Home |
Climate Change Project |
Table of Contents |
Courses | Search |
| [1] | IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT |
| [2] | No. H021153 |
| [3] | 2001.CA.0001877 <http://www.versuslaw.com> |
| [4] | November 1, 2001 |
| [5] | DVD COPY CONTROL ASSOCIATION, PLAINTIFF AND RESPONDENT, v. ANDREW BUNNER, DEFENDANT AND APPELLANT. |
| [6] | Trial Court: Santa Clara County Superior Court Superior Court No. CV 786804
Trial Judge: Hon. William J. Elfving |
| [7] | Attorneys for Plaintiffs-Respondents: Weil, Gotshal & Manges, Jared
Ben Bobrow, Christopher J. Cox, Sondra Roberto, Robert G. Sugarman, Jeffrey
L. Kessler. Counsel for Amicus Curiae on behalf of Plaintiffs-Respondents:
Computer & Communications Industry Association, Edward J. Black, American
Committee for Interoperable Systems, Howard M. Freedland, Williams &
Connolly, Suzanne H. Woods. Attorneys for Defendant-Appellant: Huber &
Samuelson, Allonn E. Levy, First Amendment Project, James Wheaton, David
Greene, Tomlinson Zisko Morosoli & Maser, Thomas E. Moore, Electronic
Frontier Foundation, Robin Dora Gross. Counsel for Amicus Curiae on behalf
of Defendant-Appellant: Howard, Rice, Nemerovski, Annette L. Hurst. |
| [8] | The opinion of the court was delivered by: Premo, Acting P.J. |
| [9] | CERTIFIED FOR PUBLICATION |
| [10] | This appeal arises from an action for injunctive relief brought under
the Uniform Trade Secrets Act, Civil Code section 3426.1, et. seq. After
learning that its trade secret had been revealed in DVD decryption software
published on the Internet, plaintiff DVD Copy Control Association (DVDCCA)
sought an injunction against defendant Andrew Bunner and numerous other
Internet web-site operators to prevent future disclosure or use of the secret.
The trial court granted a preliminary injunction, which required the defendants
to refrain from republishing the program or any information derived from
it. Bunner appeals from that order, contending that the First Amendment
to the United States Constitution protects his publication of the information
as an exercise of free speech. *fn1 |
| [11] | FACTUAL BACKGROUND |
| [12] | A DVD is a thin disk five inches in diameter which can store a large amount
of digital data. Each DVD can hold the data necessary to display a full-length
motion picture. Motion pictures stored on DVDs are protected from unauthorized
use by means of encryption using a "content scramble system" (CSS).
CSS is designed to restrict the playback of an encrypted (scrambled) DVD
to a CSS-equipped DVD player or DVD drive, which is capable of decrypting
(unscrambling) the DVD. CSS is primarily composed of algorithms and 400
"master keys." Every CSS-encrypted DVD contains all 400 master
keys, one of which is the trade secret at issue in this case. |
| [13] | DVDCCA, a trade association of businesses in the movie industry, controls
the rights to CSS. DVDCCA licenses the CSS decryption technology to manufacturers
of hardware and software for playing DVDs. Each licensee is assigned one
or more master keys unique to that licensee. |
| [14] | In October 1999, a computer program entitled "DeCSS" was posted
on the Internet allegedly by Jon Johansen, a 15-year-old resident of Norway.
DeCSS consists of computer source code *fn2
which describes a method for playing an encrypted DVD on a non-CSS-equipped
DVD player or drive. Soon after its initial publication on the Internet,
DeCSS appeared on numerous web sites throughout the world, including the
web site of defendant Andrew Bunner. In addition, many individuals provided
on their web sites "links" to copies of DeCSS on other web sites
without republishing DeCSS themselves. |
| [15] | PROCEDURAL BACKGROUND |
| [16] | 1. DVDCCA's Complaint for Injunctive Relief |
| [17] | On December 27, 1999, DVDCCA initiated an action under the Uniform Trade
Secrets Act (UTSA or "Act") against Bunner and numerous other
named and unnamed individuals who had allegedly republished or "linked"
to DeCSS. DVDCCA alleged that DeCSS "embodies, uses, and/or is a substantial
derivation of [DVDCCA's] confidential proprietary information." DVDCCA
had protected this proprietary information by limiting its disclosure to
those who had signed licensing agreements prohibiting disclosure to others.
