "uses in commerce
  any reproduction . . . of a registered mark in connection with the sale, offering for sale,
  distribution, or advertising of any goods or services on or in connection with which such
  use is likely to cause confusion, or to cause mistake, or to deceive . . . ." 15 U.S.C. §
  1114(1)(a). Section 43(a) proscribes the use in commerce of a false designation of origin
  in connection with goods or services where such use is "likely to cause confusion, or . . .
  mistake." Id. § 1125(a). Both Sega and Accolade agree that the screen display of the
  Sega trademark and message creates a likelihood of consumer confusion regarding the
  origin of Accolade's games. The question is: which party is legally responsible for that
  confusion? We disagree with the answer given by the district court.

  The district  court found that Accolade bore primary responsibility for any
  consumer confusion that resulted from the display of the false Sega Message. However,
  Accolade had no desire to cause the Sega Message to appear or otherwise to create any
  appearance of association between itself and Sega; in fact, it had precisely the opposite
  wish. It used the TMSS initialization code only because it wanted to gain access for its
  products to the Genesis III, and was aware of no other method for doing so. On the
  other hand, while it may not have been Sega's ultimate goal to mislabel Accolade's
  products, the record is clear that the false labeling was the result of a deliberate
  decision on the part of Sega to include in the Genesis III a device which would both
  limit general access and cause false labeling. The decision to use the SEGA trademark
  as an essential element of a functional device that regulates access and to cause the
  SEGA trademark and message to be displayed whenever that functional device was
  triggered compels us to place primary responsibility for consumer confusion squarely on
  Sega.

  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. There is
  no evidence whatsoever that Accolade wished Sega's trademark to be displayed when
  Accolade's games were played on Sega's consoles. To the contrary, Accolade included
  disclaimers on its packaging materials which stated that "Accolade, Inc. is not
  associated with Sega Enterprises, Ltd." When questioned regarding the Sega Message
  and its potential effect on consumers, Alan Miller testified that Accolade does not
  welcome the association between its product and Sega and would gladly avoid that
  association if there were a way to do so. Miller testified that Accolade's engineers had
  not been able to discover any way to modify their game cartridges so that the games
  would operate on the Genesis III without prompting the screen display of the Sega
  Message.

  In contrast, Sega officials testified that Sega incorporated the TMSS into the Genesis
  console, known in Asia as the Mega-Drive, in order to lay the groundwork for the
  trademark prosecution of software pirates who sell counterfeit cartridges in Taiwan and
  South Korea, as well as in the United  States. Sega then marketed the
  redesigned console worldwide. Sega intended that when Sega game programs
  manufactured by a counterfeiter were played on its consoles, the Sega Message would
  be displayed, thereby establishing the legal basis for a claim of trademark infringement.
  However, as Sega certainly knew, the TMSS also had the potential to affect legitimate
  competitors adversely. First, Sega should have foreseen that a competitor might
  discover how to utilize the TMSS, and that when it did and included the initialization
  code in its cartridges, its video game programs would also end up being falsely labeled.
  Sega should also have known that the TMSS might discourage some competitors from
  manufacturing independently developed games for use with the Genesis III console,
  because they would not want to become the victims of such a labeling practice. Thus, in
  addition to laying the groundwork for lawsuits against pirates, Sega 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.'" Anti-Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 300-01 (9th
  Cir. 1979) (quoting HMH Publishing Co. v. Brincat, 504 F.2d 713, 716 (9th Cir. 1974)).
  Sega violated the first and the third of these principles. "The trademark is misused if it
  serves to limit competition in the manufacture and sales of a product. That is the special
  province of the limited monopolies provided pursuant to the patent laws." Id. at 301
  (citation omitted).

  Sega makes much of the fact that it did not adopt the TMSS in order to wage war on
  Accolade in particular, but rather as a defensive measure against software
  counterfeiters. It is regrettable that Sega is troubled by software pirates who
  manufacture counterfeit products in other areas of the world where adequate copyright
  remedies are not available. However, under the Lanham Act, which governs the use of
  trademarks and other designations  of origin in this country, it is the effect of the
  message display that matters. Whatever Sega's intent with respect to the TMSS, the
  device serves to limit competition in the market for Genesis-compatible games and to
  mislabel the products of competitors. Moreover, by seeking injunctive relief based on the
  mislabeling it has itself induced, Sega seeks once again to take advantage of its
  trademark to exclude its competitors from the market. The use of a mark for such
  purpose is inconsistent with the Lanham Act.

