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Filed March 11, 2005
SUPERIOR COURT, STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
APPLE COMPUTER, INC.
Plaintiff,
vs.
Case No.: 1-04-CV-032178
DOE 1, an unknown individual, and Does 2-
25, inclusive, ORDER AFTER HEARING
Defendants
NN Ne)
The motion of non-parties Monish Bhatia, Kasper Jade, and Jason O’Grady (“movants”)
for a protective order blocking a subpoena issued by Plaintiff Apple Computer (“Apple”) came
on regularly for hearing on March 4, 2005. The matter was heard on the civil discovery calendar
in Department 14, Hon. James P. Kleinberg, presiding. George Riley, Esq. and David Eberhart,
Esq. of O’Melveny & Myers represented Plaintiff Apple. Thomas E. Moore III, Esq. of
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Tomlinson & Zisko, Richard R. Wiebe, Esq., Terry Gross, Esq. of Gross & Belski,'and Kurt B.
Opsahl, Esq., of Electronic Frontier Foundation represented the movants.”
Although not required to issue opinions or statements of decision when deciding cases on
the motion calendar, Code of Civil Procedure §632, 4 Witkin, California Procedure (4° ed.
1997) Trial, §306, p.461, the Court is doing so here because it believes it may be helpful to
counsel and the parties to do so.
I. LIMITS OF THIS RULING
This motion is about discovery; namely, a single subpoena served by Apple on Nfox.
The order of this Court does not go beyond the questions necessary to determine this motion
seeking a protective order against that single subpoena, and it cannot and should not be read or
interpreted more broadly. The Court makes no finding as to the ultimate merits of Apple’s
claims, or any defenses to those claims. Those issues remain for another day.
Il. BACKGROUND
A. The Litigation
Apple filed its complaint on December 13, 2004 alleging that unnamed individuals or
entities (“Does | through 25”) had leaked specific, trade secret information about new Apple
products to several online websites, including AppleInsider and PowerPage. That information
was published by these sites and regarded a FireWire audio interface for GarageBand,
codenamed “Asteroid” or “Q7.” On December 14, 2004 Judge William Elfving of this Court
granted Apple’s application to take expedited document discovery. On February 4, 2005 the
' Mr. Gross is not counsel of record in this case, but at his request the Court allowed him to participate in the hearing
by telephone; counsel for Apple did not object. Mr. Gross is counsel of record in another, recently filed action by
Apple which may raise similar issues.
? On March 3, 2005 Department 14 of the Court which is assigned the civil discovery calendar, posted its telephonic
tentative ruling in this case, which denied moving parties’ motion for a protective order. In accordance with the
Court’s usual practice in this Department, a reasoned opinion was not included with the tentative ruling. By timely
notifying Apple and the Court of their opposition to the tentative ruling all parties properly appeared for hearing the
next morning.
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Court granted Apple’s request to permit specific discovery directed at Nfox, the email service
provider for PowerPage. Apple is seeking the identities of the source or sources for this
information, and has subpoenaed Nfox.com for e-mail messages that may identify the
confidential source. Specifically Apple has sought the following information:
All documents relating to the identity of any person or entity who supplied information
regarding an unreleased Apple product code-named “Asteroid” or “Q97” (the “Product”),
including postings that appeared on PowerPage.com (the “Website”) on November 19,
November 22, November 23, and November 26, 2004. These documents include:
(a) all documents identifying any individual or individuals who provided information
relating to the Product (“Disclosing Person(s)’”), including true name(s), address(es), internet
protocol(“IP”) address(es), and e-mail address(es);
(b) all communications from or to any Disclosing Person(s) relating to the Product;
(c) all documents received from or sent to any Disclosing Person(s) relating to the
Product; and
(d) all images, including photographs, sketches, schematics and renderings of the Product
received from or sent to any Disclosing person(s).
To date, Nfox has not objected to the subpoenas on any grounds and, other than the
Nfox subpoena, no discovery is currently outstanding.
The movants brought the instant motion seeking a protective order blocking the
subpoena.’ Movants claim to be “journalists.”* On that basis they claim a privilege from
disclosing their sources as well as the benefits of California’s “shield law.”
Apple’s position is the acquisition and dissemination of the alleged trade secrets are
violations of California law, neither the federal privilege nor the California shield law bar the
subpoena, and the moving parties have no right to anonymous speech.
It is apparent that this discovery, limited as it is, calls into question issues and competing
values of great significance. On the one hand there is the movants’ claim to “free speech” which,
as even a casual student of that issue knows, is rife with complexities and restrictions. On the
> Although asked to make an “advisory ruling” on other, unserved subpoenas, the Court declines to do so.
