DVD Copy Control Ass'n, Inc. v. Bunner

4 Cal.Rptr.3d 69

75 P.3d 1

31 Cal.4th 864

DVD COPY CONTROL ASSOCIATION, INC., Plaintiff and Respondent, v. Andrew BUNNER, Defendant and Appellant.

No. S102588.

Supreme Court of California.

August 25, 2003.

As Modified October 15, 2003.

Richard R. Wiebe, San Francisco; Huber Samuelson, HS Law Group, Allonn E. Levy, San Jose; First Amendment Project, Oakland, James R. Wheaton, David A. Greene; Tomlinson Zisko Morosoli & Maser, Thomas E. Moore III, Palo Alto; Electronic Frontier Foundation, San Francisco, Cindy A. Cohn and Robin D. Gross for Defendant and Appellant.

Howard M. Freedland and Edward J. Black for American Committee for Interoperable Systems and Computer & Communications Industry Association as Amici Curiae on behalf of Defendant and Appellant.

Howard, Rice, Nemerovski, Canady, Falk & Rabkin and Annette L. Hurst, San Francisco, for Institute of Electrical and Electronics Engineers, Inc. — United States Board as Amicus Curiae on behalf of Defendant and Appellant.

Jennifer Granick, San Francisco, for Computer Professionals for Social Responsibility as Amicus Curiae on behalf of Defendant and Appellant.

Ann Beeson, Kevin S. Bankson; and Ann Brick for the American Civil Liberties Union and the American Civil Liberties Union of Northern California as Amici Curiae on behalf of Defendant and Appellant.

Jane E. Kirtley for Silha Center for the Study of Media Ethics and Law as Amicus Curiae on behalf of Defendant and Appellant.

Weil, Gotshal & Manges, Jared B. Bobrow, Christopher J. Cox, Jeffrey L. Kessler, Robert G. Sugarman, Gregory S. Coleman, Edward J. Burke, Jonathan S. Shapiro, Sondra Roberto, Richard Simon, Rachel H. Laskey and John F. Greenman, New York, NY, for Plaintiff and Respondent.

Jennifer M. Urban and Pamela Samuelson for Intellectual Property Law Professors, the Computer & Communications Industry Association and the United States Public Policy Committee of the Association for Computing Machinery as Amici Curiae on behalf of Plaintiff and Respondent.

Richard A. Epstein; Thomas C. Rubin; Covington & Burling, Robert A. Long, Jr., Washington, DC, and Anthony Hermann for Microsoft Corporation, Ford Motor Company, The Boeing Company, Sears Roebuck & Co., The Procter & Gamble Company, AOL Time Warner, Inc., BellSouth Corporation, The Coca Cola Company and the National Association of Manufacturers as Amici Curiae on behalf of Plaintiff and Respondent.

John K. Williamson, Ronald E. Myrick; Milbank, Tweed, Hadley & McCloy and James Pooley, Palo Alto, for the Intellectual Property Owners Association as Amicus Curiae on behalf of Plaintiff and Respondent.

Dan Robbins, Jason M. Okai; Williams & Connolly, David E. Kendall, Thomas G. Hentoff, Janet C. Fisher, Suzanne H. Woods, Washington, DC, Julia B. Shelton; Paul, Hastings, Janofsky & Walker; Roger M. Milgrim, New York, NY; John Fithian; Daniel L. Brenner, Neal M. Goldberg, Washington, DC, Michael S. Schooler, Diane B. Burstein; David M. Proper; William Daly; and Thomas J. Ostertag, New York, NY, for Motion Picture Association of America, Inc., American Federation of Musicians of the United States and Canada, American Federation of Television and Radio Artists, AFMA (formerly the American Film Marketing Association), American Society of Composers, Authors and Publishers, American Society of Media Photographers, Inc., Association of American Publishers, Inc., Business Software Alliance, Broadcast Music, Inc., Department of Professional Employees, Directors Guild of America, Graphic Artists Guild, Interactive Digital Software Association, National Academy of Recording Arts & Sciences, Inc., National Association of Theatre Owners, National Cable & Telecommunications Association, Inc., National Football League, National Football League Properties, Inc., National Hockey League, National Music Publishers' Association, Office of the Commissioner of Baseball, Producers Guild of America, Professional Photographers of America, Recording Industry Association of America, Screen Actors Guild, Inc., Video Software Dealers Association and Writers Guild of America, West, Inc., as Amici Curiae on behalf of Plaintiff and Respondent.

