When Taking Proprietary Information From Employers Isn't a Crime

In two decisions issued back-to-back on April 10 and 11, 2012, the Second and Ninth circuits interpreted three different federal statutes -- the Computer Fraud and Abuse Act (CFAA), the National Stolen Property Act (NSPA), and the Economic Espionage Act (EEA) -- in ways that narrowed federal prosecutors' ability to charge former employees for stealing proprietary information from their companies.

According to the U.S. Court of Appeals for the Ninth Circuit's decision in United States v. Nosal, -- F.3d -- , 2012 WL 1176119 (9th Cir. April 10, 2012), an employee does not always violate the CFAA by intentionally infringing his company's computer use policy. If an employee was authorized to access the information, and did not gain access through internal hacking, there is no criminal violation of the CFAA regardless of whether the employee misappropriated the information for his own use. Nosal creates a circuit split among the Ninth Circuit on one hand and the Eleventh, Fifth, Seventh, and First circuits on the other.

One day after Nosal, the Second Circuit further narrowed the government's ability to prosecute trade secret theft. In United States v. Aleynikov, -- F.3d -- , 2012 WL 1193611 (2d Cir. April 11, 2012), the U.S. Court of Appeals for the Second Circuit held that Sergey Aleynikov's conduct was beyond the scope of the NSPA when he misappropriated Goldman Sachs' proprietary source code for high-frequency trading because the source code consisted of "purely intangible property," and not "goods, wares, merchandise, securities or money." The court readily acknowledged that its decision might be different if Aleynikov had copied the code on an inexpensive flash drive or CD when he left Goldman. The court also held that Aleynikov's theft was not an offense under the EEA because the computer source code "was not designed to enter or pass in commerce, or to make something that does." Accordingly, Aleynikov's conviction and eight-year prison sentence were overturned.

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Source: law.com

By: Wendy H. Schwartz and Jennifer L. Achilles