Employee Who Used Work Computers to Steal Trade Secrets Secures Dismissal of Charges
In United States v. Nosal, No. 10-10038, 2012 U.S. App. LEXIS 7151, the United States Court of Appeals for the Ninth Circuit held that theft of trade secrets by an employee using his work computer did not qualify as a federal crime under the statute used to charge him. The Court upheld the ruling of the United States District Court for the Northern District of California, which dismissed five counts of an indictment against defendant for failure to state an offense pursuant to the Computer Fraud and Abuse Act (CFAA), 18 U.S.C.S. § 1030.
Defendant David Nosal used to work for Korn/Ferry, an executive search firm. Shortly after he left the company, he convinced some of his former colleagues who were still working for Korn/Ferry to help him start a competing business. The employees used their log-in credentials to download source lists, names and contact information from a confidential database on the company's computer, and then transferred that information to Nosal. The employees were authorized to access the database, but Korn/Ferry had a policy that forbade disclosing confidential information. The government indicted Nosal on twenty counts, including trade secret theft, mail fraud, conspiracy and violations of the CFAA. The CFAA counts charged Nosal with violations of 18 U.S.C. § 1030(a)(4), for aiding and abetting the Korn/Ferry employees in "exceed[ing their] authorized access" with intent to defraud. Nosal filed a motion to dismiss the CFAA counts, arguing that the statute targets only hackers, not individuals who access a computer with authorization but then misuse information they obtain by means of such access.
The district court granted the defense motion to dismiss these charges, and the Court of Appeals for the Ninth Circuit upheld that ruling. Chief Judge Alex Kosinski noted that the phrase “exceeds authorized access” in the CFAA does not extend to violation of use restrictions. The Court further held that the CFAA was a statute meant to punish hacking – the circumvention of technological access barriers – not misappropriation of trade secrets. Finally, the Court stated that if there was any doubt about whether Congress intended the CFAA to prohibit the conduct in which defendant engaged, then the court had to choose the interpretation least likely to impose penalties unintended by Congress.
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