DVD Copy Control Association, Inc. v. Bunner all cases 1.

Trial Court Injunction (excerpts)

Plaintiff, DVD Copy Control Association, is the sole licencing entity which grants licenses to the CSS technology in the DVD format. CSS, "Content Scrambling System," is an encryption system developed by Plaintiff's predecessor-in-interest in order to protect the copyrighted materials stored on DVDs. The alleged misappropriation of the CSS algorithm and master keys is the subject of this action and the instant Motion for Preliminary Injunction. The evidence is fairly clear and undisputed that the original postings of DeCSS, a program which allegedly embodies, uses and/or is a substantial derivation of CSS, to the Internet occurred on October 6 and then on October 25, 1999. Plaintiff's evidence shows that the Motion Picture Association immediately began an investigation and sent cease and desist letters on November 18, 1999. Some individuals and entities such as CNET's download.com removed the alleged trade secret materials; other did not. Thereafter, on December 27, 1999 Plaintiff filed this lawsuit seeking the limited remedy of injunctive relief for misappropriation of its trade secret. The Court denied Plaintiff's very broad request for a Temporary Restraining Order, and the parties proceeded to submit extensive argument and evidence for the Court's consideration. In the course of these proceeding, Plaintiff narrowed the scope of the injunction which they seek to only prohibit Defendants from posting and/or knowingly linking to any websites which post the trade secret and/or its derivatives. In order to prevail on the merits, Plaintiff must establish that they had a trade secret which was misappropriated. The Plaintiff has shown that the CSS is a piece of proprietary information which derived its independent economic value from not being generally known to the public and that Plaintiff made reasonable efforts under the circumstances to maintain its secrecy. Under these circumstances, the Court is satisfied that Plaintiff has shown a likelihood of prevailing on the issue of trade secret. Plaintiff must also show that the trade secret was misappropriated, or that the trade secret was obtained through improper means and that the Defendants knew or should have know that the trade secret was obtained through improper means when they posted it or its derivative to the Internet. (Civil Code Section 3426.1(b)) Although the parties dispute the who and how, the evidence is fairly clear that the trade secret was obtained through reverse engineering. The Legislative comment to the Uniform Trade Secrets Act states, "Discovery by 'reverse engineering,' that is, by starting with the known product and working backward to find the method by which it was developed," is considered proper means. The only way in which the reverse engineering could be considered "improper means" herein would be if whoever did the reverse engineering was subject to the click licence agreement which preconditioned installation of DVD software or hardware, and prohibited reverse engineering. Plaintiff's case is problematic at this pre-discovery stage. Clearly they have no direct evidence at this point that Mr. Jon Johansen did the reverse engineering, and that he did so after clicking on any licence agreement. However, in trade secret cases, it is a rare occasion when the Plaintiff has a video of an employee walking out with trade secret, or an admission of a competitor that they used improper means to obtain Plaintiff's intellectual property. In most situations, Defendants try to cover their tracks with considerably more effort than the Defendants did herein. The circumstantial evidence, available mostly due to the various defendants' inclination to boast about their disrespect for the law, is quite compelling on both the issue of Mr. Johansen's improper means and that Defendants' knowledge of impropriety. Most compelling in this matter is the relative harm to the parties. At this point in the proceeding, the harm to the Defendants is truly minimal. They will simply have to remove the

trade secret information from their web sites. They may still continue to discuss and debate the subject as they have in the past in both educational, scientific, philosophical and political context. Defendants have not provided any evidence of any economic harm which an injunction could currently cause, although if such an injunction were not granted it is quite possible that this could change which could potentially shift the burden of harm in Defendants' favor. On the other hand, the current and prospective harm to the Plaintiff, if the Court does not enjoin the display of their trade secret, will be irreparable. It is undisputed that the Plaintiff's predecessor-in-interest expended considerable time, effort and money in creating the intellectual property at issue in order to protect the copyrighted information contained on DVDs. As Plaintiff conceded at the hearing on the TRO, once this information gets into the hands of an innocent party, the Plaintiff loses their ability to enjoin the use of their trade secret. If the Court does not immediately enjoin the posting of this proprietary information, the Plaintiff's right to protect this information as secret will surely be lost, given the current power of the Internet to disseminate information and the Defendants' stated determination to do so. Religious Technology Center v. Netcom on-Line.com (N.D. Cal 1995) 923 F.Supp, 1231. In that event, the protection afforded by the encryption system licenced by the Plaintiff, whether to limit DVD hardware and software suppliers or to control unauthorized copying and distribution of DVD content will become completely meaningless. The encryption system which the Plaintiff licences cannot simply be changed like a secret code used by a military where everyone involved simply changes to new code because millions of people own current DVDs and DVD viewing systems. The Court is not persuaded that trade secret status should be deemed destroyed at this stage merely by the posting of the trade secret to the Internet. Religious Technology Center v. Netcom on-Line.com supra. To hold otherwise would do nothing less than encourage misappropriaters of trade secrets to post the fruits of their wrongdoing on the Internet as quickly as possible and as widely as possible thereby destroying a trade secret forever. Such a holding would not be prudent in this age of the Internet. Plaintiffs moved expeditiously, reasonably and responsibly to protect their proprietary information as soon as they discovered it had been disclosed by investigating, sending cease and desist letters all over the world and then filing suit against those who refused within two months of the disclosure. The Court is satisfied that trade secret status has not been destroyed. Nothing in this Order shall prohibit discussion, comment or criticism, so long as the proprietary information identified above is not disclosed or distributed.

