Sergey Aleynikov was tried and convicted on criminal charges by both a Federal and a New York state jury; both times, his conviction was reversed. But his luck on appeal may have run out. The Appellate Division, First Department, of the New York Supreme Court (the intermediate state appellate court for Manhattan) reversed the trial court's order of dismissal after a jury conviction for unlawful use of secret scientific material.
Mr. Aleynikov was employed by Goldman Sachs writing code; on his last day of employment, he transferred parts of the source code for Goldman's high frequency trading program to a foreign website for his own future use.[1]
He was tried originally in the U.S. District Court for the Southern District of New York and convicted of violations of the Economic Espionage Act and National Stolen Property Act. Those convictions were reversed by the U.S. Court of Appeals for the Second Circuit because the source code had not itself been a product placed in interstate commerce (under the EEA) and was intangible property, not a "good" (under the NSPA).
After the Federal prosecution failed, the Manhattan District Attorney's office charged Mr. Aleynikov with two counts of unlawful use of secret scientific material and one count of unlawful duplication of computer related material. The jury convicted him of only one count of unlawful use of secret scientific material. Even that conviction was overturned by the trial judge on a post-trial motion, but the DA appealed.
Two questions were posed on appeal, based on the language of the unlawful use of secret scientific material statute. The statute reads:
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.[2]
First, did Mr. Aleynikov have an "intent to appropriate to himself or another the use of secret scientific material," based on his transfer of the source code to the foreign website? Second, was transferred code "a tangible reproduction or representation of such secret scientific material"?
The appellate court addressed the second question first, trying to figure out what a "tangible" reproduction would be. In that context, the appellate court sought to avoid "hypertechnical or strained interpretations" of the statutory language. However, despite the statute having been enacted in 1967 (well before the advent of the internet) and the general rule that criminal statutes are construed based on the knowledge of the time of enactment, the appellate court turned to Black's Law Dictionary. From there, it understood that "tangible" meant that something would be required to have "physical form and characteristics."
The trial court found that computer code would not have physical form; the appellate court found that it would. In doing so, the appellate court found that the source code might not be tangible, but that Mr. Aleynikov made a tangible reproduction of it when he copied it onto a physical hard drive on a server where it took up physical space and was physically present. In reaching that conclusion, the court found that the statute had been drafted with "broad generalized language that fits squarely into today's digital world," despite the impossibility of visualizing saving code on a server at the time of drafting. Notably, the court rejected a conflict with the Second Circuit's decision that the source code was "intangible property" by distinguishing between the source code and the copy that Mr. Aleynikov had made. Although that appears to be a distinction without a difference, it was sufficient for the appellate court to find the relevant material fit within the scope of the statute.
Having reached that conclusion, the appellate court turned to whether Mr. Aleynikov had intended to "appropriate" the scientific material. New York's Penal Law defines "appropriate" as exercising control over property either (1) permanently or (2) "for so extended a period or under such circumstances as to acquire the major portion of its economic value or benefit."[3] In considering whether Mr. Aleynikov would be exercising control over the relevant code, the trial court focused on the effect on Goldman Sachs's use of the code and found that it would have had none. But the appellate court created a sharp distinction between the two subsets of control, focusing on only Mr. Aleynikov for permanent control and only Goldman Sachs for the second definition. It thus found that Mr. Aleynikov's conduct fell within the scope of the statutory offense because he had no intent to return the code. Notably, however, the definition of "appropriate" is not specific to the secret scientific material offense; the appellate court was seemingly making new law for the entirety of the New York Penal Code.
Mr. Aleynikov has already signaled that he intends to seek review in New York's highest court. There, the battle will be between narrowly construing the criminal statute to preserve its original intent and the overall integrity of the Penal Code and broadly construing it to cover clearly improper conduct. As has happened in all of Mr. Aleynikov's trials and appeals, the court will have to consider what to do when the pace of technology far outstrips the development of the criminal law.
[1] More details on Mr. Aleynikov’s actions and the prior cases can be found in a Summer 2015 snippets article and a July 6, 2015 Patent Docs post.
[2] N.Y. Pen. L. § 165.07.
[3] N.Y. Pen. L. § 155.00[4].
For additional information regarding this topic, please see:
• "Another Aleynikov Trade Secrets Case Ends with Narrower Statute," July 6, 2015
