10NES was Nintendo's program for keeping third-party manufacturers from selling unlicensed game cartridges for its original Nintendo Entertainment System. Nintendo was well aware that the Atari 2600 went bust because the market got flooded with third party game carts, much of it ranging from bad game design (i.e., Plaque Attack) to down right disgusting (i.e., Custer's Revenge).

To keep that from happening Nintendo added its 10NES security software to both its game console and carts. The game console was essentially in locked mode until a cart was plugged in. The cart generated a key code and the console generated a lock code. Each had to generate a matching pair of digits and if they didn't, the console wouldn't kick out of its locked mode.

So if you wanted your games to unlock the game console, you had to license the 10NES software under Nintendo's terms.

Atari was an early licensee. This was a bit odd because Nintendo at first offered Atari rights to distribute the whole ball of wax. Atari refused. Atari was working on the Atari 7800 which it figured would blow Nintendo's puny NES right out of the water, boyee. Atari quickly saw that the 7800 was about as exciting as looking back in the toilet and seeing that you had just created a world-class crap. Atari quickly began selling licensed games. Licensing, however, was a fairly new concept in the game word, and Atari began to balk at what it felt were highly restrictive terms on the part of Nintendo. For example Nintendo would only allow Atari to release five new titles a year.

Atari set about to reverse engineer the 10NES system. It set up a clean room. Unfortunately, someone at Atari didn't think this would be quick enough. If the market was going to be flooded with cheap shit and the video game boom was going to go bust a second time, well, Atari wanted to be there first.

In an entirely brazen move, a lawyer for Atari went down to the copyright office and convinced someone there that it was involved in a lawsuit with Nintendo and, under the principle of discovery, needed to see the source code Nintendo filed for 10NES. The copyright office happily provided the source. No, really.

Pretty soon Atari had cooked up its 10NES clone called Rabbit and was cranking out unlicensed carts. Nintendo quickly slapped Atari with a lawsuit. In a clever strategic move, Nintendo also sent major retailers like Toys 'R Us letters explaining the lawsuit and that retailers themselves might get slapped with a similar lawsuit for distributing unlicensed games. The move was brilliant. From the retailer point of view, they made way way more money from the sale of Nintendo consoles and licensed games than cheaper Atari carts which, if history was any indication, Atari would start dumping for $2. So Toys 'R Us et al were only too happy to comply. Atari, hardly blessed with a cash-rich war chest, suffered enormously from having its products removed from store shelves.

In court, Atari first tried to argue it was not breaking any Nintendo copyrights. It had merely read the data 10NES was generating and its Rabbit system was duplicating that data. Atari lawyers noted that it had been well established that while you can protect software via copyright/patent, a software manufacturer can not lay claim to the data it generates when in the user's hands. More simply put, Microsoft can copyright Word but it can't copyright the text I make Word generate.

Atari argued that they had just found a way to generate unlocking codes with their Rabbit system.

Alas, Atari's little act of deception with the copyright office came back to bite it on the ass. It would seem Atari engineers did not fully understand everything they were copying from Nintendo's original source. They copied parts of 10NES that had nothing to do with the key generation. Nintendo lawyers argued if Atari had merely engineered it via a clean room these "vestigial organs" wouldn't be in their code too. In a legal move roughly equivalent to the Italian Arm Salute, Nintendo demonstrated numerous fairly obvious ways Atari could have generated the 10NES codes. That they just happened to use the method identical to Nintendo was further evidence of wholesale copying.

Atari lost the case.