DVDCCA alleged that the proprietary information contained in DeCSS had been
"obtained by willfully `hacking' and/or improperly reverse engineering"
CSS software created by plaintiff's licensee Xing Technology Corporation
(Xing). Xing had allegedly licensed its software to users exclusively under
a license agreement that prohibited reverse engineering. According to DVDCCA,
defendants "knew or should have known" that by posting DeCSS or
providing "links" to the program, they were "misusing proprietary
confidential information gained through improper means." |
| [18] | In the complaint DVDCCA sought an injunction to prevent any future disclosures
of DeCSS. *fn3 The specific relief requested
by DVDCCA was an order "restraining Defendants . . . from making any
further use or otherwise disclosing or distributing . . . or `linking' to
other web sites which disclose, distribute or `link' to any proprietary
property or trade secrets relating to the CSS technology and specifically
enjoining Defendants . . . from copying . . . distributing, publishing .
. . or otherwise marketing the DeCSS computer program and all other products
containing, using, and/or substantially derived from CSS proprietary property
or trade secrets." |
| [19] | DVDCCA also requested a temporary restraining order (TRO). On December
27, 1999, DVDCCA sent to defendants by electronic mail a copy of the complaint
and a notice of its application for a TRO. DVDCCA's attorney submitted a
declaration stating that Bunner immediately responded by telephone and "indicated
. . . that he would take his web site down." On December 29, 1999,
the trial court denied DVDCCA's request for a TRO but issued an order to
show cause on DVDCCA's request for a preliminary injunction. A hearing was
set for January 14, 2000. On January 12, 2000, one of DVDCCA's attorneys
submitted a declaration in support of the request for a preliminary injunction
in which he stated, "Defendants Bunner [and some of his co-defendants]
. . . appear to have removed DeCSS from its original location. It is not
known whether these files were deleted or just posted elsewhere." |
| [20] | 2. DVDCCA's Evidence and Arguments |
| [21] | DVDCCA submitted a declaration of its president, John Hoy. Hoy explained
that DeCSS "embodies, uses, and/or is a substantial derivation of [DVDCCA's]
confidential proprietary information." Hoy stated that he had tested
DeCSS and determined that it contained a "master key" which DVDCCA
had licensed to Xing. Hoy further asserted that "[t]o my knowledge,"
all of the end user licenses from DVDCCA's licensees prohibited reverse
engineering. The agreement between DVDCCA and its CSS licensees prohibited
those licensees from reverse-engineering CSS. |
| [22] | A former Xing employee declared that "Xing employed technical means
to prevent the reading of its software program in clear text in order to
deny unauthorized access to the underlying CSS keys and algorithms."
Xing's "End-User License Agreement," which would appear on the
screen during installation of Xing's software DVD player, stated that the
"Product in source code form" was a "confidential" "trade
secret" and the user "may not attempt to reverse engineer . .
. any portion of the Product." Thus, the user's assent to the agreement
was obtained only through the installment process and was therefore a "click
wrap" license agreement. |
| [23] | DVDCCA argued that it had a minimal evidentiary burden. DVDCCA suggested
that it had no burden to show that [Johansen's conduct was] unlawful under
Norwegian law; instead, it needed only to show that "improper means"
under California law had been used. It argued that it could prevail even
if it could not demonstrate that Johansen's conduct was unlawful or that
defendants knew or had reason to know of the allegedly wrongful origin of
DeCSS. It also asserted that "under California law, if a trade secret
violation is established, irreparable harm is presumed" and "need
not be shown." |
| [24] | DVDCCA conceded that "computer code is speech," but it argued
it was entitled to a preliminary injunction because it had shown "a
reasonable possibility" that it would prevail at trial and because
the harm it would suffer would be "severe and irreparable." DVDCCA
maintained that, even if defendants had not initially known that DeCSS contained
a trade secret that had been acquired by improper means, they clearly were
aware of that once DVDCCA initiated the action and therefore were required
to refrain from disclosing the trade secret. |
| [25] | 3. Bunner's Evidence and Arguments |
| [26] | Bunner argued that injunctive relief would violate his First Amendment
rights. He also asserted that there was no evidence that he knew or should
have known that DeCSS had been created by improper use of any proprietary
information. |
| [27] | Bunner asked the court to take judicial notice of a Norwegian law that
permitted reverse engineering of computer software for the purpose of achieving
"interoperability" and prohibited any agreement to the contrary.
