he First Amendment trumps the state's trade secrets protection law, the Sixth District Court of Appeal ruled Thursday in a dispute over an Internet link to code that unscrambles encrypted DVDs.
A three-judge panel overturned a preliminary injunction won by an industry group that licenses the technology used to encrypt DVDs, saying it was not a permissible prior restraint on pure speech.
"[DVD Copy Control Association]'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," Justice Eugene Premo wrote. "Our respect for the Legislature and its enactment of the [Uniform Trade Secrets Act] cannot displace our duty to safeguard the rights guaranteed by the First Amendment."
An attorney for the DVD Copy Control Association said the ruling makes it impossible for companies to prevent the theft of trade secrets.
"This case holds that the California Uniform Trade Secrets Act is unconstitutional to the extent that it allows preliminary relief," said Jeffrey Kessler, a partner with Weil, Gotshal & Manges in New York. "The whole point of the UTSA is if you have a trade secret and someone steals [it], you can get an injunction and prevent it from being spread. Because once it's spread, it has no value."
The ruling was praised by David Greene, the executive director of the First Amendment Project, who argued on behalf of the Internet poster targeted by DVDCCA.
"They argued that the sky is falling on trade secrets. That's exactly the argument the Court of Appeal rejected. If they want to restrict people from publishing information, they have to meet the First Amendment test," said Greene.
The preliminary injunction turned over Thursday was issued by Santa Clara Superior Court Judge William Elfving in 1999. It ordered Andrew Bunner to remove an Internet link he'd posted that directed viewers to computer code called DeCSS, which can help users of the Linux operating system unscramble encrypted DVDs.
Greene said the ruling wouldn't dramatically affect trade secrets law.
"It invalidated preliminary injunctions in trade secrets cases where they can't prove the publisher of the information is bound by any duty of confidentiality," Greene said. "Bunner was a stranger to the DVDCCA. He owed no duty to them. He disclosed this information that any Internet user could have discovered."
The justices also took pains to say their ruling in DVD Copy Control Association v. Bunner, 01 C.D.O.S. 9406, didn't foreclose all options for holders of trade secrets.
"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," wrote Premo, who was joined by Justices Franklin Elia and Nathan Mihara. "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."
A similar dispute is pending before the New York-based Second Circuit U.S. Court of Appeals, which is reviewing an injunction issued by a federal judge that prohibits Eric Corley from posting codes that unscramble DVD encryption.
Kessler said his client plans to appeal Thursday's ruling to the state Supreme Court.