2.

Appellate Court First Amendment (excerpts)

This appeal arises from an action for injunctive relief brought under the Uniform Trade Secrets Act, Civil Code section 3426.1, et. seq. After learning that its trade secret had been revealed in DVD decryption software published on the Internet, plaintiff DVD Copy Control Association (DVDCCA) sought an injunction against defendant Andrew Bunner and numerous other Internet web-site operators to prevent future disclosure or use of the secret. The trial court granted a preliminary injunction, which required the defendants to refrain from republishing the program or any information derived from it. Bunner appeals from that order, contending that the First Amendment to the United States Constitution protects his publication of the information as an exercise of free speech. A DVD is a thin disk five inches in diameter which can store a large amount of digital data. Each DVD can hold the data necessary to display a full-length motion picture. Motion pictures stored on DVDs are protected from unauthorized use by means

of encryption using a content scramble system (CSS). CSS is designed to restrict the playback of an encrypted (scrambled) DVD to a CSS-equipped DVD player or DVD drive, which is capable of decrypting (unscrambling) the DVD. CSS is primarily composed of algorithms and 400 master keys. Every CSS-encrypted DVD contains all 400 master keys, one of which is the trade secret at issue in this case. DVDCCA, a trade association of businesses in the movie industry, controls the rights to CSS. DVDCCA licenses the CSS decryption technology to manufacturers of hardware and software for playing DVDs. Each licensee is assigned one or more master keys unique to that licensee. In October 1999, a computer program entitled DeCSS was posted on the Internet allegedly by Jon Johansen, a 15-year-old resident of Norway. DeCSS consists of computer source code2 which describes a method for playing an encrypted DVD on a non-CSS-equipped DVD pl ayer or drive. Soon after its initial publication on the Internet, DeCSS appeared on numerous web sites throughout the world, including the web site of defendant Andrew Bunner. In addition, many individuals provided on their web sites links to copies of DeCSS on other web sites without republishing DeCSS themselves. DVDCCA submitted a declaration of its president, John Hoy. Hoy explained that DeCSS embodies, uses, and/or is a substantial derivation of [DVDCCAs] confidential proprietary information. Hoy stated that he had tested DeCSS and determined that it contained a master key which DVDCCA had licensed to Xing. Hoy further asserted that [t]o my knowledge, all of the end user licenses from DVDCCAs licensees prohibited reverse engineering. The agreement between DVDCCA and its CSS licensees prohibited those licensees from reverse-engineering CSS. A former Xing employee declared that Xing employed technical means to prevent the reading of its software program in clear text in order to deny unauthorized access to the underlying CSS keys and algorithms. Xings End-User License Agreement, which would appear on the screen during installation of Xings software DVD player, stated that the Product in source code form was a confidential trade secret and the user may not attempt to reverse engineer . . . any portion of the Product. Thus, the users assent to the agreement was obtained only through the installment process and was therefore a click wrap license agreement. Bunner argued that injunctive relief would violate his First Amendment rights. He also asserted that there was no evidence that he knew or should have known that DeCSS had been created by improper use of any proprietary information. Bunner also produced a declaration from Frank Stevenson, a computer programmer in Norway who was an expert in cryptography. Stevenson declared that the master keys on a CSS-encrypted DVD could be independently derived solely from a CSS-encrypted DVD itself without any unauthorized use of CSS decryption technology. In addition, Bunner submitted a declaration by David Wagner, a University of California cryptography researcher. Wagner believed that the publication of information about flaws in supposedly secure systems serves a vital public interest by notifying the public of these flaws. In Wagners view, the DeCSS high-level source code made it possible to analyze the security of the DVD security system without undertaking any tedious reverse engineering work. Bunner also submitted a declaration by John Gilmore, an expert on computer security and encryption. Gilmore explained that widespread copying of DVDs was not currently feasible because the removable media commonly available today lacked the capacity for the enormous file size necessary to hold a complete movie.

