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Non-Compete and Trade Secrets Blog

There is an ongoing debate in the courts over whether the federal Computer Fraud & Abuse Act (“CFAA”) applies in the context of departing employees who are at odds with their former employers. The United States Court of Appeals for the 4th Circuit is the latest circuit to weigh in on the debate.

The 2nd Circuit recently reversed the conviction of Sergey Aleynikov and directed the trial court to enter a judgment of acquittal. Then one day later, the 2nd Circuit took a step back...

Numerous courts have weighed in recently on whether the Computer Fraud & Abuse Act applies in the context of a faithless employee. One more court may be poised to do so.

The recent decision in Decision Insights, Inc. v. Sentia Group, Inc., No. 09-2300 (4th Cir., Jan. 28, 2011), features two reversals of district court decisions involving a bedrock trade secrets principle: just because a secret recipe uses publicly available ingredients, it does not necessarily mean that the recipe is not a secret.

Distinguishing the New Jersey Supreme Court's decision in Stengart v. Loving Care Agency, a California Appellate Court has held that an employee's e-mails with her personal attorney sent through the employer’s workplace computer are not protected by the attorney-client privilege.

Departing employees sometimes access workplace computer systems to obtain information for purposes of using it in competition with their employer. Employers should exercise caution when undertaking such investigations to ensure they do not violate the Electronic Communications Privacy Act or the Stored Communications Act.

The criminal prosecution recently began of Sergey Aleynikov, a former Goldman Sachs computer programmer accused of stealing the computer code underlying Goldman’s high-frequency trading programs. When Aleynikov was taken into custody by the FBI, he reportedly said he did not intend to take any proprietary code. Rather, he intended to take only open source code. What’s the difference and what indispensible lesson should companies take away?

Federal courts are split over whether the Computer Fraud & Abuse Act applies to a faithless employee’s misappropriation of an employer’s confidential information by means of the employer’s computer. A California federal court recently held that an employee's access to such a computer is not "unauthorized" for purposes of the CFAA even if the employer's policies preclude such conduct.

On Friday, November 19, 2010, a Manhattan jury convicted former Société Générale trader, Samarath Agrawal, of misappropriating trade secrets. The case is one of two recent criminal prosecutions undertaken by the United States Government for employee theft of source code underlying high-frequency trading platforms.

Federal courts continue to debate whether the Computer Fraud & Abuse Act applies to the misappropriation of an employer’s electronic trade secrets by departing employees. In a recent criminal case, one more court sided with employees -- and against the U.S. Government -- when it held that the CFAA does not apply in this context.

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