When Hiroshi Yamauchi looked at Atari’s fall from grace in the early 80s, he was determined not to repeat its mistakes with Nintendo and the new Famicom. It was an object lesson that even trickled down into Nintendo’s hiring practices at the time according to Minoru Arakawa as related in David Sheff’s “Game Over”, to avoid even the kind of massive bureaucracy that Atari had blown up into in the early 80s before the collapse.
Nintendo controlled what games would appear on its system with a process that gave them an iron grip over cartridge production and licenses. If you wanted your games on a Nintendo system, you needed to negotiate with Nintendo for access and even then, you were restricted to only five games a year. Games were developed by studios but had to be sent over to Nintendo so that they could be printed on cartridges which were sold back to the developers who foot the manufacturing costs. Not only that, but they were also restricted from porting the games they made for Nintendo to any other system for two years.
Yamauchi was focused on quality and was determined not to let the fate of Atari befall the Famicom when it moved West as the Nintendo Entertainment System. It’s also something of a understatement to say that he was also a firm believer in doing what he could to maintain Nintendo’s juggernaut-like ability to print money as its game system took off.
When the Famicom finally moved to the West as the Nintendo Entertainment System, the carts for it would contain a special lock-out chip, the 10NES, that enabled them to work in the new NES systems. As Ryan J over at Retro Nintendo Reviews notes in his look at the 10NES, every NES-001 unit sold would have “a small 16-pin DIP 4-bit microprocessor that serves as gatekeeper for the console”. It would look for the chip in the cartridge and if everything was okay, you were playing with power. It was a clever piece of tech far more ironclad than looking up paragraphs in a manual for a word check.
By the late 80s and after a bit of hype, the Nintendo Entertainment System was quickly becoming a holiday favorite. Retailers were as ecstatic as Nintendo’s fans were. More developers wanted a seat on the gravy train even though they all had to abide by Nintendo’s strict controls. Unlike what Konami would find a legal loophole with their Ultra label in 1988 enabling them to circumvent the five-game limit, Atari and Tengen decided on a more brute force method.
To a company that had once ruled the home video gaming scene with a relatively open system, the security precautions by Nintendo seemed like the ingredients for a monopoly. Apparently they tried to negotiate a less restrictive license but Nintendo refused to budge.
In 1986, Atari tried to analyze the signals between the 10NES and the gatekeeper inside the NES but weren’t able to come up with a complete picture. Then they tried “chemically peeling” layers of the chip back to read the circuit paths and figure out how it all worked. That didn’t help, either.
Then in December, 1987, Atari became a licensee of Nintendo’s via Tengen — Atari’s subsidiary focused on the new console market and games that weren’t Atari. At the time, Atari was split into two companies — the Atari Corporation (which owned the rights to use the Atari brand on computer games and console games, ostensibly for their own consoles like the Atari 7800 or Atari XES computer) and Atari Games which was their arcade branch. Atari Games wanted to break into the resurgent console market led by Nintendo, so Tengen was formed as a way to do it. If it sounds kind of strange, it was.
Interestingly, the name “Tengen” (meaning “origin of heaven”) had as much the same origin as “Atari”, both terms used in the game, Go, which was coincidentally also a favorite pastime of Hiroshi Yamauchi.
Now here’s where it gets weird if it doesn’t sound so already. Atari’s techs still hadn’t figured out how to circumvent Nintendo’s security, but eventually they did thanks to…well…Nintendo. Citing that it was needed in “pending litigation”, Atari contacted lawyers to arrange for a copy of the 10NES code to be made available for a court case. The Copyright Office then provided a copy of the code to the law firm working for Atari. The problem was that there was no court case that required the code, but as Sheff pointed out in “Game Over”, it’s also possible that the law firm in question didn’t know that from talking to Atari.
Just how did the 10NES code end up in the US Copyright Office’s hands? Nintendo, at first, didn’t want to register the code as a copyright because they would be required to provide a copy of it. A lawyer assured them that it would be secure in their archives as no one was allowed to make copies, photos, etc.. of the records. But there was an exception if it came to litigation. As Sheff explains, a company violating copyright needs to know just what it’s violating, so it needs to see the copyrighted material. It was a piece of deception that would later bite Atari in the ass.
In the meantime, it helped Tengen’s R&D to finally reach coding nirvana and develop a countermeasure they called “Rabbit” that could be used in their cartridges to fool the NES into accepting unauthorized games. By August, 1988, they were beginning to manufacture their own carts. By December that year, Atari also launched another salvo against Nintendo by filing suit against them claiming that the lockout system gave Yamauchi’s empire an unfair monopoly while saying that it had successful developed its own key to get around it.