Finally, Bunner submitted his own declaration. He admitted that he had become aware of DeCSS by reading and participating in discussions held on a news web site entitled slashdot.org. He stated that he had republished the DeCSS source code on his web site so that other programmers could modify and improve DeCSS and so that Linux users could use DeCSS to play DVDs. Bunner asserted that, at the time he republished DeCSS, he had no information suggesting that DeCSS contained any trade secrets or involved any misappropriation of trade secrets, and he continued to believe that DeCSS had been either properly reverse engineered or independently created without [the] appropriation of any trade secrets. Consequently, Bunner maintained that there was no evidence that he had reason to know that Johansen had used improper means to obtain the trade secret that had allegedly been incorporated into DeCSS. California has enacted a version of the UTSA that is designed to protect economically valuable trade secrets from misappropriation. (Civ. Code, 3426.1 et. seq.) Under this statute, a trade secret is misappropriated if a person (1) acquires a trade secret knowing or having reason to know that the trade secret has been acquired by improper means, (2) discloses or uses a trade secret the person has acquired by improper means or in violation of a nondisclosure obligation, (3) discloses or uses a trade secret the person knew or should have known was derived from another who had acquired it by improper means or who had a nondisclosure obligation or (4) discloses or uses a trade secret after learning that it is a trade secret but before a material change of position. (Civ. Code, 3426.1, subd. (b).) Improper means is defined by the Act to include theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. (Civ. Code, 3426.1 subd. (a).) The Act expressly states that [r]everse engineering or independent derivation alone shall not be considered improper means. (Civ. Code, 3426.1, subd. (a).) The Act allows for injunctive relief against [a]ctual or threatened misappropriation of a trade secret. (Civ. Code, 3426.2.) Computer software can constitute a trade secret. [C]omputer software can qualify for trade secret protection under the UTSA. [Citation.] However, a plaintiff who seeks relief for misappropriation of trade secrets must identify the trade secrets and carry the burden of showing that they exist. (MAI Systems Corp. v. Peak Computer, Inc. (9th Cir. 1993) 991 F.2d 511, 522.) We will assume for purposes of our discussion that the trial court correctly concluded that DVDCCA had established a reasonable probability that it could prove these allegations and had shown that the relative burden of harms favored issuance of injunctive relief. While the trial courts conclusions, if correct, would justify preliminary injunctive relief in the absence of any free-speech concerns, we must first consider whether the order can withstand scrutiny under the First Amendment. Bunner contends that the injunction violates his First Amendment rights because it constitutes a prior restraint on his freedom of speech. DVDCCA responds that Bunner had no First Amendment right to disclose a trade secret in violation of the UTSA. The first question we consider is whether DeCSS is speech that is within the scope of the First Amendment. The application of the First Amendment does not depend on whether the publication occurred on the Internet or by traditional means. (Reno v. American Civil Liberties Union (1997) 521 U.S. 844, 870.) Likewise, it makes no difference that Bunner is a republisher rather than the original author of DeCSS. It would be anomalous if the mere fact of publication and distribution were somehow deemed to constitute conduct which in turn destroyed the right to freely publish. (Wilson v. Superior Court, supra, 13 Cal.3d at p. 660.) [A] naked prohibition against

disclosures is fairly characterized as a regulation of pure speech. ( Bartnicki v. Vopper (2001) 532 U.S. 514, __, 121 S.Ct. 1753, 1761 (Bartnicki).) Nor does it matter that the disclosure was made by an individual on his web site rather than a media publication in a newspaper. The right to freedom of speech does not restrict itself depend[ing] upon the identity or legal character of the speaker, whether corporation, association, union, or individual. (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 485; Bartnicki v. Vopper, supra, 532 U.S. at p. __ [121 S.Ct. at p. 1760], fn. 8.) DVDCCA has not alleged that Bunner engaged in any expressive conduct by posting DeCSS on his web site. Nor is there any indication in the record that Bunner engaged in conduct mixed with speech. DVDCCA does suggest, however, that DeCSS is insufficiently expressive because it is composed of source code and has a functional aspect. The issue of whether or not the First Amendment protects encryption source code is a difficult one because source code has both an expressive feature and a functional feature. The United States does not dispute that it is possible to use encryption source code to represent and convey information and ideas about cryptography and that encryption source code can be used by programmers and scholars for such informational purposes. Much like a mathematical or scientific formula, one can describe the function and design of encryption software by a prose explanation; however, for individuals fluent in a computer programming language, source code is the most efficient and precise means by which to communicate ideas about cryptography. [] . . . The fact that a medium of expression has a functional capacity should not preclude constitutional protection. [] . . . [] . . . [C]omputer source code, though unintelligible to many, is the preferred method of communication among computer programmers. [] Because computer source code is an expressive means for the exchange of information and ideas about computer programming, we hold that it is protected by the First Amendment. (Junger v. Daley (6th Cir. 2000) 209 F.3d 481, 484-485.) Like the CSS decryption software, DeCSS is a writing composed of computer source code which describes an alternative method of decrypting CSS-encrypted DVDs. Regardless of who authored the program, DeCSS is a written expression of the authors ideas and information about decryption of DVDs without CSS. If the source code were compiled to create object code, we would agree that the resulting composition of zeroes and ones would not convey ideas. (See generally Junger v. Daley, supra, 209 F.3d at pp. 482-483.) That the source code is capable of such compilation, however, does not destroy the expressive nature of the source code itself. Thus, we conclude that the trial courts preliminary injunction barring Bunner from disclosing DeCSS can fairly be characterized as a prohibition of pure speech. The First Amendment protects a wide range of expression from pure entertainment to political speech. (Schad v. Mount Ephraim (1981) 452 U.S. 61, 65.) All ideas having even the slightest redeeming social importance unorthodox ideas, controversial ideas, even ideas hateful to the prevailing climate of opinionhave the full protection of the guaranties, unless excludable because they encroach upon the limited area of more important interests. (Roth v. United States (1957) 354 U.S. 476, 484.) The parties recognize that First Amendment protection is not without limits. Obscenity, libel, and fighting words have long been recognized as falling outside the scope of the First Amendment because they lack any social value. (Roth v. United States, supra, 354 U.S. at pp. 484-485.) [I]t is well understood that the right of free speech is not absolute at all times and under all circumstances. There are certain well-defined and narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any Constitutional problem. These include the lewd and obscene, the profane, the libelous, and the insulting or fighting words . . . It has been well observed that such utterances are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality. (Chaplinsky v. New

