Unlike section 1831, which requires proof that the theft of a trade secret be intended to benefit a foreign government, instrumentality or agent, section 1832 addresses theft of trade secrets that has no impact outside the United States. Therefore, consistent with the limitations of federal jurisdiction, section 1832 requires proof of a relationship between the trade secret and "interstate or foreign commerce."54
As initially passed, section 1832 expressed this limitation by requiring that the trade secret be "related to or included in a product that is produced for or placed in interstate or foreign commerce."55 However, after the Second Circuit reversed a high-profile conviction under section 1832 for lack of a nexus to interstate or foreign commerce, Congress enacted the Trade Secret Clarification Act of 2012, revising the language to require that the trade secret be "related to a product or service used in or intended for use in interstate or foreign commerce."56 This change makes clear that section 1831 "now covers trade secrets related to products and services that an organization develops and uses only internally."57
In United States v. Aleynikov,58 a computer programmer employed by Goldman Sachs to maintain the company's high-frequency trading program—the "Trading System"—was accused of violating section 1832 when he downloaded portions of the code used in the Trading System prior to leaving Goldman for a new employer. Goldman Sachs had never sold or licensed the Trading System, and Aleynikov moved to dismiss, arguing that the trade secret at issue was therefore not related to or included in a "product" that was "produced for or placed in interstate and foreign commerce."59
Aleynikov argued that section 1832 applies only to trade secrets related to "products actually sold, licensed or otherwise distributed."60 Aleynikov noted that Black's Law Dictionary defines "product" as:
Something that is distributed commercially for use or consumption and that is usually (1) tangible personal property, (2) the result of fabrication or processing, and (3) an item that has passed through a chain of commercial distribution before ultimate use or consumption.61
The court, however, found that this definition was derived from the law of products liability and manufacturing contexts, and therefore does not represent the "ordinary meaning" of the term "product,"62 which the court found to be "something that is the result of human or mechanical effort or some natural process."63 The court noted that the Trading System was clearly the product of human effort, and that the fact that Goldman did not intend to sell or license the Trading System did not render it "any less of a 'product' within the meaning of the EEA."64
Having found that the Trading System was a "product," the Aleynikov court went on to hold that it was "produced for or placed in interstate or foreign commerce."65 The court wrote that high-frequency trading "undoubtedly qualifies" as interstate commerce, and that the Trading System was "produced for" such trading.66 The court went on to find that this interpretation was "confirm[ed]" by the statute's legislative history, which indicates that the statute is meant to be a "comprehensive tool for law enforcement personnel to use to fight theft of trade secrets."67
The Second Circuit reversed, however, finding the District Court's interpretation "untenable."68 The appellate court found that Congress did intend for section 1832 to be more limited in scope than section 1831, and that its inclusion of the "produced for or placed in" language in section 1832, but not in section 1831, "must be read as a term of limitation."69 The Second Circuit held that section 1832 did not apply to any product that "affects" commerce; but only to products "produced for or placed in" commerce.70
The Second Circuit also noted that the EEA was enacted shortly after the Supreme Court held, in United States v. Lopez, that Congress's Commerce Clause authority is limited to activities that "substantially affect interstate commerce." 71 The Aleynikov court noted that:
The Supreme Court observes a distinction between "legislation invoking Congress' full power over activity substantially 'affecting . . . commerce'" and legislation which uses more limiting language, such as activities "in commerce," and thereby does not purport to exercise the full scope of congressional authority.72
Because the EEA does not use the term "affecting commerce," but the more restrictive "in commerce," and because Goldman did not intend to sell or license the Trading System, the Aleynikov court held section 1832 inapplicable.73
In a separate concurrence, Judge Guido Calabresi found it "hard . . . to conclude that Congress . . . actually meant to exempt the kind of behavior in which Aleynikov engaged," and worried that the statute as interpreted would not apply to all of "the 'mischief' the law was enacted to address."74 Nevertheless, he agreed with the majority's parsing of the statutory language, particularly in view of the principle that ambiguous criminal statutes must be read in favor of the defendant. However, he wrote "to express the hope that Congress will return to the issue and state, in appropriate language, what I believe they meant to make criminal in the EEA."75
Congress quickly obliged. On December 28, 2012—barely eight months after the Aleynikov decision—President Obama signed into law the Trade Secrets Clarification Act of2012 (TSCA). The TSCA was intended, according to one of its sponsors, to close the "dangerous loophole" created by the Aleynikov decision.76 The TSCA amended section 1832, replacing the phrase "related to or included in a product that is produced for or placed in interstate or foreign commerce" with "related to a product or service used in or intended for use in interstate or foreign commerce." In addition to adopting the interpretation of the District Court in Aleynikov, the new language also makes clear that the trade secret at issue in a prosecution under the EEA need not relate to a product, but may relate to a service.77
Eight months after the TSCA was passed, the Second Circuit revisited the commerce requirement, on strikingly similar facts, in United States v. Agrawal.78 Agrawal was a trader in the High-Frequency Trading (HFT) department of the French bank Societe General (SocGen). In 2009, he told Tower Research Capital (Tower), a New York hedge fund, that he had a "complete understanding" of SocGen's system, and could build a "very similar" system for Tower...