According to Bunner, Johansen had reverse-engineered Xing's software to
create DeCSS so that CSS-encrypted DVDs could be played on computers that
run under a computer operating system known as Linux. Even if Johansen had
agreed not to reverse-engineer Xing's software, the Norwegian law invalidated
that term of the license agreement. Hence, Johansen's reverse engineering
was not "improper means" within the meaning of the UTSA. *fn4 |
| [28] | In support of his position Bunner submitted a declaration from an expert
on Norwegian intellectual property law stating that no Norwegian criminal
law or other legal precedent prohibited reverse engineering of computer
software. DVDCCA, however, objected to Bunner's request for judicial notice
of Norwegian law. Aided by the declaration of its own expert in Norwegian
law, it maintained that reverse engineering of a decryption program was
in fact unlawful in Norway. |
| [29] | Bunner also produced a declaration from Frank Stevenson, a computer programmer
in Norway who was an expert in cryptography. Stevenson declared that the
"master keys" on a CSS-encrypted DVD could be independently derived
solely from a CSS-encrypted DVD itself without any unauthorized use of CSS
decryption technology. |
| [30] | In addition, Bunner submitted a declaration by David Wagner, a University
of California cryptography researcher. Wagner believed that the publication
of information about "flaws in supposedly secure systems serves a vital
public interest" by notifying the public of these flaws. In Wagner's
view, the DeCSS "high-level" source code "made it possible
to analyze the security of the DVD security system without undertaking any
tedious reverse engineering work." |
| [31] | Bunner also submitted a declaration by John Gilmore, an expert on computer
security and encryption. Gilmore explained that widespread copying of DVDs
was not currently feasible because the removable media commonly available
today lacked the capacity for the "enormous file size" necessary
to hold a complete movie. |
| [32] | Finally, Bunner submitted his own declaration. He admitted that he had
become aware of DeCSS by "reading and participating in discussions
held on a news web site entitled `slashdot.org.' " He stated that he
had republished the DeCSS source code on his web site so that other programmers
could modify and improve DeCSS and so that Linux users could use DeCSS to
play DVDs. Bunner asserted that, at the time he republished DeCSS, he "had
no information suggesting" that DeCSS "contained any trade secrets"
or "involved any misappropriation of trade secrets," and he continued
to believe that DeCSS had been either "properly reverse engineered
or independently created without [the] appropriation of any trade secrets."
Consequently, Bunner maintained that there was no evidence that he had reason
to know that Johansen had used "improper means" to obtain the
trade secret that had allegedly been incorporated into DeCSS. |
| [33] | Bunner objected to DVDCCA's failure to define precisely what it was that
had been "substantially derived from proprietary information property
or trade secrets of the CSS." He also asserted that the disclosure
of the alleged trade secret throughout the world over the Internet had caused
it to "become a matter of public knowledge" which had lost any
trade secret status. |
| [34] | 4. The Trial Court's Order |
| [35] | The trial court heard DVDCCA's request for a preliminary injunction on
January 17, 2000. No evidence was introduced at the hearing. Instead, the
matter was submitted on the written declarations and the arguments of the
parties. |
| [36] | On January 21, 2000, the trial court issued a preliminary injunction.
The order enjoined 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 court
expressly refused to enjoin the defendants from linking to other web sites
that contained protected information, because the links were indispensable
to Internet access and a web-site owner could not be held responsible for
the content of other web sites. The court further stated that "[n]othing
in this Order shall prohibit discussion, comment or criticism, so long as
the proprietary information identified above is not disclosed or distributed." |
| [37] | In reaching its decision the court made the following findings. First,
DVDCCA had established that CSS was its trade secret, and DVDCCA had exerted
reasonable efforts to maintain the secrecy of the program. Second, the evidence
was "fairly clear that the trade secret was obtained through reverse
engineering." The trial court acknowledged that the UTSA recognized
reverse engineering as "proper means." Thus, "[t]he only
way in which the reverse engineering would be considered `improper means'
herein would be if whoever did the reverse engineering was subject to the
click licence [sic] agreement which preconditioned installation of DVD software
or hardware, and prohibited reverse engineering." |
| [38] | On this point the court observed that "[p]laintiff's case is problematic
at this pre-discovery stage. Clearly they have no direct evidence at this
point that Mr. Jon Johansen did the reverse engineering, and that he did
so after clicking on any licence [sic] agreement." Nevertheless, the
court concluded that "[t]he circumstantial evidence, available mostly
due to the various defendants' inclination to boast about their disrespect
for the law, is quite compelling on both the issue of Mr. Johansen's improper
means [and] th[e] Defendants' knowledge of impropriety." *fn5 |
| [39] | The trial court declined to decide whether Norwegian law prohibited Johansen's
alleged reverse engineering. "This Court is not well positioned to
interpret Norwegian Law, and Defendant's own expert, even if this Court
could consider expert testimony on a question of legal interpretation, states
that the issue has not been conclusively decided in Norway. Defendants have
not sufficiently supported their argument that the licence [sic] agreement,
like the one at issue here, would be disallowed by Norwegian Law, although
they may at some point be able to do so." |
| [40] | The court further determined that the balance of hardships favored DVDCCA.
"Most compelling in this matter is the relative harm to the parties.
At this point in the proceeding, the harm to the Defendants is truly minimal.
