An injunction against the posting of software on the internet that allows users to download copy-protected DVDs is not a violation of freedom of speech, a court has ruled.
The code allowed users to download movies from the internet
US computer programmer Andrew Bunner, 26, had posted a code online that broke its the DVD Copy Control Association's Content Scramble System (CSS).
But the organisation which represents Hollywood studios, said it controlled the encryption system which scrambles information to prevent the copying of movie DVDs.
The association sued Mr Bunner under California's Uniform Trade Secrets Act, saying he was spreading industry secrets by revealing the DeCSS code that could circumvent the protection.
A lower court had ruled that disseminating industry secrets was allowable due to free speech, but the California Supreme Court has now overturned this ruling, saying that trade secrets cannot legitimately be posted online.
But the court did not make a decision on whether the code posted by Mr Bunner was still a trade secret, leaving it for a lower court to decide.
The copyright-cracking code was actually created by Jon Johansen of Norway, and has been posted on to websites by hundreds of people, including Mr Bunner.
Mr Johansen was prosecuted in his native country in January but was acquitted of charges that he stole trade secrets.
Hollywood studios claimed the actions of Mr Bunner allowed users to copy thousands of DVDs a day.
Mr Bunner's legal case began in 2000, when a San Jose judge ruled he must remove the code from the internet.
But the appeal court lifted the injunction and said that trade secrets were not as important as freedom of speech.
The DVD Copy Control Association appealed this decision, arguing that the ruling gave criminals the go-ahead to use technology to copyright movies on a large scale.
The California Supreme Court agreed and said the order to remove the code "does not violate the free speech clauses of the United States and California
But the case continues as the Supreme Court passed the decision of whether the code in question was still a protected secret back down to the San Jose appeals court.
Mr Bunner said he had already removed the code from the internet but was fighting the case to stand up for free speech.
He said had posted the code to allow other web users to play DVDs on their computers, not to encourage widespread copying of films.
His lawyer, David Greene, said the appeals court could still ultimately support Mr Bunner's actions because the code has been spread around the globe, which may now prevent it from being recognised as a trade secret.