“Some might refer to the moving parties as “bloggers.” The site www.dictionary.reference.com defines blog as “on
line diary; a personal chronological log of thoughts published on a web page; also called Weblog, Web log.”
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other hand, there is the undisputed right to protect intellectual property as expressed in California
civil and criminal law. Before analyzing and deciding these issues the Court reiterates:
This is a discovery issue. The discovery statute provides, in part, that:
(a) Unless otherwise limited by order of the court in accordance with this article, any
party may obtain discovery regarding any matter, not privileged, that is relevant to the subject
matter involved in the pending action or to the determination of any motion made in that action,
if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the
discovery of admissible evidence. Discovery may relate to the claim or defense of the party
seeking discovery or of any other party to the action. Discovery may be obtained of the identity
and location of persons having knowledge of any discoverable matter, as well as of the existence,
description, nature, custody, condition, and location of any document, tangible thing, or land or
other property. Code of Civil Procedure § 2017(a)
Discovery is given a broad reach in California courts; at the same time the courts have
frequently balanced competing interests in this regard, for example, individual privacy rights.
See Witkin, Summary of California Law, on ed. 1988) Constitutional Law §§ 456-473, pages
642-660. But, as discussed infra, the Court does find that Apple has made out a prima facie case
that the information at issue constituted proprietary trade secrets and that it has taken adequate
steps by way of internal investigations to justify further, external discovery as it seeks here. See,
e.g., Declarations of Robin Zonic, fff 4-8, Al Ortiz, Jr., J 2-3.
B. Trade Secrets
Apple has maintained that the information published by the moving parties qualifies as
trade secrets under California law. That law is found primarily in two statutes: the Uniform
Trade Secrets Act, Civil Code §§ 3426 et. seq., (the “UTSA”) adopted in 1985,° and Penal Code
§499c. Those statutes provide, in pertinent part:
Civil Code § 3426.1. Definitions:
> As with other laws titled “Uniform,” there are differences between California’s version of this law and the original
version, but those differences are not of consequence here. The UTSA supplanted California’s common law of trade
secrets derived from the Restatement of Torts 2d.
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(b) "Misappropriation" means:
(1) Acquisition of a trade secret of another by a person who knows or has reason to know
that the trade secret was acquired by improper means; or
(2) Disclosure or use of a trade secret of another without express or implied consent by a
person who:
(A) Used improper means to acquire knowledge of the trade secret; or
(B) At the time of disclosure or use, knew or had reason to know that his or her
knowledge of the trade secret was:
(i) Derived from or through a person who had utilized improper means to acquire
it;
(ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or
limit its use; or
(iii) Derived from or through a person who owed a duty to the person seeking
relief to maintain its secrecy or limit its use; or
(C) Before a material change of his or her position, knew or had reason to know
that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
ood
(d) "Trade secret" means information, including a formula, pattern, compilation, program,
device, method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being
generally known to the public or to other persons who can obtain economic value from its
disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
Penal Code § 499c:
se
(9) "Trade secret" means information, including a formula, pattern,
compilation, program, device, method, technique, or process, that:
(A) Derives independent economic value, actual or potential, from not
being generally known to the public or to other persons who can obtain economic value from its
disclosure or use; and
(B) Is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
(b) Every person is guilty of theft who, with intent to deprive or withhold the control of a
trade secret from its owner, or with an intent to appropriate a trade secret to his or her own use or
to the use of another, does any of the following:
(1) Steals, takes, carries away, or uses without authorization, a trade secret.
(2) Fraudulently appropriates any article representing a trade secret entrusted to
him or her.
(3) Having unlawfully obtained access to the article, without authority makes or
causes to be made a copy of any article representing a trade secret.
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(c) Every person who promises, offers or gives, or conspires to promise or offer to give,
to any present or former agent, employee or servant of another, a benefit as an inducement, bribe
or reward for conveying, delivering or otherwise making available an article representing a trade
secret owned by his or her present or former principal, employer or master, to any person not
authorized by the owner to receive or acquire the trade secret and every present or former agent,
employee, or servant, who solicits, accepts, receives or takes a benefit as an inducement, bribe or
reward for conveying, delivering or otherwise making available an article representing a trade
secret owned by his or her present or former principal, employer or master, to any person not
authorized by the owner to receive or acquire the trade secret, shall be punished by imprisonment
in the state prison, or in a county jail not exceeding one year, or by a fine not exceeding five
thousand dollars ($ 5,000), or by both that fine and imprisonment.
(d) In a prosecution for a violation of this section, it shall be no defense that the person
returned or intended to return the article.
