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Second Circuit Holds Theft of “Source Code” Not a Crime Under the National Stolen Property Act

Posted in Cybercrime

Sergey Aleynikov was convicted for stealing and transferring proprietary "source code" in violation of the National Stolen Property Act (NSPA), 18 U.S.C. § 2314, and the Economic Espionage Act (EEA) of 1996, 18 U.S.C. § 1832. Source code is computer instructions in a human-readable text.

Aleynikov was a computer programmer for Goldman Sachs & Co., who developed source code for Goldman’s high-frequency trading (HFT) system, which permitted large-volume trading of securities and commodities to be made in a fraction of a second.  In 2009, Aleynikov was hired by Teza Technologies, L.L.C., a Chicago-based company, to work on its HFT system.

Prior to his going-away party at Goldman in June of 2009, Aleynikov encrypted and uploaded more than 500,000 lines of source code from Goldman’s HFT system to a server in Germany. Aleynikov flew to Chicago on July 2, 2009, taking large portions of the source code with him. He was arrested by the FBI at the airport on his return.

Aleynikov was charged and convicted and sentenced to 97 months’ imprisonment. Aleynikov appealed, and the Second Circuit Court of Appeals reversed his convictions following oral argument on February 17, 2012. Last week, the Court issued its opinion holding that Alyenikov’s conduct did not constitute a crime under either the NSPA or the EEA. The Court concluded that the source code did not constitute "goods," "wares," or "merchandise" for the purposes of the NSPA. It stated that the theft of purely intangible property was beyond the scope of the NSPA. The Court also held that Goldman’s HFT system was neither “produced for,” nor “placed in,” interstate or foreign commerce for the purposes of the EEA.

Image source: www.droiddog.com/android-blog/2011/02/samsung-releases-froyo-source-code-for-epic-and-vibrant/the-matrix/