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8/25. The Supreme Court
of the State of California issued its
opinion [54 pages in PDF] in
DVD Copy Control
Association v. Bunner, a case regarding California trade secret
law, free speech, and the publication of the DeCSS program in web sites. The
trial court issued a preliminary injunction based upon its finding of violation of
California trade secrets law. The
California
Court of Appeal (6th) reversed on free speech grounds. It did not examine
the question of whether the injunction was valid under trade secrets law. The Supreme Court
reversed the Court of Appeal, and held that the preliminary injunction does not
violate Bunner's right to free speech under the U.S. or California
Constitutions.
The Supreme Court did not decide the merits of the trade secrets
claim. Rather, it remanded to the Court of Appeal with instructions to determine
the validity of the preliminary injunction under California trade secrets law.
Moreover, the Supreme Court suggested that acquisition of trade secrets by
reverse engineering (which is what occurred in this case) may not constitute
acquisition by improper means.
Hence, this opinion stands as authority for the proposition that injunctive
relief barring the dissemination of misappropriated trade secrets, including
copy protection secrets, does not
violate the free speech rights of the misappropriators, or others who acquire
the trade secrets from them. This is a victory generally for the proponents of
trade secrets protections. However, the case is not authority on the question of
protection of trade secrets from appropriation by reverse engineering. The Court
did not address this issue. And, while the trade secret holder prevailed in this
round, it may ultimately loose, if the Court of Appeal holds that there was no
violation of California trade secrets law.
Plaintiff. DVD is sometimes known as Digital Versatile Disc. DVDs are
capable of holding full length movies in digital format. CSS is a
Content Scrambling System for DVD to protect intellectual property rights by
means of encryption. The DVD Copy Control Association (DVDCCA) is a trade
association of businesses in the movie industry. It controls the rights to CSS.
DVDCCA licenses the CSS decryption technology to manufacturers of hardware and
software for playing DVDs.
Defendant. DeCSS is a decryption tool that facilitates infringement of
movies on DVD. DeCSS consists of computer source code which describes a method for playing an
encrypted DVD on a non CSS equipped DVD player or drive. It was written by Jon
Johansen, who is not a defendant in this case. He was able to write the program
after acquiring proprietary information embodied in the technology by reverse
engineering software created by a licensee of CSS. He did this in violation of
the users' license agreement, which specifically prohibits reverse engineering.
Johansen also published DeCSS program on the web. Andrew Bunner published a copy of DeCSS on
his web site. Bunner refused DVDCCA's request to remove the DeCSS program from his
web site.
Complaint. The DVDCCA filed a complaint in 1999 in California Superior
Court against Andrew Brunner and others alleging violation of the California
Uniform Trade Secrets Act in connection with their publishing copies of DeCSS in
web sites, or linking to copies of DeCSS.
Preliminary Injunction. The Superior Court for Santa Clara County,
Judge William Elfving presiding, issued an order granting a
preliminary injunction in January of 2000.
The Superior Court held that the DVDCCA met the requirements for injunctive
relief. It found that the CSS technology contained protectable trade secrets
because it derived independent economic value from its secrecy and because the
DVDCCA made reasonable efforts to maintain its secrecy; it found that Johansen
obtained these trade secrets through reverse engineering in violation of his
license agreement, and therefore acquired these secrets by improper means; it
found that Bunner and other defendants knew or should have known that Johansen
acquired these trade secrets by improper means; it found that the trade secret
status of the CSS technology had not been destroyed because it had been
published on the web; and, it concluded that the DVDCCA would suffer irreparable
harm without an injunction.
Hence, the Superior Court enjoined Bunner and other defendants from "[p]osting
or otherwise disclosing or distributing, on their web sites or elsewhere, the
DeCSS program, the master keys or algorithms of the Content Scrambling system (‘CSS’),
or any other information derived from this proprietary information." The
Superior Court's preliminary injunction did not bar linking to copies of DeCSS
elsewhere on the web.
The Court of Appeal. The Court of Appeal issued its
opinion reversing
the Superior Court on November 1, 2001. It reasoned that
the DeCSS source code is speech entitled to First Amendment protection. It also
noted that unlike copyright, trade secret protection is not secured by the
Constitution. The Court of Appeal further reasoned that the Superior Court order
constituted a prior restraint of pure speech.
The Court of Appeal opinion was narrow. It did not review the Superior
Court's findings in support of the preliminary injunction. It assumed for the
purpose of the appeal that the DVDCCA was entitled to injunctive relief under
California trade secret law. It addressed only the issue of whether an
injunction based on trade secret law would violate freedom of speech.
See, story titled "Cal App Overturns Injunction in DeCSS Case" in
TLJ Daily E-Mail
Alert No. 300, November 2, 2001.