These statutes reflect this state’s strong commitment to the protection of proprietary
business information. See /ntegral Dev. Corp. v. Weissenbach (2002) 99 Cal. App. 4" 576,
Magnecomp Corp. v. Athene Co. (1989) 209 Cal. App. 3d 526. The statutes also support the
compelling interest of disclosure which may, in the proper civil case, outweigh First Amendment
rights. As discussed infra, the United States and California Supreme Courts have underscored
that trade secret laws apply to everyone regardless of their status, title or chosen profession. The
California Legislature has not carved out any exception to these statutes for journalists, bloggers
or anyone else.
For these reasons the Court has carefully reviewed the showing made by Apple to date.
The posting by Mr. O’Grady contained an exact copy of a detailed drawing of “Asteroid” created
by Apple. The drawing was taken from a confidential set of slides clearly labeled “Apple Need-
to-Know Confidential.” In addition, technical specifications were copied verbatim from the
confidential slide set and posted on the online site. These postings by Mr. O’Grady were spread
over three days, November 19, 22 and 23, 2004. The Court is convinced by Apple’s
presentation, including the materials produced in camera that this action has passed the
thresholds necessary for discovery to proceed.
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C. Journalists and privilege
Much of movants’ papers and argument is a recitation of the obvious: the terms and
importance of the First Amendment and the value of free speech which this Court recognizes.
This principle was explored in Ford vs. Lane, (E.D. Mich., 1999) 67 F. Supp. 2d 745, 751:
“The First Amendment protects freedom of speech and freedom of the press by
providing, “Congress shall make no law . . . abridging the freedom of speech, or of the press. . .
‘The First Amendment applies to speech on the Internet. Reno v. American Civil Liberties
Union, (1997) 521 U.S. 844. The primary purpose of the guarantee of freedom of the press is to
prevent prior restraints on publication. Near v. Minnesota, (1931) 283 U.S. 697. Evena
temporary restraint on pure speech is improper absent the "most compelling circumstances." Jn
the Matter of Providence Journal Co., (1st Cir. 1986) 820 F.2d 1342, 1351. The First
Amendment applies to the States via the Fourteenth Amendment. Near at 707”.
The broad parameters of the prior restraint doctrine were further explained in the
Pentagon Papers case, New York Times Co. v. United States, (1971) 403 U.S. 713. There, the
federal government sought to enjoin The New York Times and The Washington Post from
publishing a classified study on U.S. policy-making in Vietnam. The Vietnam conflict was
ongoing, and the government argued that the publication of the classified information might
damage the national interest. The Court observed that, because any prior restraint on speech is
presumptively invalid under the First Amendment, the government bore a heavy burden of
showing a justification for the restraint. Finding that the government had not met its burden, the
Court denied the injunction. Jd. at 714.
But the pending motion is not for injunctive relief against anyone and the Pentagon
Papers case and similar authorities are not on point.
First, the issue of prior restraint is not before the Court. The California Supreme Court’s
analysis in DVD Copy Control Association v. Bunner, (2003) 31 Cal. 4" 864 is of particular
value. In that case, in which defendant was represented by some of the same counsel
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representing movants, the Supreme Court observed that “[T]he First Amendment does not
prohibit courts from incidentally enjoining speech in order to protect a legitimate property right.”
Id., at 881. The Court went on to note that “It is something of a mystery as to how free and open
debate is frustrated by offering property protection to trade secrets.” Jd., at 883. And, further,
“The mere fact that DVD CCA’s trade secrets may have some link to a public issue does not
create a legitimate public interest in their disclosure.” Jd., at 884. Ultimately, in the context of
injunctive relief — which necessarily raises issues of prior restraint not present here — the
Supreme Court allowed the injunction to issue.
Similarly the claim of “privilege” is overstated in this context. Reporters and their
sources do not have a license to violate criminal laws such as Penal Code §499c. Bartnicki v.
Vopper, (2001) 532 U. 8. 514, 532 (indeed, the parties had done discovery, Jd. at 520);
Branzburg v. Hayes, (1972) 408 U.S. 665, 691 Counsel for the moving parties admitted this
during argument.