They will simply have to remove the trade secret information from their
web sites. They may still continue to discuss and debate the subject as
they have in the past in both [sic] an educational, scientific, philosophical
and political context. Defendants have not provided evidence of any economic
harm which an injunction could currently cause, although if such an injunction
were not granted it is quite possible that this could change which could
potentially shift the burden of harm in Defendants' favor. [¶] On the other
hand, the current and prospective harm to the Plaintiff, if the Court does
not enjoin the display of their trade secret, will be irreparable." |
| [41] | The trial court recognized that continued exposure of DVDCCA's trade secret
on the Internet would result in the loss of the secret, but it was not convinced
that the posting that had already occurred had destroyed the secret. The
court acknowledged the "many potential enforcement problems,"
but it concluded that these problems did not preclude relief so long as
DVDCCA was otherwise entitled to relief. |
| [42] | Discussion |
| [43] | 1. Standard of Review |
| [44] | Preliminary injunctions are ordinarily reviewed under the deferential
abuse-of-discretion standard. We consider only whether the trial court abused
its discretion in evaluating two interrelated factors. " ` "The
first is the likelihood that the plaintiff will prevail on the merits at
trial. The second is the interim harm that the plaintiff is likely to sustain
if the injunction [is] denied as compared [with] the harm the defendant
is likely to suffer if the preliminary injunction [is] issued." ' "
(People ex rel. Gallo v. Acuna (1997) 14 Cal.4th 1090, 1109.) |
| [45] | However, not all restraining preliminary injunctions are entitled to such
deferential review. *fn6 "[A]ny prior
restraint on expression bears a heavy presumption against its constitutional
validity." (Wilson v. Superior Court (1975) 13 Cal.3d 652, 657, italics
added.) "[T]he reviewing court in free speech cases must make an independent
examination of the whole record." (L. A. Teachers Union v. L. A. City
Bd. of Ed. (1969) 71 Cal.2d 551, 557, italics added.) "[I]n cases raising
First Amendment issues we have repeatedly held that an appellate court has
an obligation to `make an independent examination of the whole record' in
order to make sure that `the judgment does not constitute a forbidden intrusion
on the field of free expression.' " (Bose Corp. v. Consumers Union
of U.S., Inc. (1984) 466 U.S. 485, 499.) |
| [46] | Thus, in order to determine the appropriate standard of review, we must
first decide whether the restraint imposed by the trial court's preliminary
injunction implicated Bunner's First Amendment right to free expression.
If so, we exercise independent review. |
| [47] | 2. The Uniform Trade Secrets Act |
| [48] | California has enacted a version of the UTSA that is designed to protect
economically valuable trade secrets from misappropriation. (Civ. Code, §
3426.1 et. seq.) Under this statute, a trade secret is misappropriated if
a person (1) acquires a trade secret knowing or having reason to know that
the trade secret has been acquired by "improper means," (2) discloses
or uses a trade secret the person has acquired by "improper means"
or in violation of a nondisclosure obligation, (3) discloses or uses a trade
secret the person knew or should have known was derived from another who
had acquired it by improper means or who had a nondisclosure obligation
or (4) discloses or uses a trade secret after learning that it is a trade
secret but before a material change of position. (Civ. Code, § 3426.1, subd.
(b).) |
| [49] | "Improper means" is defined by the Act to include "theft,
bribery, misrepresentation, breach or inducement of a breach of a duty to
maintain secrecy, or espionage through electronic or other means."
(Civ. Code, § 3426.1 subd. (a).) The Act expressly states that "[r]everse
engineering or independent derivation alone shall not be considered improper
means." (Civ. Code, § 3426.1, subd. (a).) The Act allows for injunctive
relief against "[a]ctual or threatened misappropriation" of a
trade secret. (Civ. Code, § 3426.2.) |
| [50] | Computer software can constitute a trade secret. "[C]omputer software
can qualify for trade secret protection under the UTSA. [Citation.] However,
a plaintiff who seeks relief for misappropriation of trade secrets must
identify the trade secrets and carry the burden of showing that they exist."
(MAI Systems Corp. v. Peak Computer, Inc. (9th Cir. 1993) 991 F.2d 511,
522.) |
| [51] | DVDCCA argues that "this case is (and always has been) about theft
of intellectual property." Yet DVDCCA's complaint did not allege that
Bunner was involved in any "theft" or other improper acquisition
of intellectual property. Instead, DVDCCA alleged that Bunner's republication
of DeCSS violated the Act because (1) DeCSS disclosed one of DVDCCA's trade
secret "master keys," (2) the master key had been obtained by
improper means, and (3) Bunner had reason to know both that DeCSS contained
the master key and that the master key had been obtained by improper means.
