Source: https://biotech.law.lsu.edu/cases/IP/conlaw/dvdcca.htm
Timestamp: 2019-04-26 02:30:01+00:00

Document:
ANDREW BUNNER, DEFENDANT AND APPELLANT.
 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.
 The opinion of the court was delivered by: Premo, Acting P.J.
 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.
 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."
 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.
 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.
 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."
 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."
 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.
 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.
 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.
 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.
 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.
 *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, 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.
 *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.

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