Court of Appeal, Sixth District,
California.
DVD COPY CONTROL ASSOCIATION, Plaintiff and Respondent,
v.
Andrew BUNNER, Defendant and Appellant.
No. H021153.
Nov. 1, 2001.
Trade association of movie industry
businesses that licensed decryption technology to manufacturers of hardware and
software for playing digital versatile disks (DVDs) sought injunction against
Internet web-site operators to prevent future disclosure or use of trade secret
contained in computer program consisting of computer source code describing a
method for playing encrypted DVD on DVD player or drive that did not contain
association's decryption technology. The Superior Court, Santa Clara County,
CV786804, William J. Elfving, J., issued a preliminary injunction against
Internet web-site operator, and an operator appealed. The Court of Appeal,
Premo, Acting P.J., held that prohibition of future disclosures of computer
program was an impermissible prior restraint on web-site operator's First
Amendment right to publish program.
Weil, Gotshal & Manges, Jared
Ben Bobrow, Christopher J. Cox, Sondra Roberto, Robert G. Sugarman, Jeffrey
L. Kessler, New York City, Attorneys for
Plaintiffs-Respondents.
Computer & Communications Industry
Association, Edward J. Black, American Committee for Interoperable Systems,
Howard M. Freedland, Williams & Connolly, Suzanne H. Woods, Washington,
Dist. of Columbia, Counsel for Amicus Curiae on behalf of
Plaintiffs-Respondents.
Huber & Samuelson, Allonn E. Levy, First
Amendment Project, James
Wheaton, Oakland, David
Greene, Tomlinson Zisko Morosoli & Maser, Thomas
E. Moore, Palo Alto, Electronic Frontier
Foundation, Robin Dora Gross, Attorneys for Defendant-Appellant.
Howard, Rice, Nemerovski, Annette
L. Hurst, San Francisco, Counsel for Amicus
Curiae on behalf of Defendant Appellant.
PREMO, Acting P.J.
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]
FACTUAL BACKGROUND
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.
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.
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.
PROCEDURAL BACKGROUND
1. DVDCCA's Complaint for Injunctive
Relief
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."
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."
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."
2. DVDCCA's Evidence and Arguments
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.
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.
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."
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.
3. Bunner's Evidence and Arguments
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.
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]
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.
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.
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."
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.
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.
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.
4. The Trial Court's Order
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.
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."
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."
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]
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."
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."
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.
DISCUSSION
1. Standard of Review
[1][2] 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, 60 Cal.Rptr.2d 277, 929 P.2d 596.)
[3][4][5][6] 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, 119 Cal.Rptr. 468, 532 P.2d 116, 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, 78 Cal.Rptr. 723, 455 P.2d 827, 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, 104 S.Ct. 1949, 80 L.Ed.2d 502.)
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.
2. The Uniform Trade Secrets Act
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).)
"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.)
[7][8] 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.)
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.
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.
3. Applicability of the First Amendment
[9] 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.
[10][11] 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, 117 S.Ct. 2329, 138 L.Ed.2d 874.) 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, 119 Cal.Rptr. 468, 532 P.2d 116.) "[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, 149 L.Ed.2d 787 (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, 101 Cal.Rptr.2d 470, 12 P.3d 720; Bartnicki
v. Vopper, supra,
532 U.S. at p. ---- [121 S.Ct. at p. 1760], fn. 8.)
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.)
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.
4. Protection of Source Code Containing a
Trade Secret
[12] 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, 101 S.Ct. 2176, 68 L.Ed.2d 671.) "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, 77 S.Ct. 1304, 1 L.Ed.2d 1498.)
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, 77 S.Ct. 1304.)
"[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, 62 S.Ct. 766, 86 L.Ed. 1031, fns. omitted.)
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.
[13] 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, 272 Cal.Rptr. 352
and American
Credit Indemnity Co. v. Sacks
(1989) 213 Cal.App.3d 622, 638, 262 Cal.Rptr. 92,
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.
[14] 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.
[15] 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.
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.
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.
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.
[16] 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.
5. Prior Restraint
[17][18] 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, 113 S.Ct. 2766, 125 L.Ed.2d 441, 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, 93 S.Ct. 2553, 37 L.Ed.2d 669.)
[19] Prior restraints on pure speech are highly disfavored and
presumptively unconstitutional. (Hurvitz
v. Hoefflin
(2000) 84 Cal.App.4th 1232, 1241, 101 Cal.Rptr.2d 558.) "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." (Procter
& 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, 96 S.Ct. 2791, 49 L.Ed.2d 683 [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, 91 S.Ct. 2140, 29 L.Ed.2d 822 ["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.)
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.
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.
DISPOSITION
The order granting a preliminary injunction
is reversed. Defendant Andrew Bunner shall recover his appellate costs.
WE CONCUR: ELIA, J., and MIHARA, J.
FN1. Although there
were numerous defendants below, only Bunner has appealed.
FN2. "Source
code" is the language in which computer programmers write their computer
programs.
FN3. DVDCCA's action
sought solely injunctive relief and did not allege any cause of action for
damages.
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."
FN5. There was no
evidence that Bunner himself had ever contributed any of these writings
indicating disrespect for the law.
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, 268 Cal.Rptr. 219,
fn. omitted [preliminary injunction ordering state to pay AFDC]; Shoemaker
v. County of Los Angeles
(1995) 37 Cal.App.4th 618, 625, 43 Cal.Rptr.2d 774
[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.
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.
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, 101 Cal.Rptr.2d 470, 12 P.3d 720.) 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, 113 S.Ct. 1505, 123 L.Ed.2d 99.)
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, 93 S.Ct. 2553 [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, 87 Cal.Rptr.2d 132, 980 P.2d 846 (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].)
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DOCUMENT