On Wednesday, the 9th Circuit Court of Appeals handed down a big ruling that will make it easier for film and television studios to create stories ripped from the headlines.

The case concerns The Hurt Locker, the 2010 Oscar winner directed by Kathryn Bigelow and written by Mark Boal, about an army bomb squad during the Iraq War.

The film triggered a lawsuit by Master Sgt. Jeffrey S. Sarver, an Iraqi war veteran who claimed that Boal's research on Sarver for an issue of Playboy ultimately became a film that infringed his publicity rights and defamed him. Sarver alleged that the main character of Will James was based on his life.

In Oct. 2011, a federal judge rejected Sarver's lawsuit, and the dismissal was appealed. The case spent several years in purgatory as the 9th Circuit waited to see whether the U.S. Supreme Court would take up review of a publicity rights case involving athletes suing over video games. Last autumn, when that didn't happen, the 9th Circuit indicated that it would move forward.

Today, the federal appeals court upholds the district court ruling with a strongest possible endorsement of the filmmakers' free speech rights.

"In sum, The Hurt Locker is speech that is fully protected by the First Amendment, which safeguards the storytellers and artists who take the raw materials of life — including the stories of real individuals, ordinary or extraordinary — and transform them into art, be it articles, books, movies, or plays," writes 9th Circuit judge Diarmuid O'Scannlain. "If California’s right of publicity law applies in this case, it is simply a content-based speech restriction. As such, it is presumptively unconstitutional, and cannot stand unless Sarver can show a compelling state interest in preventing the defendants’ speech. Because Sarver cannot do so, applying California’s right of publicity in this case would violate the First Amendment."

There's no federal statute that protects one's name and likeness, and while there are trademark and false endorsement claims in the Lanham Act, many states have decided to enact statutes that guard against likeness misappropriation. California, home to many celebrities, has one of the strongest publicity rights laws, but it also has another law — the anti-SLAPP statute — that is meant to deter impingements of First Amendment rights on matters of public concern.

As such, figuring out whether to focus on the law of California or New Jersey — where Sarver lived — became the first procedural step in this case. After the 9th Circuit decides that California law applies, and satisfies itself that filings came in a timely fashion, the analysis next turns to whether the lawsuit arises from acts in furtherance of free speech in connection with a public issue.

"We conclude that this focus on the conduct of the Iraq War satisfies California’s standards for determining whether an issue is one of public concern," states the opinion. "That war, its dangers, and soldiers’ experiences were subjects of longstanding public attention. Indeed, The Hurt Locker, with its unique focus on IED disposal teams, contributed to that attention. That the film won several Oscars and reached widespread audiences only buttresses our conclusion."

As such, Sarver has to demonstrate a likelihood of prevailing before his lawsuit moves further. The district court concluded he hadn't, and the 9th Circuit agrees.

In coming to this conclusion, O'Scannlain re-visits a topic — publicity rights — that has only been addressed by the U.S. Supreme Court once, in 1977 in Zacchini v. Scripps-Howard Broadcasting Co, where the high court blessed Zacchini's theory that if an Ohio TV station showed his human cannonball act in its entirety without his consent, he'd have no incentive to perform. The decision was seen as largely giving a nod towards publicity rights laws enacted by state legislatures around the nation.

But O'Scannlain stresses that Zacchini only upholds "the right of publicity in a variety of contexts where the defendant appropriates the economic value that the plaintiff has built in an identity or performance," and as an example, points to previous cases involving celebrities challenging the use of their images in advertising. The most famous example is when Wheel of Fortune hostess Vanna White sued over an ad for VCRs.

The 9th Circuit is now drawing the line on speech — like The Hurt Locker — that it says is not proposing a commercial transaction, and plaintiffs like Sarver who have not built up any economic value in a marketable performance or identity. "The state has no interest in giving Sarver an economic incentive to live his life as he otherwise would," writes O'Scannlain.

As for Sarver's other claims, the 9th Circuit spends less time on these, but rejects his defamation claim because a film about a heroic figure could have hardly have exposed him to ridicule, damaged his reputation or injured him in his occupation. The appeals court adds that the film's portrayal "certainly would not 'highly offend' a reasonable person," thus putting down his false light invasion of privacy claim. Finally, as to intentional infliction of emotional distress, Sarver hasn't alleged enough facts to support this.

Here's the full opinion.

The filmmakers were represented by attorneys including Timothy Gorry, Irene Flores, David Halberstadter, Dale Kinsella and Jeremiah Reynolds. The MPAA, represented by Kelli Sager, filed an amicus brief in the case.

The decision is being hailed by Boal, who also worked with Bigelow on Zero Dark Thirty as well as an upcoming film about riots in Detroit in the late 1960s. He says, "I am pleased that the court found that artistic expression in films such as The Hurt Locker is fully protected by the First Amendment. This is an important victory for all filmmakers."