Thus, while Bunner did not use improper means to acquire DVDCCA's proprietary
information, he disclosed DeCSS when he knew or should have known that DeCSS
had been "created through the unauthorized use of proprietary CSS information,
which was illegally `hacked.'" The allegation that Bunner had actual
or constructive knowledge that DeCSS had been created by improper means
was premised on Bunner's alleged knowledge of postings on the Internet which
indicated that DeCSS was illicit. |
| [52] | We will assume for purposes of our discussion that the trial court correctly
concluded that DVDCCA had established a "reasonable probability"
that it could prove these allegations and had shown that the relative burden
of harms favored issuance of injunctive relief. While the trial court's
conclusions, if correct, would justify preliminary injunctive relief in
the absence of any free-speech concerns, we must first consider whether
the order can withstand scrutiny under the First Amendment. |
| [53] | 3. Applicability of the First Amendment |
| [54] | Bunner contends that the injunction violates his First Amendment rights
because it constitutes a prior restraint on his freedom of speech. DVDCCA
responds that Bunner had no First Amendment right to disclose a trade secret
in violation of the UTSA. |
| [55] | The first question we consider is whether DeCSS is "speech"
that is within the scope of the First Amendment. The application of the
First Amendment does not depend on whether the publication occurred on the
Internet or by traditional means. (Reno v. American Civil Liberties Union
(1997) 521 U.S. 844, 870.) Likewise, it makes no difference that Bunner
is a republisher rather than the original author of DeCSS. "It would
be anomalous if the mere fact of publication and distribution were somehow
deemed to constitute `conduct' which in turn destroyed the right to freely
publish." (Wilson v. Superior Court, supra, 13 Cal.3d at p. 660.) "[A]
naked prohibition against disclosures is fairly characterized as a regulation
of pure speech." (Bartnicki v. Vopper (2001) 532 U.S. 514, __, 121
S.Ct. 1753, 1761 (Bartnicki).) *fn7 Nor
does it matter that the disclosure was made by an individual on his web
site rather than a media publication in a newspaper. The right to freedom
of speech "does not restrict itself `depend[ing] upon the identity'
or legal character of the speaker, `whether corporation, association, union,
or individual.' " (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th
468, 485; Bartnicki v. Vopper, supra, 532 U.S. at p. __ [121 S.Ct. at p.
1760], fn. 8.) |
| [56] | DVDCCA has not alleged that Bunner engaged in any expressive "conduct"
by posting DeCSS on his web site. Nor is there any indication in the record
that Bunner engaged in conduct mixed with speech. DVDCCA does suggest, however,
that DeCSS is insufficiently expressive because it is composed of source
code and has a functional aspect. "The issue of whether or not the
First Amendment protects encryption source code is a difficult one because
source code has both an expressive feature and a functional feature. The
United States does not dispute that it is possible to use encryption source
code to represent and convey information and ideas about cryptography and
that encryption source code can be used by programmers and scholars for
such informational purposes. Much like a mathematical or scientific formula,
one can describe the function and design of encryption software by a prose
explanation; however, for individuals fluent in a computer programming language,
source code is the most efficient and precise means by which to communicate
ideas about cryptography. [¶] . . . The fact that a medium of expression
has a functional capacity should not preclude constitutional protection.
[¶] . . . [¶] . . . [C]omputer source code, though unintelligible to many,
is the preferred method of communication among computer programmers. [¶]
Because computer source code is an expressive means for the exchange of
information and ideas about computer programming, we hold that it is protected
by the First Amendment." (Junger v. Daley (6th Cir. 2000) 209 F.3d
481, 484-485.) |
| [57] | Like the CSS decryption software, DeCSS is a writing composed of computer
source code which describes an alternative method of decrypting CSS-encrypted
DVDs. Regardless of who authored the program, DeCSS is a written expression
of the author's ideas and information about decryption of DVDs without CSS.
If the source code were "compiled" to create object code, we would
agree that the resulting composition of zeroes and ones would not convey
ideas. (See generally Junger v. Daley, supra, 209 F.3d at pp. 482-483.)
That the source code is capable of such compilation, however, does not destroy
the expressive nature of the source code itself. Thus, we conclude that
the trial court's preliminary injunction barring Bunner from disclosing
DeCSS can fairly be characterized as a prohibition of "pure" speech. |
| [58] | 4. Protection of Source Code Containing a Trade Secret |
| [59] | The First Amendment protects a "wide range of expression" from
pure entertainment to political speech. (Schad v. Mount Ephraim (1981) 452
U.S. 61, 65.) "All ideas having even the slightest redeeming social
importance- unorthodox ideas, controversial ideas, even ideas hateful to
the prevailing climate of opinion-have the full protection of the guaranties,
unless excludable because they encroach upon the limited area of more important
interests." *fn8 (Roth v. United
States (1957) 354 U.S. 476, 484.) |
| [60] | The parties recognize that First Amendment protection is not without limits.