Hampshire (1942) 315 U.S. 568, 571-572, fns. omitted.) DeCSS does not fall into any of these established exceptions: it is not lewd, profane, obscene, or libelous, nor did it involve any fighting words. DVDCCA does not ask this court to create a new judicial exception for software containing a misappropriated trade secret, and we decline to do so here. Although the social value of DeCSS may be questionable, it is nonetheless pure speech. DVDCCA maintains, however, that courts routinely enjoin trade secret misappropriation, even over a First Amendment defense. The cases on which it relies, however, are not comparable to the situation presented here, as they involved the actual use of a secret or the breach of a contractual obligation. Californias Trade Secrets Act, like the laws enacted in many other states to protect trade secrets, does not merely enhance the enforcement of contractual nondisclosure obligations but sweeps far more broadly. It is within this broad sweep that DVDCCA seeks to place Bunner. Yet the scope of protection for trade secrets does not override the protection offered by the First Amendment. The First Amendment prohibits the enactment of any law abridging the freedom of speech . . . . The California Legislature is free to enact laws to protect trade secrets, but these provisions must bow to the protections offered by the First Amendment. None of the trade secret cases cited by DVDCCA holds to the contrary. We must conclude that Bunners republication of DeCSS was pure speech within the ambit of the First Amendment. It is therefore necessary for us to apply independent review to the trial courts issuance of a preliminary injunction. The trial courts prohibition of future disclosures of DeCSS was a prior restraint on Bunners First Amendment right to publish the DeCSS program. A prior restraint is generally defined as an administrative or judicial order forbidding certain communications when issued in advance of the time that such communications are to occur. (Alexander v. United States (1993) 509 U.S. 544, 550, italics omitted.) The special vice of a prior restraint is that it suppresses expression not only directly, but also by inducing excessive caution in the speaker. (Pittsburgh Press Co. v. Human Rel. Commn (1973) 413 U.S. 376, 390.) Prior restraints on pure speech are highly disfavored and presumptively unconstitutional. (Hurvitz v. Hoefflin (2000) 84 Cal.App.4th 1232, 1241.) In the case of a prior restraint on pure speech, the hurdle is substantially higher [than for an ordinary preliminary injunction]: publication must threaten an interest more fundamental than the First Amendment itself. DVDCCAs 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. Our respect for the Legislature and its enactment of the UTSA cannot displace our duty to safeguard the rights guaranteed by the First Amendment. Accordingly, we are compelled to reverse the preliminary injunction.

3.

Supreme Court Decision (8/25/03) (excerpts)

Today we resolve an apparent conflict between Californias trade secret law (Civ. Code, 3426 et seq.) and the free speech clauses of the United States and California Constitutions. In this case, a Web site operator posted trade secrets