Movants contend they are journalists. They make this claim because they seek the
protection of the privilege against revealing their sources of information. Defining what is a
“journalist” has become more complicated as the variety of media has expanded.° But even if the
° The Merriam-Webster online dictionary states:
jour-nal-ist
Function: noun
1 a: a person engaged in journalism; especially : a writer or editor for a news medium b : a writer who aims at a
mass audience
2: a person who keeps a journal
jour-nal-ism
Function: noun
1a: the collection and editing of news for presentation through the media b : the public press ¢ : an academic study
concerned with the collection and editing of news or the management of a news medium
2a: writing designed for publication in a newspaper or magazine b : writing characterized by a direct presentation
of facts or description of events without an attempt at interpretation ¢ : writing designed to appeal to current popular
taste or public interest
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movants are journalists, this is not the equivalent of a free pass. The journalist’s privilege is not
absolute. For example, journalists cannot refuse to disclose information when it relates to a
crime. As the Supreme Court in Branzburg stated:
“The preference for anonymity of those confidential informants involved in actual
criminal conduct is presumably a product of their desire to escape criminal prosecution, and this
preference, while understandable, is hardly deserving of constitutional protection.” 408 U.S. at
691.
D. The Mitchell standard
The balancing of interests between discovery and privilege was addressed by the
California Supreme Court in Mitchell v. Superior Court, (1984) 37 Cal. 3d 268, 276. In that case,
at pages 279-84, the following five-part test was articulated for weighing whether discovery
should be permitted over an assertion of the Federal privilege:
(1) “Nature of the litigation and whether the reporter is a party:”
Although not yet named as defendants, it is certainly possible “journalists” may be;
certainly Mr. O’Grady’s declaration suggests this possibility.
(2) “Does discovery sought go to the heart of plaintiff's claim:”
Without this discovery Apple’s case will be crippled, since it will not know the
defendants upon whom it should serve process.
(3) “Have other sources of information been exhausted?”
The moving parties maintain Apple should have done more investigating up to this point,
including the unusual step of noticing the depositions of its own employees. But the Court is
convinced, upon reviewing Apple’s public and in camera materials that a thorough investigation
has been done and all alternative means have been exhausted.
(4) “What is the public good served by protecting the misappropriation of trade secrets?”
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Movants did not present a persuasive reason of “public good” and never answered the
Court’s inquiry as to why there was a true public benefit from disclosure. See Mitchell v.
Superior Court at 283 and DVD Copy Control Association v. Bunner at 883-85.
(5) [Paraphrased] In the context of a defamation case, should the Court require the
plaintiff to make a prima facie showing of falsity?
This is not a defamation case, and movants do not believe this factor is pertinent. In any
event, the Court finds that Apple has made a prima facie case of misappropriation and this is yet
another reason to allow discovery.
E. The Shield Law
Easily overstated in its power, “[t]he description ‘shield law’ conjures up visions of broad
protection and sweeping privilege. The California shield law, however, is unique in that it
affords only limited protection. It does not create a privilege for newspeople, rather it provides
an immunity from being adjudged in contempt. This rather basic distinction has been misstated
and apparently misunderstood by members of the news media and our courts as well.” KSDO v.
Superior Court, (1982) 136 Cal. App. 3de 375, 379-80.
California Evidence Code §§ 1070(a) and (b), cited by movants, are quite specific in their
terms:
(a) A publisher, editor, reporter, or other person connected with or employed upon a
newspaper, magazine, or other periodical publication, or by a press association or wire service,
or any person who has been so connected or employed, cannot be adjudged in contempt by a
judicial, legislative, administrative body, or any other body having the power to issue subpoenas,
for refusing to disclose, in any proceeding as defined in Section 901, the source of any
information procured while so connected or employed for publication in a newspaper, magazine
or other periodical publication, or for refusing to disclose any unpublished information obtained
or prepared in gathering, receiving or processing of information for communication to the public.
(b) Nor can a radio or television news reporter or other person connected with or employed by
a radio or television station, or any person who has been so connected or employed, be so
adjudged in contempt for refusing to disclose the source of any information procured while so
connected or employed for news or news commentary purposes on radio or television, or for
refusing to disclose any unpublished information obtained or prepared in gathering, receiving or
processing of information for communication to the public.
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Based on that language and the facts presented, it is far from clear that Mr. O’Grady
qualifies for relief from the subpoena on the grounds advanced.’ Whether he fits the definition of
a journalist, reporter, blogger, or anything else need not be decided at this juncture for this
fundamental reason: there is no license conferred on anyone to violate valid criminal laws. DVD
Copy Control Association v. Bunner, at 874-88, Bartnicki. v. Vopper, (2001) 532 U.S. 514,
Branzburg, 408 U.S. 691.5
Finally, it is worth noting that other privileges have been similarly circumscribed,
including:
The legislative privilege, (1972) Gravel v. United States, 408 U.S. 606
The executive privilege of the President of the United States, United States v. Nixon,
(1974) 418 U.S. 683
The attorney-client privilege, Evidence Code § 956
The marital communications privilege, Evidence Code § 981
The physician-patient privilege, Evidence Code §§ 997, 999
The psychotherapist-patient privilege, Evidence Code § 1018.