Supreme Court. On February 20, 2002, the Supreme Court ordered review of
the Court of Appeal. See, story titled "California Supreme Court To Review
DeCSS Case" in TLJ
Daily E-Mail Alert No. 374, February 22, 2002.
The Supreme Court's review in this case is limited. The Supreme Court wrote
that "the narrow question before us is whether the preliminary injunction
violates Bunner's right to free speech under the United States and California
Constitutions even though DVD CCA is likely to prevail on its trade secret claim
against Bunner."
The Court first reasoned that computer code is expression, and is therefore
protected by the First Amendment of the U.S. Constitution. However, the level of
scrutiny to be accorded depends upon whether the injunction is content neutral
or content based. In the present case, the Court held that the injunction is
content neutral, and thus, entitled to a lower level of scrutiny.
The Court elaborated on content neutrality. It wrote that "the injunction
singled out Bunner's communications because of DVD CCA's efforts to maintain the
secrecy of the CSS technology and the competitive advantage it enjoyed from
those efforts -- and not because of the communications' subject matter or any
disagreement with Bunner’s message or viewpoint. In other words, the trial
court issued the injunction to protect DVD CCA's statutorily created property
interest in information -- and not to suppress the content of Bunner's
communications." The Court added, "Indeed, the governmental purpose behind
protecting trade secrets like the CSS technology through injunctive relief is
wholly unrelated to their content."
The Court also wrote that "The fact that the preliminary injunction
identifies the prohibited speech by its content does not make it content based.
... any injunction remedying this deprivation must refer to the content of that
information in order to identify the property interest to be protected. Such an
injunction remains content neutral so long as it serves significant governmental
purposes unrelated to the content of the proprietary information."
The Court then applied the content neutral test, as articulated by the
Supreme Court of the U.S. in
Madsen v.
Women’s Health Center, 512 U.S. 753 (1994). That is, "when evaluating a
content-neutral injunction ... [w]e must ask ... whether the challenged
provisions of the injunction burden no more speech than necessary to serve a
significant government interest."
The California Supreme Court held that the injunction satisfies this test. It
held that "California's trade secret law undoubtedly serves significant
government interests." First, the government has an interest in incenting
investment in innovation, and trade secret protection, like patent and copyright
protection, serve this interest.
In addition, the Court held that trade secret law furthers the
government interest in promoting business ethics. It wrote that "By prohibiting
Bunner from exploiting and destroying DVD CCA's trade secrets because of his
actual or constructive knowledge of its illegal acquisition, the preliminary
injunction merely applies this venerable standard of commercial ethics to a
constitutionally recognized property interest in information. Because a person
who knowingly exploits the illegal acquisition of property owned by another
should be in ``no better position than´´ the illegal acquirer himself ... the injunction
burdens no more speech than necessary to serve the government’s important
interest in maintaining commercial ethics."
The Court also wrote that "In this case, the content of the trade secrets
neither involves a matter of public concern nor implicates the core purpose of
the First Amendment. ... Bunner posted these secrets in the form of DeCSS on
the Internet so Linux users could enjoy and use DVD’s and so others could
improve the functional capabilities of DeCSS. He did not post them to comment
on any public issue or to participate in any public debate. Indeed, only
computer encryption enthusiasts are likely to have an interest in the expressive
content—rather than the uses—of DVD CCA’s trade secrets."
Finally, the Court considered the "prior restraint doctrine". It wrote that
"Although the preliminary injunction issued by the trial court survives the
Madsen test, we must still determine whether the prior restraint doctrine
bars it. Because the injunction is content neutral and was issued because of
Bunner’s prior unlawful conduct, we conclude it is not a prior restraint and
therefore does not violate the First Amendment." It held that the preliminary
injunction in this case is not a prior restraint. Rather, it is based upon
"prior unlawful conduct".
So, the Court concluded that "we find that the preliminary injunction at
issue here is not a prior restraint. The injunction is content neutral ... , and
the trial court found that Bunner had previously disclosed DVD CCA’s trade
secrets in violation of California law. The court therefore issued the
content-neutral injunction because of Bunner’s ``prior unlawful conduct.´´"
The Court also briefly disposed of the parallel argument that the Superior
Court's preliminary injunction violated the free speech clause of the California
Constitution.
Then, the Supreme Court remanded to the Court of Appeal, with instructions.
It wrote that "We merely hold that the preliminary injunction does not violate
the free speech clauses of the United States and California Constitutions,
assuming the trial court properly issued the injunction under California’s
trade secret law. On remand, the Court of Appeal should determine the validity
of this assumption."