Obscenity, libel, and "fighting words" have long been recognized
as falling outside the scope of the First Amendment because they lack any
social value. (Roth v. United States, supra, 354 U.S. at pp. 484-485.) "[I]t
is well understood that the right of free speech is not absolute at all
times and under all circumstances. There are certain well-defined and narrowly
limited classes of speech, the prevention and punishment of which have never
been thought to raise any Constitutional problem. These include the lewd
and obscene, the profane, the libelous, and the insulting or `fighting'
words . . . It has been well observed that such utterances are no essential
part of any exposition of ideas, and are of such slight social value as
a step to truth that any benefit that may be derived from them is clearly
outweighed by the social interest in order and morality." (Chaplinsky
v. New Hampshire (1942) 315 U.S. 568, 571-572, fns. omitted.) |
| [61] | DeCSS does not fall into any of these established exceptions: it is not
lewd, profane, obscene, or libelous, nor did it involve any fighting words.
DVDCCA does not ask this court to create a new judicial exception for software
containing a misappropriated trade secret, and we decline to do so here.
Although the social value of DeCSS may be questionable, it is nonetheless
pure speech. |
| [62] | DVDCCA maintains, however, that courts "routinely enjoin trade secret
misappropriation," even over a First Amendment defense. The cases on
which it relies, however, are not comparable to the situation presented
here, as they involved the actual use of a secret or the breach of a contractual
obligation. In both Courtesy Temporary Service, Inc. v. Camacho (1990) 222
Cal.App.3d 1278, 1291 and American Credit Indemnity Co. v. Sacks (1989)
213 Cal.App.3d 622, 638, for example, the orders enjoined the use of confidential
information to solicit customers. In Garth v. Staktek Corp. (Tex.App. 1994)
876 S.W.2d 545 the injunction was necessary to preclude the improper sale
and use of trade secret technology. And in Cherne Indus., Inc. v. Grounds
& Associates (Minn. 1979) 278 N.W.2d 81 the defendants were enjoined
from using confidential customer information obtained from their former
employer in violation of their contractual duty not to use or disclose the
information or take it with them when they left the company. The enforcement
of a contractual nondisclosure obligation does not offend the First Amendment.
A voluntary agreement not to disclose a trade secret ordinarily waives any
First Amendment protection for an ensuing disclosure. |
| [63] | California's Trade Secrets Act, like the laws enacted in many other states
to protect trade secrets, does not merely enhance the enforcement of contractual
nondisclosure obligations but sweeps far more broadly. It is within this
broad sweep that DVDCCA seeks to place Bunner. Yet the scope of protection
for trade secrets does not override the protection offered by the First
Amendment. The First Amendment prohibits the enactment of any law "abridging
the freedom of speech . . . ." The California Legislature is free to
enact laws to protect trade secrets, but these provisions must bow to the
protections offered by the First Amendment. None of the trade secret cases
cited by DVDCCA holds to the contrary. |
| [64] | DVDCCA also relies heavily on cases that upheld injunctions in copyright
infringement cases. Protections for trade secrets, however, are not comparable
to protections for copyrights with respect to the First Amendment. First,
since both the First Amendment and the constitutional authority underlying
the Copyright Act are contained in the United States Constitution, the resolution
of a conflict between free speech and copyright involves a delicate balancing
of two federal constitutional protections. Article I of the United States
Constitution explicitly grants Congress the power "To promote the progress
of science and useful arts, by securing for limited times to authors and
inventors the exclusive right to their respective writings and discoveries."
(U.S. Const., art. I, § 8.) The UTSA, on the other hand, lacks any constitutional
foundation. Consequently, a clash between the trade secrets law and the
First Amendment does not involve a balancing between two constitutional
interests. |
| [65] | Second, injunctions in copyright infringement cases have been upheld "on
the ground that First Amendment concerns are protected by and coextensive
with the [Copyright Act's] fair use doctrine." (Nihon Keizai Shimbun,
Inc. v. Comline Business Data (2nd Cir. 1999) 166 F.3d 65, 74.) The "fair
use" exception permits copying and use of a copyrighted work "for
purposes such as criticism, comment, news reporting, teaching . . . , scholarship,
or research" under certain circumstances. (17 U.S.C., § 107.) It "offers
a means of balancing the exclusive rights of a copyright holder with the
public's interest in dissemination of information affecting areas of universal
concern, such as art, science and industry. Put more graphically, the doctrine
distinguishes between `a true scholar and a chiseler who infringes a work
for personal profit.' " (Wainwright Sec. v. Wall Street Transcript
Corp. (1977) 558 F.2d 91, 94.) In contrast, the UTSA contains no exception
for "fair use" or any other vehicle for safeguarding First Amendment
concerns. The Act prohibits even speech that is scholarly, addresses legitimate
concerns, and seeks no profit for the speaker, while the Copyright Act's
fair-use doctrine would permit copyright infringement in those circumstances.
