DVD Copy Control Association, Inc. v. McLaughlin
United States District Court,
Superior Court of California, County of Santa Clara
decided
January 20, 2000
ORDER GRANTING PRELIMINARY INJUNCTION
The above-entitled matter came on for hearing before the Honorable William J.
Elfving on January 18, 2000 at 1:30 p.m. in Department 2. The matter
having been taken under submission, the Court orders as follows:
The Plaintiff's Motion for Preliminary Injunction is GRANTED in part as
follows:
The named Defendants, their officers, directors, principals, agents, servants,
employees, attorneys, successors and assigns, representatives and all persons
acting in concert with them, are hereby enjoined from: Posting or
otherwise disclosing or distributing, on their websites or elsewhere, the DeCSS
program, the master keys or algorithms of the Content Scrambling system ("CSS"),
or any other information derived from this proprietary information.
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 their Motion for Preliminary Injunction in a
misappropriation of trade secret case, the Plaintiff must show that they are
likely to prevail on the merits, and that the burden of harm weighs in their
favor. (See generally Witkin, Cal. Procedure, 4th ed., Provisional
Remedies, IV Injunctions, Section 296) "A preliminary injunction may be
properly issued whenever the questions of law or fact are grave and difficult,
and injury to the moving party will be immediate, certain, and great if it is
denied, while the loss to the opposing party will be trivial if it is granted."
Wilms v. Hand (1951) 101 Cal.App.2d 811, 815
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.
Although Defendants argue extensively that a 40 bit encryption system is weak at
best, it is undisputed that the encryption remained a secret for close to three
years and was limited in its strength by certain international export
regulations. Under the law, a system to protect secrecy does not become
unreasonable simply because a clever thief finds a way to penetrate the security.
(E.L. du Pont de Nemours & Co., inc. v. Christopher, (CA5, 1970) 431
F.2d 1012) 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.
Defendants make the additional argument that even if Johansen clicked on the
license agreement, such an agreement contravenes Norwegian law. This Court
is not well positioned to interpret Norwegian Law, and Defendant's own expert,
even if this Court could consider expert testimony on question of legal
interpretation,(1) states that the issue has not been
conclusively decided in Norway. Defendants have not sufficiently supported
their argument that the licence agreement, like the one at issue here, would be
disallowed by Norwegian Law, although they may at some point be able to do so.
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.
Whether or not the Defendants agree that such information as at issue here
should be protected or secret is irrelevant to the determination herein.
Our system currently places high importance on protecting such intellectual
property, and this Court must enforce such protections with all appropriate and
available means.
In granting this injunction this Court is mindful of the many enforcement
problems. However, a possibility or even a likelihood that an order may be
disobeyed or not enforced in other jurisdictions is not a reason to deny the
relief sought. For the reasons Plaintiff has clearly articulated in their
complaint and moving papers, it has chosen this jurisdiction to seek an
injunction. If this Court determines that Plaintiff has met its burden
then they are entitled to the relief sought, and seeking enforcement of the
order, whether in this or other jurisdictions becomes Plaintiff's responsibility.
However, the Court refuses to issue an injunction against linking to other
websites which contain the protected materials as such an order is overbroad and
extremely burdensome. Links to other websites are the mainstay of the
Internet and indispensable to its convenient access to the vast world of
information. A website owner cannot be held responsible for all of the
content of the sites to which it provides links. Further, an order
prohibiting linking to websites with prohibited information is not necessary
since the Court has enjoined the posting of the information in the first
instance.
Nothing in this Order shall prohibit discussion, comment or criticism, so
long as the proprietary information identified above is not disclosed or
distributed.
IT IS FURTHER ORDERED that Plaintiff DVD-CCA shall post a bond in the amount
of $10,000 pursuant to CCP Section 529..
William J. Elfving
FOOTNOTES:
1. Defendant stated in passing at the hearing on Preliminary
Injunction that issues of foreign law are questions of fact, however neither
side has provided this Court with argument or authority on this point.
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