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| DATE | 2004-09-24 |
| FROM | Mike Richardson - NYLXS PRESIDENT
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| SUBJECT | Subject: [hangout] [DMCA_Discuss] First Amendment Defense Fails in DVD Copy Control
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---------- Forwarded message ----------
Date: Fri, 24 Sep 2004 10:09:48 +0400
From: Vladimir Katalov
To: dmca_discuss-at-lists.microshaft.org
Subject: [DMCA_Discuss] First Amendment Defense Fails in DVD Copy Control
Trade Secret Case
First Amendment Defense Fails in DVD Copy Control Trade Secret Case
17 September 2004
Article by York M. Faulkner
Reprinted with permission from the IP Litigator, January/February 2004
Published by Aspen Law & Business
http://www.mondaq.com/article.asp?articleid=28463&email_access=on&ASIMPR=187&ASTAGS=ad.size.Banner+product.9+type.article
(subscription)
In DVD Copy Control Association, Inc. v. Bunner [31 Cal. 4th 864, 75
P.3d 1, 4 Cal. Rptr. 3d 69 (Aug. 25, 2003)], the California Supreme
Court rejected a Web site proprietor’s First Amendment defense against
the DVD Copy Control Association’s (the Association’s) claim of trade
secret misappropriation. At issue in that case was the right of
Bunner, the Web site proprietor, to publish on the Internet a script
of computer code used to de-encrypt DVDs, enabling them to be copied
at digital quality. The trial court had found that Bunner obtained the
computer code from a third party and that Bunner either knew or had
reason to know that the third party had reversed engineered the code
in violation of a license agreement. Accordingly, the trial court
ruled that Bunner’s disclosure of the computer code on the Internet
constituted trade secret misappropriation under the California statute
and granted a preliminary injunction in favor of the Association.
Bunner appealed.
Despite assuming that the Association would likely prevail on the
merits and suffer irreparable harm, the appellate court ruled that
Bunner’s publication of the computer code was "pure speech" and that
the trial court’s injunction was an invalid prior restraint. The
appellate court distinguished other cases in which courts had rejected
a First Amendment defense to trade secret misappropriation, finding
that those cases "involved the actual use of a trade secret or a
breach of a contractual obligation." [Bunner at 874.] Here, the
appellate court ruled that in the absence of an actual use or breach
of duty, enjoining Bunner’s publication of the computer code would
violate the First Amendment. The Association appealed.
The California Supreme Court granted the appeal to decide the
constitutional question. The California high court followed the
appellate court’s lead in assuming as true the trial court’s findings
in support of a preliminary injunction. It was satisfied that under
California law, a trade secret misappropriation includes the
unauthorized disclosure of trade secret information by a person who
knew or had reason to know that the information was obtained
improperly. The court was further satisfied that the California
statute empowered the courts to enjoin either actual or threatened
misappropriation. Accordingly, the court narrowed the issue to
"whether the preliminary injunction violated Bunner’s rights to free
speech under the United States and California Constitutions." [Bunner
at 875.] It did not otherwise review the merits of the Association’s
trade secret claims.
The court first determined whether Bunner’s publication of the
computer code was speech subject to scrutiny under the First
Amendment. The court recited prior US Supreme Court precedents that
extended First Amendment scrutiny to "the dissemination of technical
scientific information, and scientific research, and attempts to
regulate the publication of instructions." [Bunner at 876 (citations
omitted).] The court concluded that computer code "is an expressive
means for the exchange of information and ideas about computer
programming" and joined other courts, holding that "computer code, and
computer programs constructed from code can merit First Amendment
protection." [Id. (citations omitted).]
The court next considered the level of scrutiny to apply in its
constitutional analysis. The court explained that the critical
question is whether the injunction was content neutral or content
based. Content-based injunctions are subject to a heightened level of
scrutiny, while content-neutral injunctions are subject to a lesser
level of scrutiny. The court concluded that the trial court’s
preliminary injunction in favor of the Association was content
neutral. The court reasoned that the injunction was motivated by
Bunner’s misappropriation of the Association’s trade secret property
rather than by any disagreement with Bunner’s message or viewpoint.
The court acknowledged that the preliminary injunction described the
prohibited speech by referring to its content. The court explained,
however, that it was necessary to refer to the content of the speech
in order to identify the property interest to be protected and that
doing so did not render the injunction content based.
Having decided that the injunction was content neutral, the court then
explored "whether the challenged provisions of the injunction burden
no more speech than necessary to serve a significant government
interest." [Bunner at 880 (citation omitted).] The court enumerated
several government policies in favor of trade secret protection. It
noted, for example, that trade secret law encourages "the development
and exploitation of those items of lesser or different invention than
might be accorded protection under the patent laws, but which items
still have an important part to play in the technological and
scientific advancement of the Nation." [Id. (citations omitted).] The
court was also persuaded that trade secret law helps maintain
"standards of commercial ethics." [Bunner at 881 (citations omitted).]
Content that protecting trade secrets furthers a significant
government interest, the court then determined that the preliminary
injunction restrained no more speech than necessary to serve that
government interest. At the outset, the court noted that trade secrets
derive their value from nondisclosure. The court therefore reasoned
that prohibiting the disclosure of the trade secret was the only way
to preserve the property rights created by trade secret law and to
promote the government interest underpinning that law. The court
concluded that "because we assume for purposes of this appeal that the
injunction is justified under California’s trade secret law, we also
assume that this provision of the injunction is necessary to protect
the Association’s property interest in the misappropriated trade
secrets." [Bunner at 885.] The court therefore found that the
preliminary injunction burdened no more speech than necessary to serve
the significant government interest at issue.
Finally, the court analyzed whether the prior restraint doctrine would
prohibit the preliminary injunction. The court acknowledged that
"prior restraints on speech and publication are the most serious and
the least tolerable infringement on First Amendment rights." [Bunner
at 886 (citations omitted).] Nevertheless, the court cited authority
for the proposition that the prior restraints doctrine applies only to
content-based injunctions. Having found that the preliminary
injunction was content neutral, the court concluded that the heavy
presumption against prior restraints did not apply. The court
emphasized that "this is not a case of government censorship, but a
private plaintiff’s attempt to protect his property rights." [Bunner
at 886 (citations omitted).]
In conclusion, the court ruled that the protections under the
California Constitution were coterminous with the First Amendment and
that the preliminary injunction therefore did not violate California
law. The court emphasized that it had merely held that "the
preliminary injunction does not violate the free speech clauses of
United States and California Constitutions, assuming the trial court
properly issued the injunction under California’s trade secrets law."
[Bunner at 889.] On remand, the California Supreme Court instructed
the appellate court to independently examine the entire record to
ensure that the preliminary injunction was warranted under
California’s trade secret law.
Two concurring opinions were written, both of which emphasized the
importance of a rigorous review of the likelihood of success before
affirming a preliminary injunction aimed at speech. One of the
justices expressed his view that the preliminary injunction should not
survive that rigorous review. Accordingly, although the First
Amendment defense failed in this case, the court’s decision
demonstrates the added difficulty of obtaining preliminary injunctive
relief against the publication and disclosure of trade secrets,
especially when that relief is subject to constitutional scrutiny.
_______________________________________________
USC Title 17 Sec. 107. - Limitations on exclusive rights: Fair use
This material is distributed to those who have expressed a prior interest in receiving the included information for research and educational purposes.
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