The motion picture industry's effort to ban computer code that subverts its DVD encryption scheme has suffered a setback in California, with the state's high court issuing an order that could see many of the defendants dropped from the closely watched case. The California Supreme Court on Thursday effectively ordered a lower court to show why defendant Matthew Pavlovich should remain in the case even though he is not a California resident. The order applies only to Pavlovich and does not ensure he will be removed from the suit, but it could signal that the end is near for many defendants in the year-old case: Of 21 defendants listed by name in court papers, 18 do not live in California, according to Pavlovich's attorney, Allon Levy. "This is an important case for free speech on the Internet," he said. "The defendants are not alleged to have created the code but only to have found it and republished it. The standard of how you know it's been misappropriated is very vague." The movie industry is represented in the case by a group called DVD Copy Control Association. A spokesman for the group declined to comment, saying the attorneys handling the case had not yet reviewed the order. The California case and a similar federal suit filed in New York have become a rallying cause for the open-source software movement, which sees the motion picture industry crackdown as an assault on its very lifeblood. The suits target open-source Linux computer code known as DeCSS that defeats the security software on DVD-formatted movies. The code was posted on the Internet in October 1999 by a 16-year-old Norwegian student and quickly spread across the Web. The lawsuit seeks to put an end to the distribution, arguing it violates the federal Digital Millennium Copyright Act in New York and state trade secrets law in California. Thus far, the defendants have fared better in California than New York, where a federal judge earlier this year ordered an injunction banning Eric Corley from publishing links on his Web site to the disputed code. Defense lawyers plan to appeal the ruling, Levy said. According to Levy, both cases hold significant implications for free speech as well as "reverse engineering," a technique used by software developers to re-create patented products without running afoul of intellectual property laws. Although California state law specifically allows reverse engineering, the plaintiffs have argued that anyone who takes possession of their CSS anti-copying software must promise not to reverse engineer the product. That agreement is demanded in the form of a so-called click-wrap license, which must be accepted before the software can be downloaded. Levy rallied several arguments on behalf of his clients. He contends that the click-wrap license is invalid, as it runs counter to California state law. He said the plaintiffs' standard for showing the defendants knew they were posting illegal code is too general. Levy also argues that the court has no jurisdiction over non-California residents. Levy said a trial date has not yet been set for the California case but expects it will be set at a hearing scheduled for February in the Santa Clara Superior Court. Find out how the open-source movement is revolutionising the high-tech world at the Linux Lounge. DVD is changing the face of computing, entertainment and gaming. Find out how in the DVD Basement Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet News forum. Let the editors know what you think in the Mailroom. And read other letters.