The state's high court overturned an earlier decision that said blocking Web publishers from posting the controversial piece of software called DeCSS, which can be used to help decrypt and copy DVDs, would violate their First Amendment rights. An industry technology coalition called the DVD Copy Control Association (DVD CCA) had sued dozens of people in California courts, contending that posting the software online violated its trade secrets rights.
Monday's state Supreme Court decision did leave room for another legal about-face, asking a lower court to revisit the question of whether any industry trade secret rights actually were violated.
But judges said that for now, property rights outranked free speech rights in this case, because DVD copy-protection technology was never meant to be public. Nor did the DeCSS code itself contribute significantly to a debate over whether DVDs should be encrypted at all, the judges said.
"Disclosure of this highly technical information adds nothing to the public debate over the use of encryption software or the DVD industry?s efforts to limit unauthorized copying of movies on DVDs," the court wrote. "We do not see how any speech addressing a matter of public concern is inextricably intertwined with and somehow necessitates disclosure of DVD CCA's trade secrets."
The long-running case, originally filed in 1999, has been a closely watched test of how much freedom individuals have to distribute software online that runs against corporate or other powerful interests or even violates a law.
The defendant in the case, software developer Andrew Bunner, was one of hundreds of people to post a piece of software called DeCSS online in 1999. The software, created by Norwegian teenager Jon Johansen partly to allow DVDs to be played on a computer with a Linux operating system, could more broadly be used in the process of decrypting and copying DVDs.
The Motion Picture Association of America (MPAA) sued many of the Web sites that posted Johansen's code, arguing that under the federal Digital Millennium Copyright Act (DMCA), it was illegal to create or distribute. A New York federal court agreed andor even linking to other sites that carried the code.
In California state court, the DVD CCA, which holds intellectual property rights to the copy-protection technology on DVDs, separately sued Bunner and dozens of others, saying they had violated the group's trade secret rights.
Bunner's case is the only one still pending. Most of the defendants did not appeal the trial court's initial preliminary injunction that bars them from publishing the code. One other defendant, Texas resident Matthew Pavlovich,after the state Supreme Court ruled that he couldn't be sued in California.
The DVD CCA welcomed the ruling as an unambiguous victory.
"The DVD CCA is gratified the California Supreme Court has re-affirmed that trade secrets are protected from theft and illegal publication under California law," Weil, Gotshal and Manges attorney Robert Sugarman, who represents the industry coalition, said in a statement. "The Court's decision confirms that the First Amendment is not a shield to allow thieves to distribute stolen intellectual property."
Not a complete loss
Although the ruling is a loss for Bunner, the programmer's attorneys welcomed parts of the decision, saying it actually opened up promising new avenues for their client.
The ruling did say software code like DeCSS should be afforded some strong First Amendment protection, even if trade secrets rights trumped free speech shields in this particular case. However, the court cautioned that its decision was based on a very narrow reading of the earlier decisions, including the assumption that the original trial court had ruled correctly that the release of DeCSS had violated the industry coalition's trade secrets.
The court ordered the case to be sent back to the appeals court level, where judges would review the trade secrets issue more closely. Bunner's attorneys said they expected to show the appeals court that information such as DeCSS that was widely dispersed on the Net could not qualify for trade secret protection.
"We are pleased that the court has found that a strong level of First Amendment scrutiny applies in trade secrets cases," said Gwen Hinze, an Electronic Frontier Foundation attorney who has worked on the case. "We don't think that there is a trade secret here."
While the DeCSS cases still set an important precedent, the DVD-copying issue has moved on. Other software that allows DVD copying is widely and freely available online, and retail packages are even sold in stores such as CompUSA.
The leading producer of that retail software, a company called 321 Studios, also has been sued by the MPAA. A decision is expected in that case soon.
Outside attorneys who are looking at the case say the ruling should make the broader software industry breathe a quiet sigh of relief.
The previous appeals court ruling, which had said Bunner could not be blocked from posting the code online due to First Amendment protections, threatened to undermine ordinary software companies' ability to protect their own intellectual property, some attorneys said. Under the previous ruling, a disgruntled employee might be able to post a company's proprietary code online and claim free speech rights, for example.
Monday's Supreme Court ruling will let companies protect their legitimate trade secrets from online distribution while still holding out the possibility that DeCSS might ultimately be deemed too widely distributed to qualify for that protection, some attorneys said.
"The reversal on those narrow grounds is important and helpful to the software industry in order to protect its trade secrets," said Jonathan Band, an intellectual property attorney with Morrison & Foerester. "The earlier decision could have been a problem for software companies."