January 01, 2004

Case Note on DVD CCA v. Bunner (California 2003)

In August 2003 the California Supreme Court resolved a conflict between the status of DeCSS software as protected speech and the status of trade secrets as protected property, applying the "Madsen" standard of scrutiny of speech restrictions proposed as a remedy for actual trade secret misappropriations. It found no application of the Bartnicki decision, which it read as limited to speech addressing matters of more substantial public concern than those involved in the publication of DeCSS. It reversed a Court of Appeals ruling that an injunction on use and republication of DeCSS was an unconstitutional prior restraint, and remanded for appellate review of the factual determinations in light of these principles.

Judge Moreno's concurrence called for a higher threshold of proof of actual trade secret misappropriation before allowing such restrictions on speech, cast doubt that DeCSS still actually qualified as a secret, and challenged the efficacy of license agreements that attempt to override statutory shelters for "reverse engineering."

DVD Copy Control Association, Inc. v. Bunner, 31 Cal. 4th 864 (2003).

Procedural Status

The controversy arose from the Internet publication of DeCSS, a program that decrypts content on DVDs secured with the Content Scrambling System ("CSS"). The program was developed by a licensee of CSS that reverse engineered its proprietary technology despite a provision in the license forbidding such reverse engineering. The program was widely republished on the Internet, one of its republishers being Mr. Bunner.

When DVD CCA discovered the decryption tool was at large, it filed legal action alleging trade secret misappropriation in violation of the California version of the Uniform Trade Secrets Act (UTSA), Cal. Civil Code 3426 et seq. The District Court found that DVD CCA was likely to prevail on the merits and issued a preliminary injunction against the defendants (one of whom was Mr. Bunner) forbidding use, copying, or distribution of DVD CCA's trade secrets generally and DeCSS specifically.

The Court of Appeals assumed as true the trial court finding that a trade secret misappropriation had occurred but found that the injunction constituted a prior restraint of "pure speech" and violated the First Amendment.

The California Supreme Court also assumed that a trade secret misappropriation had occurred, but reversed the Court of Appeals and remanded for further consideration, holding that the First Amendment did not preclude a preliminary injunction on the assumed facts.

The Court's Analysis
First, the Court acknowledged that computer code such as DeCSS qualified as speech protected by the First Amendment, citing, with discussion:
* Junger v. Daley, 209 F.3d 481 (6th Cir. 2000)
* Universal City Studios, Inc. v. Reimerdes, 111 F.Supp.2d 294 (S.D.N.Y. 2000)
* Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2nd Cir. 2001)
* United States v. Elcom, Ltd., 203 F.Supp.2d 1111 (N.D.Cal. 2002)

Second, the Court found that the injunction was "content neutral" because its principal purpose was protection of a statutory property interest, with only incidental impact upon the content of the enjoined communication, citing, with discussion:
* Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984)
* Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974)
* San Francisco Arts & Athletics, Inc. v. United States Olympic Comm., 483 U.S. 522 (1987)

As a "content neutral" sanction, the Court applied a lower level of scrutiny prescribed by Madsen v. Women's Health Center, 512 U.S. 753 (1994), under which the Court ust ask "whether the challenged provisions of the injunction burden no more speech than necessary to serve a significant government interest." Madsen, 512 U.S. at 765.

The Court distinguished the decision in Bartnicki v. Vopper, 532 U.S. 514 (2001), noting that "five justices in Bartnicki endorsed the application of a lesser standard even though the statute arguably prohibited 'pure speech.'" The California Supreme Court favored Rodney A. Smolla's analysis of Bartnicki in "Information as Contraband: The First Amendment and Liability for Trafficking in Speech" 96 Nw. U.L.Rev. 1099 (2002). In that article, Smolla makes the intriguing argument that the true holding of Bartnicki was expressed not by Justice Stevens' majority opinion, but by the combined opinions of the two concurring and the three dissenting justices in that case.