Consequently, one of the primary justifications for issuing injunctions
in these copyright infringement cases is not present in trade secret cases. |
| [66] | Third, the statutory prohibition on disclosures of trade secrets is of
infinite duration rather than "for limited Times." While the limited
period of copyright protection authorized by the United States Constitution
ensures that copyrighted material will eventually pass into the public domain,
thereby serving the public interest by increasing its availability to the
general public, the UTSA bars disclosure of a trade secret for a potentially
infinite period of time, thereby ensuring that the trade secret will never
be disclosed to the general public. |
| [67] | Thus, the availability of injunctive relief against copyright infringement
is supported by justifications that are inapplicable to trade secrets. Both
the First Amendment and the Copyright Act are rooted in the United States
Constitution, but the UTSA lacks any constitutional basis. The prohibition
on disclosure of a trade secret is of infinite duration while the copyright
protection is strictly limited in time, and there is no "fair use"
exception as there is for copyrighted material. These significant distinctions
between copyright and trade secret protections explain why courts have concluded
that the First Amendment is not a barrier to injunctive relief in copyright
infringement cases. |
| [68] | We must conclude that Bunner's republication of DeCSS was "pure speech"
within the ambit of the First Amendment. It is therefore necessary for us
to apply independent review to the trial court's issuance of a preliminary
injunction. |
| [69] | 5. Prior Restraint |
| [70] | The trial court's prohibition of future disclosures of DeCSS was a prior
restraint on Bunner's First Amendment right to publish the DeCSS program.
A prior restraint is generally defined as an administrative or judicial
order "forbidding certain communications when issued in advance of
the time that such communications are to occur." (Alexander v. United
States (1993) 509 U.S. 544, 550, italics omitted.) The "special vice"
of a prior restraint is that it suppresses expression not only directly,
but also by "inducing excessive caution in the speaker." (Pittsburgh
Press Co. v. Human Rel. Comm'n (1973) 413 U.S. 376, 390.) |
| [71] | Prior restraints on pure speech are highly disfavored and presumptively
unconstitutional. (Hurvitz v. Hoefflin (2000) 84 Cal.App.4th 1232, 1241.)
"In the case of a prior restraint on pure speech, the hurdle is substantially
higher [than for an ordinary preliminary injunction]: publication must threaten
an interest more fundamental than the First Amendment itself. Indeed, the
Supreme Court has never upheld a prior restraint, even faced with the competing
interest of national security or the Sixth Amendment right to a fair trial."
(Proctor & Gamble Co. v. Bankers Trust Co. (6th Cir. 1996) 78 F.3d 219,
226-227; cf. Nebraska Press Assn. v. Stuart (1976) 427 U.S. 539, 563 [the
Sixth Amendment right of a criminal defendant to a fair trial does not outrank
the First Amendment right of the press to publish information]; New York
Times Co. v. United States (1971) 403 U.S. 713, 718-726 ["national
security" interest in suppressing classified information in the Pentagon
Papers did not outrank First Amendment right of press to publish classified
information].) "[I]t is clear that few things, save grave national
security concerns, are sufficient to override First Amendment interests."
(United States v. Progressive, Inc. (1979) 467 F.Supp. 990, 992 [court issued
prior restraint on publication of technical information about hydrogen bomb
only because it found that such information was analogous to information
about troop movements which posed a grave threat to national security].)
"If a threat to national security was insufficient to warrant a prior
restraint in New York Times Co. v. United States, the threat to plaintiff's
copyrights and trade secrets is woefully inadequate." (Religious Technology
Center v. Lerma (E.D.Va. 1995) 897 F.Supp. 260, 263.) |
| [72] | DVDCCA's statutory right to protect its economically valuable trade secret
is not an interest that is "more fundamental" than the First Amendment
right to freedom of speech or even on equal footing with the national security
interests and other vital governmental interests that have previously been
found insufficient to justify a prior restraint. Our respect for the Legislature
and its enactment of the UTSA cannot displace our duty to safeguard the
rights guaranteed by the First Amendment. Accordingly, we are compelled
to reverse the preliminary injunction. |
| [73] | We express no opinion as to whether permanent injunctive relief may be
obtained after a full trial on the complaint, as that issue is not before
us. *fn9 We further have no occasion to
decide whether damages for Bunner's disclosure would be appropriate in these
circumstances. DVDCCA may, of course, bring an action for damages or even
injunctive relief against anyone who violates the Act by conduct rather
than speech. In addition, a person who exposes the trade secret may be liable
for damages if he or she was bound by a contractual obligation to safeguard
the secret. And anyone who infringes a copyright held by DVDCCA or by any
DVD content provider may be subject to an action under the Copyright Act.