Bill Lockyer, Attorney General, Manuel M. Medeiros, State Solicitor General, Richard M. Frank, Chief Assistant Attorney General, Louis Verdugo, Jr., Assistant Attorney General, Catherine Z. Ysrael, Regina J. Brown and Emilio E. Varanini IV, Deputy Attorneys General, as Amici Curiae on behalf of Plaintiff and Respondent.

BROWN, J.

Today we resolve an apparent conflict between California's trade secret law (Civ.Code, § 3426 et seq.)¹ 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. The trial court found that the operator misappropriated these trade secrets in violation of section 3426.1 and issued a preliminary injunction pursuant to section 3426.2, subdivision (a), prohibiting the operator from disclosing these secrets. Accepting as true the trial court's findings, we now consider whether this preliminary injunction violates the First Amendment of the United States Constitution and article I, section 2, subdivision (a) of the California Constitution. We conclude it does not.

I.

A.

Digital versatile discs (DVD's) "are five-inch wide disks capable of storing more than 4.7 [Gigabytes] of data. In the application relevant here, they are used to hold full-length motion pictures in digital form. They are the latest technology for private home viewing of recorded motion pictures and result in drastically improved audio and visual clarity and quality of motion pictures shown on televisions or computer screens." (Universal City Studios, Inc. v. Reimerdes (S.D.N.Y.2000) 111 F.Supp.2d 294, 307, fn. omitted (Reimerdes).)

"[T]he improved quality of a movie in a digital format brings with it the risk that a virtually perfect copy, i.e., one that will not lose perceptible quality in the copying process, can be readily made at the click of a computer control and instantly distributed to countless recipients throughout the world over the Internet." (Universal City Studios, Inc. v. Corley (2d Cir.2001) 273 F.3d 429, 436 (Corley ).) Recognizing this risk of widespread piracy, the motion picture industry insisted that a viable protection system be made available to prevent users from making copies of motion pictures in digital form. Without such protection, it would not have agreed to release movies on DVD's.

To provide this protection, two companies, Toshiba and Matsushita Electric Industrial Co., Ltd., developed the Content Scrambling System (CSS). "CSS is an encryption scheme that employs an algorithm configured by a set of `keys' to encrypt a DVD's contents. The algorithm is a type of mathematical formula for transforming the contents of the movie file into gibberish; the `keys' are in actuality strings of 0's and 1's that serve as values for the mathematical formula. Decryption in the case of CSS requires a set of `[master] keys' contained in compliant DVD players, as well as an understanding of the CSS encryption algorithm. Without the [master] keys and the algorithm, a DVD player cannot access the contents of a DVD. With the [master] keys and the algorithm, a DVD player can display the movie on a television or a computer screen, but does not give a viewer the ability to use the copy function of the computer to copy the movie or to manipulate the digital content of the DVD." (Corley, supra, 273 F.3d at pp. 436-437.)

The motion picture, computer, and consumer electronics industries decided to use the CSS technology to encrypt copyrighted content on DVD's and agreed that this content should not be subject to unauthorized (i) copying or (ii) transmission, including making the content available over the Internet. To this end, they began licensing the technology in October 1996. Under the terms of the licensing agreement, licensees had to maintain the confidentiality of proprietary information embodied in the CSS technology, including the "master keys" and algorithms. The agreement also contained other terms and conditions designed to ensure the confidentiality of this proprietary information. These industries later established the DVD Copy Control Association, Inc. (DVD CCA) as the entity charged with granting and administering the licenses to the CSS technology.

Despite these efforts to safeguard the CSS technology, Jon Johansen, a Norwegian resident, acquired the proprietary information embodied in the technology — including the master keys and algorithms — by reverse engineering software created by a licensee, Xing Technology Corporation (Xing). Xing's software is licensed to users under a license agreement, which specifically prohibits reverse engineering. Using the proprietary information culled from this software, Johansen wrote a program called DeCSS that decrypts movies stored on DVD's and enables users to copy and distribute these movies. According to DVD CCA, DeCSS "embodies, uses, and/or is a substantial derivation of confidential proprietary information" found in the CSS technology. Johansen posted the source code² of DeCSS on an Internet Web site³ in October 1999.

Soon thereafter, DeCSS appeared on other Web sites, including a Web site maintained by Andrew Bunner. Bunner posted DeCSS on his Web site allegedly because "it would enable `Linux' users to use and enjoy `DVDs' available for purchase or rental in video stores" and "make `Linux' more attractive and viable to consumers." Bunner also claimed he wanted "to ensure [that] programmers would have access to the information needed to add new features, fix existing defects and, in general, improve the `[D]eCSS' program."

B.

Upon discovering the posting of DeCSS on the Internet, DVD CCA and the Motion Picture Association (MPA) made extensive efforts to...