  B. Functionality

  Sega argues that even if the legal analysis we have enunciated is correct, the facts do
  not support its application to this case. Specifically, Sega contends that the TMSS does
  not prevent legitimate unlicensed competitors from developing and marketing Genesis
  III-compatible cartridges that do not trigger a display of the Sega trademark and
  message. In other words, Sega claims that Accolade could have "engineered around"
  the TMSS. Accolade strongly disagrees with Sega's factual assertions. It contends that
  the TMSS initialization sequence is a functional feature that must be included in a video
  game program by a manufacturer in order for the game to  perate on the Genesis
  III. Sega's factual argument stands or falls on the Nagashima declaration and the
  accompanying modified game cartridges that Sega introduced at the hearing. Having
  carefully reviewed the declaration, we conclude that Sega has not met its burden of
  establishing nonfunctionality.

  Based on the Nagashima declaration and on the modified cartridges, the district court
  concluded that the TMSS initialization sequence was not a necessary component of a
  Genesis-compatible game. n10 The court found that Accolade could have created a
  game cartridge that lacked the TMSS initialization code but would still operate on the
  Genesis III, or could have programmed its games in such a way that the false Sega
  Message would not be displayed on the screen. The court further found that either
  modification could have been accomplished at minimal additional expense to Accolade.
  Accordingly, the court ruled that Accolade could not assert a functionality defense.

  - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

  n10 Accolade challenges the admissibility of the Nagashima declaration and the
  modified cartridges on several grounds. First, it argues that the district court promised to
  hold an in camera hearing on the declaration, but never did so. However, the record
  reveals that the district judge ultimately promised to hold such a hearing only if she felt
  it was necessary.

  Second, Accolade contends that because Nagashima never specified the nature of the
  modification that he had made to Accolade's cartridges, the district court erred in
  admitting the cartridges as evidence without ascertaining that the TMSS initialization
  sequence really had been omitted. In a preliminary injunction proceeding, the district
  court is accorded broad discretion in ruling on the admissibility of evidence. Flynt
  Distributing Co., Inc. v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984). In the absence of
  any evidence that Nagashima was lying, it was not an abuse of discretion for the district
  judge to admit his declaration and the altered Accolade cartridges as evidence. The fact
  that neither Accolade nor the district court was able to verify Nagashima's statements
  affects the weight to be given the statements and the proffered cartridges, not their
  admissibility.

  - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -

  The question whether a product feature is functional is a question of fact. Inwood
  Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 855, 72 L. Ed. 2d 606, 102 S.
  Ct. 2182 (1982). Determination of the correct legal standard to apply in evaluating
  functionality, however, is a question of law which we review de novo. Id. at 855 n.15.
  The burden of proving nonfunctionality is on Sega. See Rachel v. Banana Republic, Inc.,
  831 F.2d 1503, 1506 (9th Cir. 1987). In the case before us, we conclude that the district
  court's finding of nonfunctionality was based on its use of an incorrect legal standard.
  Viewed in the correct light, the record before us supports only one conclusion: The TMSS
  initialization code is a functional feature of a Genesis-compatible game and Accolade
  may not be barred from using it.

  "Functional features of a product are features 'which constitute the actual benefit that
  the consumer wishes to purchase, as distinguished from an assurance that a particular
  entity made, sponsored, or endorsed a product.'" Vuitton et Fils S.A. v. J. Young
  Enterprises, Inc., 644 F.2d 769, 774 (9th Cir. 1981)   (quoting International Order
  of Job's Daughters v. Lindeburg & Co., 633 F.2d 912, 917 (9th Cir. 1980), cert. denied,
  452 U.S. 941, 69 L. Ed. 2d 956, 101 S. Ct. 3086 (1981)). A product feature thus is
  functional "if it is essential to the use or purpose of the article or if it affects the cost or
  quality of the article." Inwood Laboratories, 456 U.S. at 850 n.10. The Lanham Act does
  not protect essentially functional or utilitarian product features because such protection
  would constitute a grant of a perpetual monopoly over features that could not be
  patented. Keene Corp. v. Paraflex Industries, Inc., 653 F.2d 822, 824 (3d Cir. 1981).
  Even when the allegedly functional product feature is a trademark, the trademark owner
  may not enjoy a monopoly over the functional use of the mark. Job's Daughters, 633
  F.2d at 918-19.