It added that "On remand, the Court of Appeal must therefore ``make an
independent examination of the entire record´´ ..., and determine whether
the evidence in the record supports the factual findings necessary to establish
that the preliminary injunction was warranted under California’s trade secret
law ..." (Citations omitted.)
The Supreme Court, in its review California trade secret law earlier in its
opinion, hinted as to what the outcome of this review should be. It wrote that
the California statute protects holders of trade secrets from misappropriation.
Misappropriation occurs when a person acquires a trade secret by improper means.
This includes theft, bribery, misrepresentation, breach or inducement of a
breach of a duty to maintain secrecy, and espionage; however, the statute
provides that "Reverse engineering or independent derivation alone" (citing the
California statute).
Jon Johansen originally obtained the DVDCCA's trade secrets by reverse
engineering.
Justice Janice Brown wrote the opinion of the Supreme Court. She was joined by
Ronald George, Marvin Baxter,
Rivera, and Robie.
Other Opinions. There were two other opinions, which both essentially
concurred in part and dissented in part.
Justice
Carlos Moreno
wrote a lengthy opinion. He wrote that "I concur in the majority's narrow
holding, which, as I understand it, is that the First Amendment does not
categorically prohibit preliminary injunctions to enjoin the publication of
trade secrets. I further agree that the First Amendment requires independent
appellate review of such preliminary injunctions, rather than the deferential
review usually accorded such injunctions. I write separately for two reasons.
First, I believe there is a need to clarify how the prior restraint doctrine
under the First Amendment applies to the publication of alleged trade secrets.
Second, I would forgo further proceedings in the Court of Appeal and simply
affirm that court's judgment. In my view, the DVD Copy Control Association's
(DVD CCA) trade secret claim against Bunner is patently without merit for the
reasons explained below."
Justice Kathryn Werdegar wrote a one page opinion. She wrote, "I agree with the
majority’s conclusion that the First Amendment to the United States Constitution
does not necessarily preclude injunctive relief in trade secret cases. I find in
Justice Moreno's concurring opinion, however, a more satisfying reconciliation
of that conclusion with the constitutional rules governing prior restraints and
content-based restrictions of speech."
Related Cases.
Pavlovich v. Superior Court. In this case, the DVDCCA filed a complaint
in the Superior Court for Santa Clara County California
against Matthew Pavlovich and others alleging misappropriation of trade secrets
and other claims. Pavlovich published the DeCSS program in a web site which he
owned and operated. He is not a resident of California. However, he is the
President of a technology start up company, and a leader of the open source
movement. He also testified that he knew that the movie industry was based in
California, and that DeCSS would harm that industry. He sought to quash the
summons.
On August 7, 2001, the Court of Appeal of California (6th Appellate District) issued its
opinion in Pavlovich v. Superior Court, holding that
California's long-arm jurisdiction statute reaches owners, publishers, and
operators of web sites when, in violation of California law, they make available
for copying or distribution trade secrets or copyrighted material of California
companies. See, story titled "California Has Personal Jurisdiction over Non
Resident DeCSS Poster" in
TLJ Daily E-Mail
Alert No. 244, August 8, 2001.
However, on November 25, 2002, the Supreme Court of California issued its 4-3
opinion
[53 pages in PDF] in Pavlovich v. Superior Court, reversing the
Court of Appeal. The Supreme Court held that the California courts do not have
personal jurisdiction over a nonresident individual who had published the DeCSS
program his web site. See, story titled "California Has No Personal Jurisdiction
Over Non Resident DeCSS Poster", in
TLJ Daily E-Mail
Alert No. 557, November 26, 2002.
Universal City Studios v. Reimerdes/Corley. This is another DeCSS
related case. Although, this case involved copyright law, and specifically, the
anti-trafficking provision of the Digital Millennium Copyright Act (DMCA).
University City Studios, and other movie studios, filed a complaint in U.S.
District Court (SDNY) against persons who had published copies of DeCSS in web
sites, or hyperlinked to copies in other web sites.
On August 17, 2000, the District Court issued its
opinion
(published at 111 F.Supp.2d 294) in Universal City Studios v. Reimerdes.
The Court held that posting DeCSS violated the DMCA's provision banning
trafficking in technology that circumvents measures controlling access to
copyrighted works, that hyperlinking also violates the DMCA, that the DMCA does
not violate the First Amendment as applied to decryption software, that the
defendants did not engage in protected fair use, that the movie studios are
entitled to injunctive relief.
On November 28, 2001, the U.S. Court
of Appeals (2ndCir) issued its
opinion (published at 273 F.3d 429) in Universal City Studios v. Corley
affirming the District Court. See also, story titled "Second Circuit Upholds
DMCA and Corley Injunction" in
TLJ Daily E-Mail
Alert No. 319, December 3, 2001.
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