owned by another on his Internet Web site despite knowing or having reason to know that the secrets were acquired by improper means. Because of the unusual procedural posture of this case, we follow the lead of the Court of Appeal and assume as true the trial court findings in support of the preliminary injunction. (Cf. Bartnicki v. Vopper (2001) 532 U.S. 514, 524-525 (Bartnicki) [making certain assumptions about the facts [b]ecause of the procedural posture of the case].) Specifically, we accept for purposes of this appeal that DVD CCA is likely to prevail on its claims that (1) the CSS technology and its master keys and algorithms are trade secrets; (2) publication of these trade secrets on the Internet has not destroyed their trade secret status; (3) publication of DeCSS discloses these trade secrets; (4) the creator of DeCSS acquired these trade secrets by improper means; and (5) Bunner knew or had reason to know that DeCSS disclosed trade secrets acquired by improper means. We also assume that DVD CCA will suffer irreparable harm without injunctive relief and that the injunction will cause minimal harm to Bunner. Thus, the narrow question before us is whether the preliminary injunction violates Bunners right to free speech under the United States and California Constitutions even though DVD CCA is likely to prevail on its trade secret claim against Bunner. In answering this question, we must first determine whether restrictions on the dissemination of computer codes in the form of DeCSS are subject to scrutiny under the First Amendment. We conclude they are. As computer code . . . is a means of expressing ideas, the First Amendment must be considered before its dissemination may be prohibited or regulated. . . . But that conclusion still leaves for determination the level of scrutiny to be applied in determining the constitutionality of an injunction prohibiting the dissemination of computer code. (Reimerdes, supra, 111 F.Supp.2d at p. 327.) In determining the appropriate level of scrutiny, the critical question is whether the injunction is content neutral or content based. (See Madsen v. Womens Health Center (1994) 512 U.S. 753, 762-764 (Madsen); Los Angeles Alliance for Survival v. Los Angeles (2000) 22 Cal.4th 352, 364-365 (Los Angeles Alliance).) Content-based injunctions are subject to the level of heightened scrutiny set forth in Perry Ed. Assn. [v. Perry Local Educators Assn. (1983)] 460 U.S. [37,] 45]. (Madsen, at pp. 763-764.) By contrast, contentneutral injunctions are subject to the lesser level of scrutiny set forth in Madsen, supra, 512 U.S. at page 765. In this case, we conclude that the preliminary injunction issued by the trial court is content neutral and should be reviewed under the standard articulated in Madsen. Our principal inquiry in determining content neutrality is whether the government has adopted a regulation of speech without reference to the content of the regulated speech. (Madsen, supra, 512 U.S. at p. 763, quoting Ward v. Rock Against Racism (1989) 491 U.S. 781, 791.) [L]iteral or absolute content neutrality is not necessary. (Los Angeles Alliance, supra, 22 Cal.4th at p. 368.) The governments purpose is the controlling consideration, and a governmental regulation of speech is only content based if the government adopted the regulation because of disagreement with the message it conveys. (Ward, at p. 791.) This is true for speech cases generally . . . . (Ibid.) Thus, an injunction that serves purposes unrelated to the content of expression is deemed neutral, even if it has an incidental effect on some speakers or messages but not others. (Ibid.) However, injunctions that by their terms distinguish favored speech from disfavored speech on the basis of the ideas or views expressed are content based. (Turner Broadcasting System, Inc. v. FCC (1994) 512 U.S. 622, 643.)

Applying this standard, we conclude that the preliminary injunction at issue here is content neutral. The underlying basis for the injunction is the trial courts holding that Bunner misappropriated DVD CCAs propertyits trade secretsin violation of Californias trade secret law. (See Ruckelshaus v. Monsanto Co. (1984) 467 U.S. 986, 1003-1004 (Monsanto) [holding that trade secrets are a property right . . . protected by the Taking Clause of the Fifth Amendment].) In issuing the injunction, the court therefore relied on the fact that DVD CCA made reasonable efforts to keep the information secret ( 3426.1, subd. (d)(2)), and that DVD CCA received a competitive advantage over others . . . by virtue of its exclusive access to the information (Monsanto, at p. 1012). Thus, the injunction singled out Bunners communications because of DVD CCAs efforts to maintain the secrecy of the CSS technology and the competitive advantage it enjoyed from those effortsand not because of the communications subject matter or any disagreement with Bunners message or viewpoint. In other words, the trial court issued the injunction to protect DVD CCAs statutorily created property interest in informationand not to suppress the content of Bunners communications. Because the injunction is justified without reference to the content of Bunners communications, it is content neutral. (See Bartnicki, supra, 532 U.S. at p. 526 [finding a statute that singled out communications by virtue of the fact that they were illegally intercepted . . . rather than the subject matter is content neutral].) Under the Madsen test, when evaluating a content-neutral injunction . . . [w]e must ask . . . whether the challenged provisions of the injunction burden no more speech than necessary to serve a significant government interest. (Madsen, supra, 512 U.S. at p. 765.) This test requires a balance between the governmental interest and the magnitude of the speech restriction. (SFA&A, supra, 483 U.S. at p. 537, fn. 16.) [W]e conclude that the preliminary injunction issued by the trial court achieves the requisite balance and burdens no more speech than necessary to serve the government interests at stake here. (Madsen, at p. 765.) Assuming, as we do, that the trial court properly granted injunctive relief under Californias trade secret law, its preliminary injunction burdens no more speech than necessary to serve these significant government interests. First, prohibiting the disclosure of trade secrets acquired by improper means is the only way to preserve the property interest created by trade secret law and its concomitant ability to encourage invention. Trade secrets are a peculiar kind of property. Their only value consists in their being kept private. (In re Iowa Freedom of Information Council (8th Cir. 1983) 724 F.2d 658, 662.) Thus, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data. (Monsanto, supra, 467 U.S. at p. 1011, fn. omitted.) Second, prohibiting Bunnerwho knew or had reason to know that the trade secrets were acquired by improper meansfrom disclosing those secrets upholds the standard of commercial ethics maintained by trade secret law. The duty to respect trade secrets imposed on any person who acquires the secret with knowledge that his transferor had improperly acquired it is derived from the rules governing the receipt of stolen or misappropriated land or chattels. (Privacy, Publication, and the First Amendment, supra, 52 Stan. L.Rev. at p. 1039.) Under these rules, a purchaser of stolen property with actual or constructive notice of the true owners interests in that property cannot prevail against that owner....