  In determining whether a product feature is functional, a court may consider a number of
  factors, including - but not limited to - "the availability of alternative designs; and
  whether a particular design results from a comparatively simple or cheap   method
  of manufacture." Clamp Mfg. Co. v. Enco Mfg. Co., Inc., 870 F.2d 512, 516 (9th Cir.),
  cert. denied, 493 U.S. 872, 107 L. Ed. 2d 155, 110 S. Ct. 202 (1989). The availability of
  alternative methods of manufacture must be more than merely theoretical or
  speculative, however. The court must find "that commercially feasible alternative
  configurations exist." Id. (emphasis added). Moreover, some cases have even suggested
  that in order to establish nonfunctionality the party with the burden must demonstrate
  that the product feature "'serves no purpose other than identification.'" Keene Corp., 653
  F.2d at 826 (quoting SK&F Co. v. Premo Pharmaceutical Laboratories, Inc., 625 F.2d
  1055, 1063 (3d Cir. 1980)). With these principles in mind, we turn to the question
  whether the TMSS initialization code is a functional feature of a Genesis-compatible
  game.

  It is indisputable that, in the case before us, part of "the actual benefit that the
  consumer wishes to purchase" is compatibility with the Genesis III console. The TMSS
  initialization code provides that compatibility. Sega argues that the modified
  cartridges that were introduced in the district court establish the actual existence of
  technically and commercially feasible alternative methods of gaining access to the
  Genesis III. The cartridges were prepared by Nagashima, an employee in Sega's
  Hardware Research and Development Department who was "familiar with the TMSS
  system". At most, the Nagashima affidavit establishes that an individual familiar with
  the operation of the TMSS can discover a way to engineer around it. It does not
  establish that a competitor with no knowledge of the workings of the TMSS could do so.
  Nor is there any evidence that there was any public or industry awareness of any
  alternate method for gaining access to the Genesis III. Evidence that an individual, even
  an independent expert, produced one or more cartridges is not sufficient proof that an
  alternate method exists. What is needed for proof of that fact is proof of the method
  itself. Here, such proof is totally lacking. What is also needed is proof that knowledge of
  the alternate method exists or is readily available to knowledgeable persons in the
  industry. That proof also is totally lacking here. Accordingly, the district court erred as a
  matter   of law in concluding that the Nagashima declaration and the modified
  cartridges were sufficient to establish nonfunctionality.

  Because the TMSS serves the function of regulating access to the Genesis III, and
  because a means of access to the Genesis III console without using the TMSS
  initialization code is not known to manufacturers of competing video game cartridges,
  there is an insufficient basis for a finding of nonfunctionality. Moreover, we note that the
  only evidence in the record (other than the Nagashima declaration) relating to
  Accolade's ability to gain access to the Genesis III through the use of any process other
  than the TMSS is the affidavit of Alan Miller. Miller stated that Accolade's software
  engineers - who, absent any evidence to the contrary, we presume to be reasonably
  competent representatives of their profession - have not been able to discover such a
  method. This evidence supports our conclusion that Sega has not met its burden of
  establishing nonfunctionality.

  Sega argues that it is not required to share with Accolade or with any other competitor
  the secrets of how the TMSS works, and how to engineer around it. Sega is correct - the
  law does not require that  it disclose its trade secrets to Accolade in connection
  with its effort to prevail on its Lanham Act claim, nor in connection with its effort to
  defend itself against Accolade's counterclaim. Nevertheless, a Lanham Act plaintiff is
  not entitled to prevail in litigation solely on the basis of unsupported assertions. Rather,
  it has a choice. It can take its chances and proceed to trial without the sensitive
  evidence. Alternatively, if it believes the evidence important to the resolution of the
  dispute, it may seek a protective order from the court pursuant to Federal Rule of Civil
  Procedure 26(c)(7) governing discovery. "The protective order is not a substitute for
  [evidence relevant to the merits]. Its purpose . . . is to prevent harm by limiting
  disclosure of relevant and necessary information." Micro Motion, Inc. v. Kane Steel Co.,
  Inc., 894 F.2d 1318, 1325 (Fed. Cir. 1990) (emphasis omitted). Upon a showing that a
  protective order is warranted, see American Standard, Inc. v. Pfizer Inc., 828 F.2d 734,
  739-44 (Fed. Cir. 1987), the court may restrict access to the disputed material to the
  opposing party's counsel, or may  [*69]  allow the parties to retain independent experts
  to evaluate material that is subject to the protective order. See, e.g., Safe Flight
  Instrument Corp. v. Sundstrand Data Control, Inc., 682 F. Supp. 20, 22 (D. Del. 1988)
  (listing cases). The latter solution is particularly helpful to the court in a case such as
  this one, in which the dispute is highly technical in nature. However, neither the district
  court nor Sega took advantage of this procedure. Thus there is no independent evidence
  to support the conclusion offered by Nagashima.

