DVD Industry Wins Ruling

In a case pitting free speech rights against trade secrets, the California Supreme Court ruled on Monday that courts can prevent computer users from posting codes on the Internet that allow others to illegally copy DVDs.

The state high court held that constitutional free speech rights do not protect a computer user whose posting enables others to unlawfully download and copy movies.

The decision was a victory for the DVD and motion picture industries, which contend that movie companies lose more than $3 billion in annual sales to DVD copying and other forms of piracy. Much of the DVD losses stem from publication of the decryption code, the industry says.

Monday’s ruling “gives trade secret holders the capability to resort to the courts to prevent and indeed deter individuals from improperly posting trade secrets,” said Robert G. Sugarman, who represented the DVD industry. “If they do, they are violating court orders.”

The ruling stemmed from an injunction ordering computer programmer Andrew Bunner, 26, to remove a DVD decryption code from his Web site. The code, which cracks the industry’s technological locks, was first posted in 1999 by a 15-year-old in Norway who wanted to download movies at home.

More than 100 other Web sites, including Bunner’s, copied the code and posted it on the Internet. Most of the other Web sites either settled the cases or simply removed the code, but free speech activists helped Bunner appeal.

David Greene, who represented Bunner, said his client still may prevail when the case returns to the Court of Appeal and the evidence is examined.

But he added that Monday’s ruling was troubling for the 1st Amendment in any case and may be appealed. Greene is executive director of the First Amendment Project, which advocates free speech rights.

Under the state high court’s reasoning, according to Greene, a court could order anyone to stop publishing an alleged trade secret as long as the content of the publication was not at issue, or if the publication was of technical information.

Bunner had a Web site for selling nutritional supplements and posted the decryption code because he said he thought people would find the information interesting.

Bunner said he had no idea the code was a trade secret.

“I still don’t think it is a trade secret,” Bunner said Monday.

The DVD Copy Control Assn., which licenses the technology for encrypting DVDs, notified Bunner and others that they were violating the law and asked them to remove the code from their site.

Bunner said he immediately removed it, but the DVD association contends he did not take it off his site until he was ordered to by a judge.

In issuing the injunction, Santa Clara Superior Court Judge William J. Elfving concluded that the DVD industry was likely to prevail in a trial and that Bunner either knew or should have known that the code had been illegally obtained.

Elfving also held that the encryption technology remained a trade secret protected by law even though the means to unravel it had been widely disseminated on the Internet.

A Court of Appeal in Santa Clara County overturned the injunction on the grounds that it violated free speech rights.

The state high court, in an opinion written by Justice Janice Rogers Brown, said the court injunction did not involve government censorship and burdened “no more speech than necessary to serve the government’s interest in encouraging innovation and development.

“The protection of trade secrets and the benefits to research and development derived from the government’s recognition of this property right depend on the judiciary’s power to enjoin disclosures by those who know or have reason to know of their misappropriation,” Brown wrote.

The court said that the content of the trade secret in the case “neither involves a matter of public concern nor implicates the core purpose of the 1st Amendment.

“He did not post them to comment on any public issue or to participate in any public debate.”

The court returned the case to the Court of Appeal to look at the facts and determine whether the injunction had been properly granted. Among the questions the appeals court will have to answer is whether the encryption technology actually was a trade secret since the code to break it had been so widely publicized.

Justice Carlos R. Moreno agreed in a separate opinion that the 1st Amendment does not categorically prohibit court injunctions to stop the publication of trade secrets. But he argued that the standard for granting such injunctions should be more rigorous. In the DVD case, there was insufficient evidence that the industry would prevail in its litigation because the technology was “not demonstrably secret.”

“A preliminary injunction on speech issued without a credible determination that plaintiff will prevail on the merits is a quintessential case of suppressing speech,” he wrote.

The code that Bunner published remains available online and in packaged software.

“We understand from what people claim that it is still being posted” by Internet service providers and others, said Sugarman, the DVD association’s lawyer. “To the best of our financial ability, we continue to go after them.”

Bunner said the ruling was “not great, but I guess it’s not as bad as it could have been.”

He said he feared Monday’s decision might deter people from posting technologies that could be used to develop products helpful to consumers.

Ann Brick, a staff attorney with the American Civil Liberties Union of Northern California, said the decision was troubling because courts may be “too quick to enter a preliminary injunction where it is not appropriate.”

Dan Robbins, vice president and counsel of the Motion Picture Assn. of America, called Monday’s ruling helpful.

“We think the Supreme Court got it exactly right on the 1st Amendment issue that was in front of them,” Robbins said. “Now it’s up to the other court to look at these other, highly factual issues involved.”