By prohibiting Bunner from exploiting and destroying DVD CCAs trade secrets because of his actual or constructive knowledge of its illegal acquisition, the preliminary injunction merely applies this venerable standard of commercial ethics to a constitutionally recognized property interest in information. Because a person who knowingly exploits the illegal acquisition of property owned by another should be in no better position than the illegal acquirer himself (Wendling Lumber, supra, 153 Cal. at p. 414), the injunction burdens no more speech than necessary to serve the governments important interest in maintaining commercial ethics. In this case, the content of the trade secrets neither involves a matter of public concern nor implicates the core purpose of the First Amendment. Whether . . . speech addresses a matter of public concern must be determined by the content, form, and context of a given statement, as revealed by the whole record. (Connick v. Myers (1983) 461 U.S. 138, 147-148, fn. omitted.) DVD CCAs trade secrets in the CSS technology are not publicly available and convey only technical information about the method used by specific private entities to protect their intellectual property. Bunner posted these secrets in the form of DeCSS on the Internet so Linux users could enjoy and use DVDs and so others could improve the functional capabilities of DeCSS. He did not post them to comment on any public issue or to participate in any public debate. Indeed, only computer encryption enthusiasts are likely to have an interest in the expressive content rather than the usesof DVD CCAs trade secrets. (See Tien, Publishing Software as a Speech Act, supra, 15 Berkeley Tech. L.J. at pp. 662-663 [Programming languages provide the best means for communicating highly technical ideassuch as mathematical conceptswithin the community of computer scientists and programmers].) Thus, these trade secrets, as disclosed by Bunner, address matters of purely private concern and not matters of public importance. Finally, the preliminary injunction does not burden more speech than necessary by prohibiting the disclosure of information derived from the DeCSS program, the master keys or algorithms of the [CSS]. Because we assume for purposes of this appeal that the injunction is justified under Californias trade secret law, we also assume that this provision of the injunction is necessary to protect DVD CCAs property interest in the misappropriated trade secrets. Therefore, this portion of the injunction burdens no more speech than necessary to serve the significant government interests at issue here. (See ante, at pp. 16-19.) The preliminary injunction issued by the trial court therefore burdens no more speech than necessary to serve the significant government interests promoted by Californias trade secret law. Accordingly, it satisfies the Madsen test. Although the preliminary injunction issued by the trial court survives the Madsen test, we must still determine whether the prior restraint doctrine bars it. Because the injunction is content neutral and was issued because of Bunners prior unlawful conduct, we conclude it is not a prior restraint and therefore does not violate the First Amendment. Applying these principles, we find that the preliminary injunction at issue here is not a prior restraint. The injunction is content neutral (see ante, at pp. 1115), and the trial court found that Bunner had previously disclosed DVD CCAs trade secrets in violation of California law. The court therefore issued the content neutral injunction because of Bunners prior unlawful conduct. (Madsen, supra, 512 U.S. at p. 763, fn. 2.) Although the court made its finding of prior unlawful conduct in the context of a preliminary injunction and found only that DVD CCA