  In summary, because Sega did not produce sufficient evidence regarding the existence
  of a feasible alternative to the use of the TMSS initialization code, it did not carry its
  burden and its claim of nonfunctionality fails. Possibly, Sega will be able to meet its
  burden of proof at trial. We cannot say. However, we conclude that in light of the record
  before the district court, Sega was not entitled to preliminary injunctive relief under the
  Lanham Act. n11

  - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -

  n11 Sega contends that even if the TMSS code is functional, Accolade, as the copier,
  was obligated to take the most effective measures reasonably available to eliminate the
  consumer confusion that has arisen as a result of the association of Sega's trademark
  with Accolade's product. The district court relied on Plasticolor Molded Products v. Ford
  Motor Co., 713 F. Supp. 1329, 1339 (C.D. Cal. 1989), a decision it acknowledged had
  been vacated. See Plasticolor Molded Products v. Ford Motor Co., 767 F. Supp. 1036
  (C.D. Cal. 1991). When a product feature is both functional and source-identifying, the
  copier need only take reasonable measures to avoid consumer confusion. American
  Greetings Corp. v. Dan-Dee Imports, Inc., 807 F.2d 1136, 1141 (3d Cir. 1986); Job's
  Daughters, 633 F.2d at 919 (the degree of protection afforded a product feature that has
  both functional and source-identifying aspects depends on the characteristics of the use
  and on the copier's merchandising practices). Assuming arguendo that the rules
  applicable to copiers apply here, the measures adopted by Accolade satisfy a
  reasonableness standard. Accolade placed disclaimers on its packaging materials which
  stated that "Accolade, Inc. is not associated with Sega Enterprises, Ltd." While
  Accolade could have worded its disclaimer more strongly, the version that it chose
  would appear to be sufficient.

  - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -

  C. Accolade's Request for Preliminary Injunctive Relief

  Finally, we decline to order the district court to grant Accolade preliminary injunctive
  relief on its Lanham Act claim. If requested, the district court may reconsider that issue
  in light of the legal principles we have set forth. The parties have presented arguments
  regarding the hardships they would suffer under various circumstances. We believe those
  arguments should be weighed by the district court before any affirmative relief is
  ordered. Moreover, the parties may have additional factual material they wish to present
  regarding the question of Accolade's right to preliminary injunctive relief. Pending
  further consideration of this matter by the district court, we are content to let the matter
  rest where it stands, with each party as free to act as it was before the issuance of
  preliminary injunctive relief. We are confident that preserving the status quo in this
  manner will not lead to any serious inequity. Costs on appeal shall be assessed against
  Sega.

  AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

  ORDER

  The opinion filed October 20, 1992 is amended as follows:

  1. On page 12529, middle paragraph delete "In this  appeal, Sega does not raise
  a separate claim of copyright infringement with respect to the header file."

  2. On page 12547, after the sentence ending in "U.S.P.Q. 2d at 1254," insert the
  following footnote: * We therefore reject Sega's belated suggestion that Accolade's
  incorporation of the code which "unlocks" the Genesis III console is not a fair use. Our
  decision on this point is entirely consistent with Atari v. Nintendo, 975 F.2d 832 (Fed.
  Cir. 1992). Although Nintendo extended copyright protection to Nintendo's 10NES
  security system, that system consisted of an original program which generates an
  arbitrary data stream "key" which unlocks the NES console. Creativity and originality
  went into the design of that program. See id. at 840. Moreover, the federal circuit
  concluded that there is a "multitude of different ways to generate a data stream which
  unlocks the NES console." Atari, 975 F.2d at 839. The circumstances are clearly different
  here. Sega's key appears to be functional. It consists merely of 20 bytes of initialization
  code plus the letters S-E-G-A. There is no showing that there is a multitude of
  different ways to unlock the Genesis III console. Finally, we note that Sega's security
  code is of such de minimis length that it is probably unprotected under the words and
  short phrases doctrine. 37 C.F.R. § 202.1(a).