We hold only that a preliminary injunction cannot be used to restrict Bunner
from disclosing DeCSS. |
| [74] | Disposition |
| [75] | The order granting a preliminary injunction is reversed. Defendant Andrew
Bunner shall recover his appellate costs. |
| [76] | WE CONCUR: |
| [77] | Elia, J. |
| [78] | Mihara, J. |
|
|
|
| Opinion Footnotes | |
|
|
|
| [79] | *fn1 Although there were numerous defendants
below, only Bunner has appealed. |
| [80] | *fn2 "Source code" is the
language in which computer programmers write their computer programs. |
| [81] | *fn3 DVDCCA's action sought solely injunctive
relief and did not allege any cause of action for damages. |
| [82] | *fn4 Civil Code section 3426.1 of the
Act defines "improper means" of acquiring a trade secret to include
"theft, bribery, misrepresentation, breach or inducement of a breach
of a duty to maintain secrecy, or espionage through electronic or other
means. Reverse engineering or independent derivation alone shall not be
considered improper means." |
| [83] | *fn5 There was no evidence that Bunner
himself had ever contributed any of these writings indicating disrespect
for the law. |
| [84] | *fn6 The trial court's preliminary injunction
purported in part to be more than a restraining injunction. It stated that
defendants "will simply have to remove the trade secret information
from their web sites." Removal of information from a web site would
appear to be an affirmative act which would change the status quo. "Where,
as here, the preliminary injunction mandates an affirmative act that changes
the status quo, we scrutinize it even more closely for abuse of discretion.
`The judicial resistance to injunctive relief increases when the attempt
is made to compel the doing of affirmative acts. A preliminary mandatory
injunction is rarely granted, and is subject to stricter review on appeal.'
" (Board of Supervisors v. McMahon (1990) 219 Cal.App.3d 286, 295,
fn. omitted [preliminary injunction ordering state to pay AFDC]; Shoemaker
v. County of Los Angeles (1995) 37 Cal.App.4th 618, 625 [preliminary injunction
ordering reinstatement of employee to administrative posts from which he
had been removed].) Since the record before us reflects that Bunner had
already removed DeCSS from his web site and neither party argues that the
trial court's injunction was a mandatory injunction, it is appropriate to
view the trial court's order, at least as to Bunner, as simply a restraining
injunction. |
| [85] | *fn7 Both parties have submitted supplemental
briefs addressing Bartnicki. In this recent case the United States Supreme
Court considered the extent to which the First Amendment protected a third-party
publisher who was constructively aware that the published information had
been unlawfully obtained. The United States Supreme Court ruled that the
First Amendment precluded imposition of post-publication damages on the
third party. (532 U.S. at p. __ ; 121 S.Ct. at pp. 1756-1760.) Bartnicki
did not involve the disclosure of trade secret information, and the court
expressly declined to consider whether the same result would have been reached
in such a case. (532 U.S. at p. __ ; 121 S.Ct. at p. 1764.) Bartnicki also
did not involve a prior restraint. The parties agree that the plurality
opinion in Bartnicki does not resolve the issues before us in this case. |
| [86] | *fn8 Even "commercial speech"
is entitled to some level of First Amendment protection though less than
"noncommercial speech." (Gerawan Farming, Inc. v. Lyons, supra,
24 Cal.4th at pp. 485-486.) Commercial speech is, at its "core,"
speech that proposes a commercial transaction, and may it extend also to
speech " `related solely to the economic interests of the speaker and
its audience.' " (Cincinnati v. Discovery Network, Inc. (1993) 507
U.S. 410, 422.) |
| [87] | *fn9 Whether a permanent injunction
may constitute a prior restraint is unclear. (Compare Alexander v. United
States, supra, [prior restraint encompasses permanent as well as preliminary
injunctions] with Pittsburgh Press Co. v. Human Rel. Comm'n, supra, 413
U.S. at p. 390 [prior restraints suppress speech "before an adequate
determination that it is unprotected by the First Amendment"]; see
also Aguilar v. Avis Rent A Car System, Inc. (1999) 21 Cal.4th 121, 138
(lead opn of George, C.J.) [injunction after judicial finding of employment
discrimination is not an invalid prior restraint, but only precludes continuation
of unlawful activity].) |
The Climate Change and Public Health Law Site
The Best on the WWW Since 1995!
Copyright as to non-public domain materials
See DR-KATE.COM for home hurricane and disaster preparation
See WWW.EPR-ART.COM for photography of southern Louisiana and Hurricane Katrina
Professor Edward P. Richards, III, JD, MPH - Webmaster
Provide Website Feedback - https://www.lsu.edu/feedback
Privacy Statement - https://www.lsu.edu/privacy
Accessibility Statement - https://www.lsu.edu/accessibility