FormGen Incorporated, GT Interactive Software Corporation and Apogee Software, Limited (FormGen) (plaintiffs) created a computer game called Duke Nukem 3D (DN-3D) that shows the main character, Duke Nukem, from the first-person perspective. The player directs Duke through game levels that include fictional bad guys while trying to find the level’s exit. FormGen also included a feature in DN-3D that allows players to generate new levels using the program and to save the levels and post them online for use by other players. Micro Star (defendant) downloaded 300 of the player-created levels and sought to package them as a CD game for sale, to be called Nuke It. Micro Star filed for declaratory judgment in the district court seeking confirmation that Nuke It would not infringe FormGen’s copyrights. FormGen filed a counterclaim, seeking a preliminary injunction barring production and distribution of Nuke It. The district court held that Nuke It was not a derivative work, but granted FormGen a preliminary injunction related to the packaging. Both FormGen and Microstar appealed.