At the hearing the movants admitted to such limitations.
II. CONCLUSION AND DISPOSITION
In this case, accepting for present purposes that Apple’s allegations about trade secrets
are true, the information divulged falls squarely under the UTSA and Penal Code §499c
definitions. As such it is stolen property, just as any physical item, such as a laptop computer
containing the same information on its hard drive (or not) would be. The information remains the
same and is not transformed by its form or who receives it.’ Therefore, the Court used the
’ The undisputed facts are that Mr. O’Grady took the information and turned around and put it on the PowerPage site
with essentially no added value. As noted at the outset, the Court declines to make “advisory rulings” with respect to
Monish Bhatia, Kasper Jade, PowerPage, or AppleInsider as movants request.
SAn experienced Wall Street Journal reporter was indicted and convicted for trading on inside information twenty
years ago. Carpenter v. United States, (1987) 484 U.S. 19
° For example, documents sent by a client to his/her lawyer do not become “privileged” simply by being sent to
counsel.
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charged word “fence” to describe parties who acted as go-betweens between the generator of the
secret property and the recipients of it. Although specifically asked of counsel for movants, the
Court did not hear rebuttal to the analogy at the hearing. The bottom line is there is no exception
or exemption in either the UTSA or the Penal Code for journalists - however defined - or anyone
else.
Much of the movants’ papers and their oral argument stressed the public’s interest in
Apple and its products. Movants miss the point. Of course the public is interested in Apple. It is
a company which has achieved iconic status. One need no further proof of this point than to
review the personal history of movant O’Grady who, according to his own declaration “has been
working with Macintosh computers since 1985 ... co-founded the first dedicated Apple Power
Book User Group ... in the United States ... has contributed articles to MacWEEK, MacWorld,
MacAddict, MacPower(Japan) ...[and] written chapters for The Macintosh Bible.” Movant's
Opening Brief at 4: 8-20. Mr. O’Grady is far from alone: the public has had, and continues to
have a profound interest in gossip about Apple. Therefore it is not surprising that hundreds of
thousands of “hits” on a website about Apple have and will happen. But an interested public is
not the same as the public interest.
At the hearing the Court specifically asked what public interest was served by publishing
private, proprietary product information that was ostensibly stolen and turned over to those with
no business reason for getting it. Movants’ response was to again reiterate the self-evident
interest of the public in Apple, rather than justifying why citizens have a right to know the
private and secret information of a business entity, be it Apple, H-P, a law firm, a newspaper,
Coca-Cola, a restaurant, or anyone else. Unlike the whistleblower who discloses a health, safety,
or welfare hazard affecting all, or the government employee who reveals mismanagement or
worse by our public officials, the movants are doing nothing more than feeding the public’s
insatiable desire for information.
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Indeed, a careful review of movants’ opening and reply papers and the hearing transcript
reveals that movants never adequately dealt with the issue of the intersection of trade secrets and
journalistic privilege. Movants’ opening brief does not mention the UTSA or Penal Code § 499c.
The reply brief states, “This motion does not implicate the issue of whether Apple’s trade secret
was protected speech; ...” Movants’ Opening Brief, at 7: 4-5. When skilled lawyers largely
ignore an essential issue that the Court specifically inquires about, it sends a message they have
little to say on the subject. And if, as movants argue, trade secrets are always at risk — a “sieve,”
quoting Kewanee Oil v. Bicron, (1974) 416 U.S. at 489-90'° -- how does one explain the
explicit statutory language of the UTSA and Penal Code?
Let there be no doubt: nothing in this order is meant to preclude the exchange of opinions
and ideas, speculation about the future, or analyses of known facts. The rumor and opinion mills
may continue to run at full speed. What underlies this decision is the publishing of information
that at this early stage of the litigation fits squarely within the definition of trade secret. The right
to keep and maintain proprietary information as such is a right which the California legislature
and courts have long affirmed and which is essential to the future of technology and innovation
generally. The Court sees no reason to abandon that right even if it were to assume, arguendo,
movants are “journalists” as they claim they are.
For all of the above reasons the Court denies the movants’ request for a protective order.
This order is stayed for seven court days to allow the parties, or any of them, to exercise their
appellate rights.
IT IS SO ORDERED
Dated: March 11, 2005
/s/ James P. Kleinberg
Honorable James P. Kleinberg
Judge of the Superior Court
” Citing Kewanee is interesting because in that case the United States Supreme Court affirmed the co-equal status of
trade secrets with patents as methodologies for protecting proprietary information.
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