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San Francisco-California courts can prevent Web sites from posting computer code revealing trade secrets without fear of trampling on basic free speech rights, the state Supreme Court has ruled. In a case over DVD encryption technology a unanimous court said on Aug. 25 that protecting trade secrets in such cases may trump the First Amendment. Computer code is not pure speech, the court said, and thus does not enjoy absolute free speech protections under the state and federal constitutions. The court rejected a state Court of Appeal holding that a preliminary injunction preventing computer code from being posted on the Web was a free speech violation. “Assuming, as we do, that the trial court granted injunctive relief under California’s trade secret law, its preliminary injunction burdens no more speech than necessary to serve these significant government interests,” Justice Janice Rogers Brown wrote. “The protection of trade secrets . . . depends on the judiciary’s power to enjoin disclosures by those who know or have reason to know of their misappropriation.” Brown wrote that while the code was speech subject to First Amendment protection, it could be held to a lesser standard of review than pure speech. DVD Copy Control Association Inc. v. Andrew Bunner, No. 03 C.D.O.S. 7684. Sigh of relief for IP owners Intellectual property attorneys said the decision reaffirms rights that trade secrets holders feared could have been lost. “This is a huge and complete victory, not just for the DVD Copy Control Association but for owners of trade secrets in California and across the country,” said Robert Sugarman, a partner at New York’s Weil, Gotshal & Manges who represents DVD Copy Control. “There are a lot of trade secrets owners that breathed a sigh of relief in reading this decision,” said Gary Weiss, an intellectual property partner in the Menlo Park, Calif., office of Orrick, Herrington & Sutcliffe. The court “strongly emphasized the public policy bases for the Uniform Trade Secret Act-incentive for invention and encouraging corporate ethics,” he said. In 1999, DVD Copy Control Association Inc. sued a group of Internet users for trade secrets misappropriation for posting computer code that stripped security protections from DVDs. Without encryption, users can duplicate copyrighted motion pictures stored on the discs. Technology companies formed the DVD Copy Control Association to develop and protect DVD encryption technology. Andrew Bunner, a San Francisco programmer, was named as a defendant and was enjoined by a Santa Clara, Calif., superior court from posting code on a Web site that cracked DVD security. Bunner challenged the injunction on free speech grounds. The Sixth District Court of Appeal agreed with him, finding that even if the injunction was justified under California trade secrets law, it violated the First Amendment. The Supreme Court has remanded the case to the Sixth District to re-examine it and make sure the preliminary injunction is in line with California trade secrets law. Bunner’s attorney, Allonn Levy, said the ruling ensured there was still some level of First Amendment scrutiny for trade secrets injunctions. “You will have to consider the First Amendment when dealing with third-party misappropriation claims,” said Levy, an associate at San Jose, Calif.’s Hopkins & Carley. “You are going to have that heightened evidentiary standard. It’s not quite intermediate or strict scrutiny, but it’s in between.” Levy said he also doubted if DVD Copy Control Association could prove that the security-cracking code at issue, first written by a 15-year-old Norwegian boy and then widely circulated on the Internet, was still a trade secret. But IP attorneys said the key to the decision was that the Supreme Court defined the case as a trade secrets issue-not a free speech issue. “This is a very important decision for the software industry because, for years, they assumed they had trade secret protections,” said Jonathan Band, a partner in the Washington office of San Francisco’s Morrison & Foerster. “Now, if someone starts to post their trade secrets, they can go to state court and get an injunction and go back to work.” Chief Justice Ronald George and Justice Marvin Baxter concurred, along with First District Court of Appeal Justice Maria Rivera and Third District Justice Ronald Robie. Justices Kathryn Mickle Werdegar and Carlos Moreno wrote concurring opinions. Justices Joyce Kennard and Ming Chin recused themselves.

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