Will Nintendo sue?
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An academic conference in my area used to host an annual "Mario AI championship", where competitors submitted either Mario-playing AI controllers, or systems to procedurally generate Mario-like levels [1]. After a few years someone at Nintendo found out, and demanded that we: 1) stop using the name "Mario", and 2) stop using the Mario assets in the procedural level generation framework. Imo there was a decent fair-use claim in that case, but nobody wanted to pursue it, so now it's informally referred to as the "Non-Mario AI competition" [2]. (As a direct reimplementation of an actual Mario Bros game, the project here seems like it would not really have a good fair-use claim, anyway.)
That's in contrast to Blizzard's reaction to the annual Starcraft AI competition [3]: once they found out about it, they sent a representative and donated prizes.
They have noticed and have alleged copyright infringement:
http://www.washingtonpost.com/blogs/the-switch/wp/2013/10/20...
I have seen one SC2 bot, based on the rather impressive feat of intercepting raw DirectX calls and reconstructing game state from them: http://graphics.stanford.edu/~mdfisher/GameAIs.html
Edit: Concern about trademark issues is also what apparently led to the Super Mario Clone FOSS project (http://sourceforge.net/projects/smclone/, note the URL) being renamed Secret Maryo Chronicles. I'm not sure if Nintendo ever contacted them or if it was a precautionary change.
Edit 2: There's some interesting commentary from a professional lawyer on the issue of trademarking and copyrighting characters at http://www.ivanhoffman.com/characters.html, though it's from 2003.
"Mario" is a current EU trademark held by Nintendo for categories 9, 28, 38 and 41.
- http://esearch.oami.europa.eu/copla/trademark/data/007061501 ;
- [UK:] http://www.ipo.gov.uk/tmcase/Results/1/UK00001182493.
The USPTO TESS db shows "Mario" is a character mark held by "Mario Camacho Foods, LLC".
It may be that the protection afforded is far less as people generally in TM law have an [near] absolute right to trade under their given name.
Why did Nintendo let the application for "Mario" lapse? I can think of least three options: 1) it was by chance; 2) their lawyers decided the trademark won't be granted; 3) they thought it was somehow undesirable to own the trademark for the word "Mario"; I wonder what it really was.
Anyway, you're right. The GP was mistaken that you cannot trademark common names [5]. Looks like he was right that "Mario" isn't a trademark of Nintendo's but for the wrong reason.
[1] Trademark Electronic Search System, http://tmsearch.uspto.gov.
[2] You can paste it into their "Free Form" search form. Unfortunately, it looks like you cannot link to search results directly.
[3] http://tsdr.uspto.gov/#caseNumber=73397991&caseType=SERIAL_N...
[4] http://www.uspto.gov/trademarks/basics/abandon.jsp
[5] For US examples see, e.g., http://tsdr.uspto.gov/#caseNumber=74259941&caseType=SERIAL_N... and http://tsdr.uspto.gov/#caseNumber=85026053&caseType=SERIAL_N....
Most of the time that argument is a convenient cop-out. You'd have to abandon your trademark pretty hard to lose the rights to it; leaving a few obscure online projects unmolested won't matter.
The real deal is that companies are very protective of their IP because they don't want anything to potentially impact their brand(s), and lawyers are eager to bill for as many hours as they can. It's possible that IP owners could commit a small team of goodwill ambassadors to filter alleged infringements and send licenses instead of (or quick on the heels of) C&Ds to good projects, but who's going to do that?
Might be worth contributing to if you are interested in HTML5 game dev or have some experience with the potential legal issues surrounding the project.
Namco on the other hand appears to still be somewhat reliant on sales of their 30-year-old Pac-Man game. They issued a DMCA on my silly Pac-Man project last year [1][2]. My goal was to archive and educate people about the internal mechanics of the game.
Except that they did. http://www.washingtonpost.com/blogs/the-switch/wp/2013/10/17...
http://www.nintendo.com/corp/legal.jsp#helping
But, it seems Nintendo is pretty lenient on fan-made content:
http://kotaku.com/5585802/nintendo-doesnt-want-to-criminaliz...
N.B. I am not a lawyer.
I think the reason Nintendo doesn't stop you from playing ROMs is similar to the reason HBO doesn't stop everyone from downloading Game of Thrones - it would be just about impossible. It doesn't mean they condone it.
[1] https://en.wikipedia.org/wiki/Video_game_emulator#Legal_issu...