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In late August the California Supreme Court ruled that state courts may prevent Web sites from posting computer code that reveals trade secrets without fear that in doing so they will trample basic free speech rights. The court � in a case involving DVD encryption technology � said protecting trade secrets in such cases may trump the First Amendment. Computer code is not pure speech, said the justices, and thus does not enjoy absolute free speech protections under the state and federal constitutions. The unanimous ruling rejected the Sixth District Court of Appeal’s holding that a preliminary injunction preventing computer code from being posted on the Web violated free speech rights. That ruling had sent a wave of fear through Silicon Valley companies. “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 . . . depend[s] on the judiciary’s power to enjoin disclosures by those who know or have reason to know of their misappropriation.” Justice Brown wrote that while the computer code was speech subject to First Amendment protections, it could be held to a lesser standard of review than pure speech. Intellectual property attorneys say the case reaffirms rights that trade secrets holders feared could be lost if the Sixth District was upheld. “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,” says Robert Sugarman, a partner with Weil, Gotshal & Manges who represents the association. In 1999 DVD Copy Control sued a group of Internet users over posting computer code that stripped security protections from DVDs. Without encryption, users can duplicate copyrighted movies from DVDs. Technology companies formed the association to develop and protect DVD encryption technology. Andrew Bunner, a San Francisco programmer, was named as a defendant and was enjoined by California superior court in Santa Clara from posting code on a Web site that cracked DVD security. Bunner challenged the injunction, arguing that it violated his free speech rights. The Sixth District agreed, 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 back to the Sixth District, directing the court to make sure the preliminary injunction is in line with California trade secrets law. Bunner’s attorney, Allonn Levy, says the ruling ensured there was 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,” says Levy, an associate with San Jose’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 says he also doubts if DVD Copy Control could prove that the security-cracking code, first written by a 15-year-old Norwegian boy and then widely circulated on the Internet, was still a trade secret. But IP attorneys say the key to the decision was that the supreme court defined the case as an issue of trade secrets � not free speech. “This is a very important decision for the software industry,” says Jonathan Band, a partner with 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.”
A version of this story originally appeared in The Recorder, a sibling publication of Corporate Counsel and a part of American Lawyer Media.

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