was likely to succeed on the merits, this finding is sufficient to render inapplicable the heavy presumption against prior restraints. Our decision today is quite limited. We merely hold that the preliminary injunction does not violate the free speech clauses of the United States and California Constitutions, assuming the trial court properly issued the injunction under Californias trade secret law. On remand, the Court of Appeal should determine the validity of this assumption. Appellate Court Decision (on remand)(2/27/04) In order to obtain an injunction prohibiting disclosure of an alleged trade secret, the plaintiffs first hurdle is to show that the information it seeks to protect is indeed a trade secret. The UTSA defines a trade secret as information . . . that: (1) Derives independent economic value, actual or potential, from not being generally known . . . ; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. ( 3426.1, subd. (d).) In short, the test for a trade secret is whether the matter sought to be protected is information (1) that is valuable because it is unknown to others and (2) that the owner has attempted to keep secret. (ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 18.) The first element is the crucial one here: in order to qualify as a trade secret, the information must be secret, and must not be of public knowledge or of a general knowledge in the trade or business. (Kewanee Oil Co. v. Bicron Corp., supra, 416 U.S. at p. 475.) The secrecy requirement is generally treated as a relative concept and requires a fact-intensive analysis. (1 Milgrim on Trade Secrets (2003) 1.07[2], pp. 1-343, 1-352.) Widespread, anonymous publication of the information over the Internet may destroy its status as a trade secret. (Religious Technology Center v. Netcom On-Line Com. (N.D.Cal. 1995) 923 F.Supp. 1231, 1256; see also Religious Tech. Center v. NetCom OnLine Comm. (N.D.Cal. 1995) 907 F.Supp. 1361.) The concern is whether the information has retained its value to the creator in spite of the publication. (See Rest.3d Unfair Competition, 39, com. f, p. 431.) Publication on the Internet does not necessarily destroy the secret if the publication is sufficiently obscure or transient or otherwise limited so that it does not become generally known to the relevant people, i.e., potential competitors or other persons to whom the information would have some economic value. In the instant matter, the secrecy element becomes important at two points. First, if the allegedly proprietary information contained in DeCSS was already public knowledge when Bunner posted the program to his Web site, Bunner could not be liable for misappropriation by republishing it because he would not have been disclosing a trade secret. Second, even if the information was not generally known when Bunner posted it, if it had become public knowledge by the time the trial court granted the preliminary injunction, the injunction (which only prohibits disclosure) would have been improper because DVD CCA could not have demonstrated interim harm. 1. The Likelihood of Prevailing on the Merits The trial court did not make an express finding that the proprietary information contained in DeCSS was not generally known at the time Bunner posted it. Indeed, there is no evidence to support such a finding. Bunner first became aware of DeCSS on or around October 26, 1999. But there is no evidence as to when he actually posted it. Indeed, neither Bunners name nor his Web site address appears among the 66 cease and desist letters counsel sent in November. We do know, however, that by the first week in November Internet news magazines were publicizing the creation of DeCSS and informing readers that the program was available to be downloaded for free on the

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Internet. As early as July 1999 people in the computer programming community were openly discussing the fact that the CSS code had been reverse engineered and were brainstorming ways to be able to use it legally. That means that when DeCSS appeared in October 1999 there was a worldwide audience ready and waiting to download and repost it. DVD CCA urges us, in effect, to ignore the fact that the allegedly proprietary information may have been distributed to a worldwide audience of millions prior to Bunners first posting. According to DVD CCA, so long as Bunner knew or should have known that the information he was republishing was obtained by improper means, he cannot rely upon the general availability of the information to the rest of the world to avoid application of the injunction to him. In support of this position, DVD CCA contends that the denial of an injunction would offend the public policies underlying trade secret law, which are to enforce a standard of commercial ethics, to encourage research and invention, and to protect the owners moral entitlement to the fruits of his or her labors. (See DVD, supra, 31 Cal.4th at pp. 880-882.) DVD CCA points out that these policies are advanced by making sure that those who misappropriate trade secrets do not avoid judicial sanction by making the secret widely available. The first problem with this argument is that by denying a preliminary injunction the court does not per se protect a wrongdoer from judicial sanction, which in most cases would come following trial on the merits. Second, the evidence in this case is very sparse with respect to whether the offending program was actually created by improper means. Reverse engineering alone is not improper means. (See footnote 7 ante.) Here the creator is believed to be a Norwegian resident who probably had to breach a Xing license in order to access the information he needed. We have only very thin circumstantial evidence of when, where, or how this actually happened or whether an enforceable contract prohibiting reverse engineering was ever formed. Finally, assuming the information was originally acquired by improper means, it does not necessarily follow that once the information became publicly available that everyone else would be liable under the trade secret laws for re-publishing it simply because they knew about its unethical origins. In a case that receives widespread publicity, just about anyone who becomes aware of the contested information would also know that it was allegedly created by improper means. Under DVD CCAs construction of the law, in such a case the general public could theoretically be liable for misappropriation simply by disclosing it to someone else. This is not what trade secret law is designed to do. It is important to point out that we do not assume that the alleged trade secrets contained in DeCSS became part of the public domain simply by having been published on the Internet. Rather, the evidence demonstrates that in this case, the initial publication was quickly and widely republished to an eager audience so that DeCSS and the trade secrets it contained rapidly became available to anyone interested in obtaining them. Further, the record contains no evidence as to when in the course of the initial distribution of the offending program Bunner posted it. Thus, DVD CCA has not shown a likelihood that it will prevail on the merits of its claim of misappropriation against Bunner. 2. Interim Harm The element of secrecy also bears upon the question of interim harm. The Restatement explains the relationship this way: Injunctive relief is often appropriate in trade secret cases to insure against additional harm from further unauthorized use of the trade secret and to deprive the defendant of additional benefits from the appropriation. If the information has not become generally known, an injunction may also be appropriate

