August 25, 2003

DVD-CCA v. Bunner - loss!

The California DVD trade-secret case has just had a loss.


"Today we resolve an apparent conflict between California's 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. 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."

But later [cites to various cases cut-out for readability]

"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 California's trade secret law. On remand, the Court of Appeal should determine the validity of this assumption. Because there appears to be some confusion over the proper standard of review, we offer guidance below."

"In upholding the preliminary injunction against Bunner's First Amendment challenges, we rely on the assumption that DVD CCA is likely to prevail on the merits of its trade secret claim against Bunner. As such, "any factual findings subsumed" in the trade secret misappropriation determination "are subject to constitutional fact review." ...

"[W]here a Federal right has been denied as the result of a [factual] finding . . . or where a conclusion of law as to a Federal right and a finding of fact are so intermingled as to make it necessary, in order to pass upon the Federal question, to analyze the facts," the reviewing court must independently review these findings. ... "[F]acts that are germane to" the First Amendment analysis "must be sorted out and reviewed de novo, independently of any previous determinations by the trier of fact." ... And "the reviewing court must ` "examine for [itself] the statements in issue and the circumstances under which they were made to see . . . whether they are of a character which the principles of the First Amendment . . . protect." ' " ...

On remand, the Court of Appeal must therefore "make an independent examination of the entire record" ... and determine whether the evidence in the record supports the factual findings necessary to establish that the preliminary injunction was warranted under California's trade secret law ... [noting that appellate courts must independently review factual findings relevant to the resolution of any First Amendment issues]). If, after this examination, the court finds the injunction improper under California's trade secret law, then it should find that the trial court abused its discretion. (See ibid. [holding that, in determining whether the "issuance of a preliminary injunction constitutes an abuse of " discretion under the First Amendment, the reviewing court must independently review the factual findings subsumed in the constitutional determination]; ... [holding that preliminary injunctions are reviewed "under an abuse of discretion standard"].) Otherwise, it should uphold the injunction.

By Seth Finkelstein | posted in legal | on August 25, 2003 01:22 PM (Infothought permalink) | Followups
Seth Finkelstein's Infothought blog (Wikipedia, Google, censorware, and an inside view of net-politics) - Syndicate site (subscribe, RSS)

Subscribe with Bloglines      Subscribe in NewsGator Online  Google Reader or Homepage