In 2009, Sergey Aleynikov was a computer programmer employed by Goldman Sachs to write high-frequency trading code. He accepted an offer to join a new Chicago-based company, Teza Technologies. Before he left Goldman Sachs, however, he sent portions of Goldman’s high frequency trading code to a German server for his own future use. After Goldman found out, it went to the FBI; Aleynikov was then arrested on a flight home from a visit to Chicago. With that arrest began a circuitous journey through the U.S. legal system, governed by two different sovereigns and under two different legal regimes – neither one of which was ultimately found to cover his actions.
Federal Prosecution of Aleynikov under the Economic Espionage Act and the National Stolen Property Act
Aleynikov was first tried[1] in the U.S. District Court for the Southern District of New York on charges of violating the Federal Economic Espionage Act of 1996 (“EEA”)[2] and the National Stolen Property Act (“NSPA”).[3] At that time, the EEA’s trade secret misappropriation section provided:
Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly . . . without authorization . . . downloads, uploads, . . . transmits, . . . or conveys such information . . . [would be guilty of a criminal offense punishable by up to ten years in jail].[4]
The parties disputed the application of the EEA to Aleynikov’s behavior, Aleynikov’s intent in uploading the code to the German server, and the importance of the uploaded code. Ultimately, however, the jury found Aleynikov guilty under the EEA and NSPA.
The U.S. Court of Appeals for the Second Circuit interpreted the EEA and the NSPA more narrowly than the trial court. It stressed that the EEA had been adopted as a response to the Supreme Court’s decision that the relevant section of the NSPA (18 U.S.C. § 2314) did not apply to purely intangible property, as found in Dowling v. United States, 473 U.S. 207 (1985).[5] It then considered the differences in language between the economic espionage provision of the EEA (18 U.S.C. § 1831) and the trade secrets provision (18 U.S.C. § 1832). The former did not require that the information be “related to or included in a product that is produced for or placed in interstate or foreign commerce,” while the latter did.[6] Given the statutory language, the Second Circuit found that Goldman’s code was intended to remain confidential (and not be related to any product placed in interstate commerce).[7] It therefore overturned Aleynikov’s Federal conviction.
Remarkably, the Second Circuit’s decision in the Federal Aleynikov case subsequently led to a change in the EEA. Although it cannot apply to the Aleynikov case (under both the Constitution’s ex post facto clause and double jeopardy case law), § 1832 was amended to apply to any trade secret “that is related to a product or service used in or intended for use in interstate or foreign commerce.”[8] Thus, in future cases, misappropriation of computer code that is intended to remain confidential, but used in relation to a service performed in interstate commerce, will be an offense under the EEA.
State Prosecution of Aleynikov for Unlawful Use of Secret Scientific Material and Unlawful Duplication of Computer Related Material
After sitting in prison for over a year awaiting resolution of the Federal claims against him, Sergey Aleynikov thought he was no longer in jeopardy when the Second Circuit issued its opinion absolving him of criminal liability. Not true. Rather than returning Aleynikov’s computer, other evidence, and passport, the U.S. Attorney’s Office turned it all over to the New York County (Manhattan) DA’s office. Ultimately, that evidence was ruled to be illegally transferred and inadmissible as evidence against Aleynikov. The DA’s office nonetheless decided to prosecute Aleynikov.
The state court prosecution proceeded on three counts under two statutes: two counts of Unlawful Use of Secret Scientific Material (N.Y. Pen. L. § 165.07) and one count of Unlawful Duplication of Computer Related Material (N.Y. Pen. L. § 156.30).[9] The former statute provides:
A person is guilty of unlawful use of secret scientific material when, with intent to appropriate to himself or another the use of secret scientific material, and having no right to do so . . . , he makes a tangible reproduction or representation of such secret scientific material by means of writing, photographing, drawing, mechanically or electronically reproducing or recording such secret scientific material.[10]
The latter statute provides:
A person is guilty of unlawful duplication of computer related [material] . . . when having no right to do so, he or she copies, reproduces or duplicates in any manner: 1. any computer data or computer program and thereby intentionally and wrongfully deprives or appropriates from an owner thereof an economic value or benefit in excess of [$2,500].[11]
Aleynikov challenged his state indictment on numerous grounds, ranging from double jeopardy, to the high-frequency trading code not being “secret scientific material,” to not having made a “tangible reproduction or representation,” and to not having deprived Goldman of the value of the code. The trial court judge rejected those arguments and allowed the case to go forward to trial.
At trial in April 2015, Aleynikov argued that he had committed no crime, based both on his own lack of culpable intent and the technical language of the relevant statutes. The jury returned with a split verdict: guilty on one count of Unlawful Use of Secret Scientific Material, hung on the other count of Unlawful Use of Secret Scientific Material, and not guilty of Unlawful Duplication of Computer Related Material. After the jury verdict, Aleynikov renewed his motion to dismiss both counts of Unlawful Use of Secret Scientific Material; the trial...