Bunner provides useful guidance about what might qualify as specially protected speech on matters of public concern. It does so through its discussion of why Mr. Bunner's situation does not qualify. The Court applied the test found in Connick v. Meyers, 461 U.S. 138 (1983) and examined the following elements of the content, form and context of the statements in question.
* The information in question was not publicly available and conveyed only technical information.
* DeCSS was not posted in order to comment on a public issue or to participate in a public debate. With the exception of a few "encryption enthusiasts," as the Court called them, the public would be interested only in the use of DeCSS, not the content of its code.
* The public debate over the use of encryption and copy protection of DVDs does not require disclosure of DeCSS, and the debate will not be impaired by enjoining its distribution.

Third, the Court noticed significant governmental interests served by California's trade secrets law, including innovation incentives, maintenance of commercial ethics and the protection of property interests. The Court found that the DeCSS content disclosed by Bunner did not address, involve or illustrate matters of substantial public concern, so that Bartnicki did not control its decision. It also saw a clear distinction from the cases involving attempts to enjoin publication of information lawfully obtained, such as:
* Florida Star v. B.J.F., 491 U.S. 524 (1989)
* Smith v. Daily Mail Publishing Co., 443 U.S. 97 (1979)
* Landmark Communications, Inc. v. Virginia, 435 U.S. 829 (1978)
* Oklahoma Publishing Co. v. District Court, 430 U.S. 308 (1977)
* Cox Broadcasting v. Cohn, 420 U.S. 469 (1975)

On balance, it found that the injunction satisfied the Madsen standard of scrutiny, assuming that an actual trade secret misappropriation occurred.

Fourth, the Court found that the injunction was not a prior restraint because it was content neutral and based upon unlawful conduct that had already occurred. It distinguished CBS Inc. v. Davis, 510 U.S. 1315 (1994) invalidating an injunction of a broadcast of a video revealing unsanitary practices in a meat packing plant. Without a finding that the video was unlawfully obtained, the substantial public concern with the facts revealed outweighed the interest of the packer in preventing the broadcast.

Finally, the Court applied the same analyses to dispose of Bunner's claims under the Constitution of the State of California.

It remanded the case for further review, emphasizing that the injunction was justified only if appellate review supported the finding that DVD CCA was likely to prevail at trial.

Judge Moreno's Concurring Opinion

In his opinion, Judge Moreno analyzed the case differently and questioned the validity of the trial court's findings. He cited the dangers that a preliminary injunction may work to bar protected speech before adjudication of the merits of the speaker's constitutional claims, citing Pittsburg Press Co. v. The Pittsburg Commission on Human Relations, 413 U.S. 376 (1973). Criticizing the majority's analysis as "incomplete," Judge Moreno characterized the injunction as "subject matter censorship" that was unjustified because DVD CCA's proprietary information had become so widely disseminated on the Internet that it was no longer actually a secret.

He acknowledged that trade secret laws serve sufficiently important societal purposes to justify limiting First Amendment rights in proper cases, citing:
* Cohen v. Cowles Media Co., 501 U.S. 663 (1991)
* Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562 (1977)
* Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974)
* Ruckelshaus v. Monsanto, 467 U.S. 986 (1984).

He called for a more rigorous evidentiary standard in order to "separate meritorious trade secret claims from those involving protected speech." A plaintiff, contended Judge Moreno, "should be required to actually establish a likelihood of prevailing on the merits, regardless of the balance of harms," or the injunction may constitute a prior restraint.

He noted that a higher hurdle would also apply when substantial public concern was implicated, even when secrets were unlawfully obtained, as in New York Times v. United States, 403 U.S. 713 (1971).

He contended that there was "no likelihood that DVD CCA would prevail on the merits," because "DeCSS was not demonstrably secret in this case when Bunner republished it, and Bunner was neither alleged to be the original misappropriator nor to be in privity with any such misappropriator."

He also cast doubt on the use of a license agreement to nullify statutory language excepting reverse engineering from the definition of "improper means" of acquiring a trade secret, citing Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989) and the exclusive jurisdiction of federal patent law.

DougSimpson.com/blog

Posted by dougsimpson at January 1, 2004 12:21 PM | TrackBack
Comments