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to preserve the plaintiffs rights in the trade secret by preventing a public disclosure. If the trade secret has already entered the public domain, an injunction may be appropriate to remedy any head start or other unfair advantage acquired by the defendant as a result of the appropriation. However, if the defendant retains no unfair advantage from the appropriation, an injunction against the use of information that is no longer secret can be justified only on a rationale of punishment and deterrence. Because of the public interest in promoting competition, such punitive injunctions are ordinarily inappropriate in trade secret actions. (Rest.3d Unfair Competition, 44, com. c, p. 500.) As the trial court clearly explained, the preliminary injunction prohibiting disclosure was intended to protect the trade secret. Therefore, even if Bunner was liable for misappropriation, if the information had since become generally known, a preliminary injunction prohibiting disclosure would have done nothing to protect the secret because the secret would have ceased to exist. Further, assuming that an injunction against the use of information could be justified, we can conceive of no possible justification for an injunction against the disclosure of information if the information were already public knowledge. This case is distinguishable from Underwater Storage, Inc. v. United States Rubber Co. (D.C. Cir. 1966) 371 F.2d 950, 955 (Underwater Storage), which DVD CCA cites for the proposition that a misappropriator or his privies can[not] baptize their wrongful actions by general publication of the secret. In Underwater Storage the defendant had misappropriated trade secrets and used them to develop a storage system for the United States Navy. After completing its work for the Navy, the defendant later published the alleged trade secrets, presumably representing them as its own technical know-how. (Id. at p. 952.) In resolving a statue of limitations question, the appellate court rejected the contention that the subsequent publication of the secret prevented the plaintiff from seeking compensation from the original misappropriator. The court stated: Once the secret is out, the rest of the world may well have a right to copy it at will; but this should not protect the misappropriator or his privies. (Id. at p. 955.) Underwater Storage was not concerned with the issuance of a preliminary injunction. The information was concededly public when the case was filed. The courts holding was that under the circumstances the defendant could still be liable in damages for his previous misappropriation. That holding does not alter the conclusion that a preliminary injunction cannot be used to protect a secret if there is no secret left to protect. One of the analytical difficulties with this case is that it does not fit neatly into classic business or commercial law concepts. The typical defendant in a trade secret case is a competitor who has misappropriated the plaintiffs business secret for profit in a business venture. In that scenario, the defendant has as much interest as the plaintiff has in keeping the secret away from good faith competitors and out of the public domain. But here, according to DVD CCA it has no good faith competitors. And the alleged misappropriators not only wanted the information for themselves, they also wanted the whole world to have it. We concur with the concerns expressed by Judge Whyte in his opinion in Religious Technology Center v. Netcom On-Line Com., supra, 923 F.Supp at page 1256: The court is troubled by the notion that any Internet user, . . . can destroy valuable intellectual property rights by posting them over the Internet, especially given the fact that there is little opportunity to screen postings before they are made. [Citation.] Nonetheless, one of the Internets virtues, that it gives even the poorest individuals the power to publish to millions of readers, [citation], can also be a detriment to the value of intellectual property rights. The anonymous (or judgment proof) defendant can permanently destroy valuable trade secrets, leaving no one to hold liable for the misappropriation. (Fn. omitted.)

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There is little question that such behavior is unethical and that it probably violates other laws. But that which is in the public domain cannot be removed by action of the states under the guise of trade secret protection. (Kewanee Oil Co. v. Bicron Corp., supra, 416 U.S. at p. 481.) The evidence in the present case is undisputed that by the time this lawsuit was filed hundreds of Web sites had posted the program, enabling untold numbers of persons to download it and to use it. The only inference that can be drawn from this evidence is that by December 27, 1999 when DVD CCA first took legal action to stop publication of DeCSS, the technology had become available to those persons most interested in obtaining it. DVD CCA presented no evidence that the disclosure it sought to prohibit would cause more or different harm than that it claims it would have suffered by the general disclosure of the program. Accordingly, the record does not support the trial courts finding that the balance of harms favored DVD CCA. III. Conclusion We conclude that evidence in the limited record before us does not justify the issuance of an injunction under the UTSA. DVD CCA presented no evidence as to when Bunner first posted DeCSS and no evidence to support the inference that the CSS technology was still a secret when he did so. Further, there is a great deal of evidence to show that by the time DVD CCA sought the preliminary injunction prohibiting disclosure of the DeCSS program, DeCSS had been so widely distributed that the CSS technology may have lost its trade secret status. There is no evidence at all to the contrary. Thus, DVD CCA has not shown a likelihood of success on the merits; nor has it demonstrated that it would suffer further harm if the preliminary injunction did not issue. The preliminary injunction, therefore, burdens more speech than necessary to protect DVD CCAs property interest and was an unlawful prior restraint upon Bunners right to free speech. (DVD, supra, 31 Cal.4th at p. 881; and see Madsen v. Womens Health Center, Inc. (1994) 512 U.S. 753, 765.) It follows that issuance of the injunction was an abuse of the trial courts discretion.

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