A tiny Beverly Hills firm has developed and is about to begin shipping a new software product to retailers that has industry giant Sony Corp. seeing red.

Bleem Inc.’s new software, currently in final testing and due to ship in a few weeks, will enable video-game enthusiasts to play Sony Playstation games on the Sega Dreamcast video-game console. Until now, anyone wanting to play a Playstation game also needed to purchase (or otherwise get access to) a Playstation console.

And this isn’t the first time that nine-person Bleem has provoked the industry’s 800-pound gorilla. In fact, Bleem and Sony have been embroiled in legal battles for more than a year over Bleem’s existing software that allows PC users to play PlayStation games on their computers.

Analysts and industry insiders expect Sony to initiate further litigation over Bleem’s software for Dreamcast owners.

Bleem and other so-called “emulators” have become a major source of controversy in recent months. The debate has become so heated that the Interactive Digital Software Association, a major trade group for the video-game business, declined to comment on the issue beyond a statement posted on its Web site.

“If the sole purpose of an emulator is to allow the playing of a console game on a PC, and the owner of the copyrights in that console game has not authorized the copying, performance, display, or derivative work created when a console game is played on a PC, then the creation and use of that emulator constitutes an infringement of the copyrights in the console game,” the site states.

Sony did not return calls for comment, but the company is likely especially concerned about emulators now because the U.S. debut of its next-generation Playstation 2 system is slated for October, and sales are expected to be huge. (Playstation 2’s debut in Japan in March drew throngs of consumers to electronics stores.)

“The official view is that (console manufacturers) are discouraging this (emulator software),” said John G. Taylor, a video-game analyst at Arcadia Investment Corp. “Every game of Sony’s has a software lock (so the system won’t play pirated games), and games are designed and intended to only be available for the PlayStation hardware system.”

Once the Playstation 2 system is released in the U.S., emulator programmers will likely waste little time in taking up the challenge of cracking its programming codes.

Overall industry reaction

Despite a few legal battles, most console makers other than Sony haven’t shown much interest in stamping out small programming companies that make emulators, because they feel those companies will end up folding over time. “None of them have been particularly successful,” Taylor said.

Emulators are primarily targeted to hard-core gamers, not nearly as big an audience as a major company like Sony is targeting to buy its upcoming PlayStation 2. Plus, the experience of playing games using an emulator is often not consistent, like it is on a video-game console. Varying computer specifications can make game speed choppy. And not all games are compatible with emulation software, though emulation companies maintain Web sites to keep customers up to date on which games work and which don’t.

Sony filed a suit claiming copyright infringement last month, its latest in a string of suits against Bleem. The electronics giant has already been turned down several times in its effort to get a court order prohibiting Bleem from shipping its software.

“They’re charging us with six patent infringements related to data processing and data handling basically related to our ability to make the games work on another platform,” said Sean Kauppinen, spokesman for Bleem. “They’re saying, ‘How could you do that without using our information?’ But we didn’t use their information. We happen to have one of those programmers who can figure it out.”

Marathon sessions

Randy Linden, the company’s head programmer, sat in front of a PC and a PlayStation for 18 hours a day for 18 months, observing how games looked, sounded, and played on the game console, and he tested different codes to generate a similar experience on the PC. For many games, Bleem claims users will actually experience better graphics playing PlayStation games on a Dreamcast console than they would on a PlayStation.

“He’s figured out how a PlayStation would interpret different parts of a PlayStation game,” Kauppinen said. “It’s basically trial and error. It’s actually writing pieces of code to play the game, and if the code works, you know you’ve stumbled on the right code.”

To date, Bleem has sold 300,000 units of its software for the PC, at $29.95 apiece. Preorders have already been submitted for the Sega Dreamcast program, but Kauppinen declined to release sales projections. Meanwhile, the company is carefully watching its bank account in preparation for continuing litigation.

“From the sales of the PC product, the profits have gone to defending ourselves,” he said.

Bleem will release four versions of emulators for the Dreamcast, each retailing for $19.99 and capable of playing 100 games. The company’s employees still have a few more weeks of testing ahead of them before the new software will be shipped. Employees must spend 120 hours testing each game to see how it plays and attempting to fix any glitches.

Not all emulators are controversial. Software developers often use them to create programs for a certain platform, like a new video-game console, while it is still in development. In those cases, emulators are used with the consent of the manufacturer.

Makers of emulators sold to consumers say that a person who isn’t planning to buy all the video-game consoles might, with an emulator, buy games that can be played on a single type of console. That could ultimately help sales of games, they argue, and games carry much higher profit margins than the hardware used to play them.

The problem is, many Web sites offer pirated copies of games that can be downloaded, often for free. And there is an incentive to do just that, despite a download time of up to an hour after all, games can cost more than $50 apiece.

A Sony PlayStation will reject pirated games, but emulators have not been able to replicate the piece of code that weeds out pirated software. That means an emulator can play pirated software, though Bleem and some other emulator makers denounce such practices.