Nintendo was not happy. Things got ugly. Nintendo quickly countersued claiming that as a licensee, Atari and Tengen used information from the partnership to ultimately undermine their agreement and use what they learned to compete against them. Not only that, but looking at the Rabbit code, despite modifications, it was clearly based on Nintendo’s own code taken from the Copyright Office. The judge upheld Nintendo’s injunction against Tengen towards the end of 1989, forcing the company to recall all of their games, halt marketing, and stop creating anything for the NES, pointing out that they had deceived their way into attaining the code.
Before the judgement came down, Nintendo allegedly brought its retail muscle to bear down that same year on chains that carried Tengen games. The short story goes that if a store continued to carry Tengen titles, it could not expect to get any Nintendo titles — and anything Nintendo was on fire. Ames, a large department store chain at the time, was apparently cut off by Nintendo in August, 1989, for continuing to sell Tengen titles. Retailers were spooked. No one wanted to go up against Nintendo and potentially sacrifice whatever profit margins they might gain from playing ball.
Even while that was going on, in early 1989, Atari had filed another suit against Nintendo for infringing on one of its own patents alleging their system was using “borrowed” technology (Nintendo had also filed suit against Tengen in the same year over Tetris which Tengen ultimately lost and was forced to recall all of their cartridges). Magnavox also joined in the suit spree having been responsible for the Magnavox Odyssey which is arguably the first game console, citing tech that Nintendo allegedly didn’t license. And there were others including one by Jack Tramiel (then head of Atari) who accused Nintendo’s restrictive two-year exclusivity on their games to be “unfair restraint on fair trade”. It was as if a perfect storm of lawsuits had turned 1989 into a nightmare for Nintendo’s legal eagles. It created enough noise to even get the attention of lawmakers on Capitol Hill along with the FTC a few years later.
It also didn’t help that at the time that there was also a fair bit of “Japanophobia” in the United States. Japan Inc. was a monster machine then, dominating the marketplace with all sorts of things from cars to personal electronics, and in the US, there was a fair bit of resentment over their success from several quarters (especially the auto industry). Even movies and books were influenced by Japan’s seemingly unstoppable successes, painting future worlds heavily influenced by Japanese language or individuals, an attitude resurrected in the past few years in using China’s rise to paint the same pictures across different media.
In 1991, the injunction was temporarily lifted pending appeal and Tengen was allowed to sell games again for the NES only to stop once more in 1992 when the appeal failed. The battles between the two continued until it was settled in 1994. In the same year, Tengen, Atari, Games, and the Time Warner Interactive Group were combined into what would become Time Warner Interactive after Time Warner bought a controlling stake in Atari. The FTC also backed off in the early 90s as Nintendo slowly made changes to the way it did business, eventually relaxing restrictions and even offering coupons on Nintendo products supposedly to help avoid price fixing allegations which had also boiled to the surface. Whether or not that might also have had something to do with the success of a little console from Sega at the time is another story.
Tengen games had a rough history on the NES, but that didn’t stop them from hitting up competitors like Sega both during and after the turmoil. They went on to create and publish games for Sega’s lineup of hardware ranging from the Master System to the Sega CD. Even the TurboGrafx-16 got a little Tengen love. Tengen Ltd., Tengen’s Japanese subsidiary, also published games for Sega’s Mega Drive (the Sega Genesis in Japan) with colorful manuals that stood in contrast to the otherwise bland Japanese ones.
To the young, gaming audience playing Nintendo, Sega, or the NEC’s TurboGrafx-16, all of this was meaningless. All many would see when Tengen appeared on the scene were its strangely shaped black cartridges. Were these really Nintendo games? There’s no Nintendo “Seal of Quality” on the boxes. Are these for real? But they were, and kids everywhere discovered Gauntlet for the first time or Paperboy and Tetris on the NES. Sure, it was weird when Tengen dropped out of sight on the NES every so often, but then there they were again on the Genesis! It was strange stuff, but for Nintendo and Atari, it was a battle that, along with others, slowly change the way Nintendo would do business. Coupled with the 16-bit war and Sega’s climb as a serious threat to the House of Mario, the invincible front Nintendo put forth had been chipped.
Tengen might not have survived the same way that Electronic Arts or Capcom from those early days would on their own, or become a household name as Konami did. But for a brief moment in history, the actions it took made it something of a surprising renegade in an industry dominated by Nintendo’s grey, square cartridges. Konami’s Ultra label took a softer approach to hop over Nintendo’s fences with a shell company. In Tengen’s case, they didn’t just want to get around those fences. They wanted to burn the fences down.