Protecting Your Company’s Digital Information From Departing Employees 4th Circuit Weighs in on Liability Under the Computer Fraud and Abuse Act

by Poyner Spruill LLP
Contact

[authors: Jason B. James, Joshua B. Durham]

WEC Carolina Energy Solutions, LLC v. Miller arose when Mike Miller resigned from his position as Project Director for WEC Carolina Energy Solutions, Inc. Twenty days later, according to WEC, he made a presentation to a potential customer on behalf of WEC's competitor, Arc Energy Services, Inc. The customer ultimately chose to do business with Arc. WEC contended that before resigning, Miller, acting at Arc's direction, downloaded WEC's proprietary information and used it in making the presentation.  WEC filed suit under the CFAA, but the Fourth Circuit determined the CFAA did not apply.

Writing the opinion in the case, Judge Henry F. Floyd acknowledged that “[o]ur conclusion here will likely disappoint employers hoping for a means to rein in rogue employees.”  The court, following the Ninth Circuit’s recent decision in United States v. Nosal concluded that the CFAA provides no right of action against those soon to depart employees who access computer information that they previously had authority to access and then turn around and disclose that same information to competitors.  Rather, the purpose of the CFAA is primarily to address outsider hacking activities; not to police violations of an employer’s computer usage policies.

Noting that the CFAA fails to provide any remedy for misappropriation of trade secrets or violation of a use policy where authorization has not been rescinded, the court followed “the canon of strict construction of criminal statutes” and refused to expand the scope of the statute to an interpretation beyond the plain language used by Congress. 

The court dismissed the argument that the rogue employees “exceeded their authority” when obtaining information for an improper purpose.  That argument failed in large part because, similar to the Ninth Circuit’s analysis in Nosal, the court ruled that the CFAA is concerned with the “unauthorized access of protected computers.”  The court determined that under the plain language of the CFAA, an employee accesses a computer “without authorization” when he gains admission to a computer without approval.  Additionally, the court determined that an employee “exceeds authorized access” under the CFAA when he has approval to access a computer, but uses his access to obtain or alter information that falls outside the bounds of his approved access.  Under either analysis, the departing employees in both WEC Carolina and Nosal accessed information that they previously had authority to access.  Both courts determined that the definitions under the CFAA did not extend to the improper use of information validly accessed. 

The decisions by the Ninth and Fourth Circuits – and their refusal to expand the CFAA to address the improper use of information validly accessed – contrasts directly with the decisions from the Fifth, Seventh, and Eleventh Circuits.  Those cases, beginning with the Seventh  Circuit’s International Airports decision in 2006, permit employers to pursue CFAA claims against employees who violate computer use policies or otherwise violate duties of loyalty to their employers in accessing computer data for the purpose of injuring their employer or violating computer usage policies.  As the court in Nosal noted:

“We remain unpersuaded by the decisions of our sister circuits that interpret the CFAA broadly to cover violations of corporate computer use restrictions or violations of a duty of loyalty. See United States v. Rodriguez, 628 F.3d 1258 (11th Cir. 2010); United States v. John, 597 F.3d 263 (5th Cir. 2010); Int’l Airport Ctrs., LLC v. Citrin, 440 F.3d 418 (7th Cir. 2006). These courts looked only at the culpable behavior of the defendants before them, and failed to consider the effect on millions of ordinary citizens caused by the statute’s unitary definition of “exceeds authorized access.”

Assuming Congress does not first address the “authorized access” issue under the CFAA, the stage may now be set for the US Supreme Court to resolve the dispute between circuits.   In fact, on July 9, 2012, the Solicitor General, hoping to appeal the Nosal decision, obtained a thirty-day extension of the deadline to file a petition for a writ of certiorari with the US Supreme Court. 

In the meantime, employers in the Ninth and Fourth Circuits looking to rein in their rogue employees should consider state-law causes of action including conversion, tortious interference with contractual relations, civil conspiracy, and misappropriation of trade secrets.  Additionally, employers should revisit their computer use policies and ensure that those policies and contractual agreements contain clearly delineated, conspicuous restrictions regarding use of information systems for unauthorized purposes. Those purposes should be articulated as specifically as possible, and, to the extent possible, clearly define terms like “unauthorized use” or “competitive purposes.”

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Poyner Spruill LLP | Attorney Advertising

Written by:

Poyner Spruill LLP
Contact
more
less

Poyner Spruill LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.