CFAA Does Not Apply to Employee Data Theft According to Ninth Circuit

by Fisher Phillips
Contact

Dispute Seems Destined for United States Supreme Court

“Computers have become an indispensable part of our daily lives. We use them for work; we use them for play. Sometimes we use them for play at work. Many employers have adopted policies prohibiting the use of work computers for nonbusiness purposes. Does an employee who violates such a policy commit a federal crime? How about someone who violates the terms of service of a social networking website? This depends on how broadly we read the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030.”

And so begins the reasoning of the United States Court of Appeals for the Ninth Circuit on way to its conclusion that the CFAA does not apply to data theft by an employee who steals information he was permitted to access in the first place. 

The CFAA makes it unlawful to access a computer without authorization, or to exceed the scope of one’s authorization, for the purpose of obtaining or altering information in the computer that one is not entitled to obtain or alter. 

In US v. Nosal, the U.S. Court of Appeals for the Ninth Circuit acknowledged that the CFAA can be read either of two ways: First, it could refer to someone who's authorized to access only certain data or files but accesses unauthorized data or files.  This is colloquially known as ‘hacking.’

The Court offers an example.  “[A]ssume an employee is permitted to access only product information on the company's computer but accesses customer data: He would ‘exceed authorized access’ if he looks at the customer lists.”

But the Court noted that the statute also could be interpreted differently.  Namely, the language might refer to someone who has unrestricted physical access to a computer, but is limited in the use to which he can put the information. “For example, an employee may be authorized to access customer lists in order to do his job but not to send them to a competitor.”

And so goes the dispute.  According to the government, employees violate the CFAA when they access information on their employer’s computer for an improper purpose.

A majority of the Ninth Circuit rejected the government’s view of the CFAA with a litany of colorful language and hypotheticals:

“The government's interpretation would transform the CFAA from an anti-hacking statute into an expansive misappropriation statute. Basing criminal liability on violations of private computer use polices can transform whole categories of otherwise innocuous behavior into federal crimes....For example, it's not widely known that, up until very recently, Google forbade minors from using its services. Adopting the government's interpretation would turn vast numbers of teens and pre-teens into juvenile delinquents and their parents and teachers into delinquency contributors.”

From the Ninth Circuit’s perspective, the danger is palpable.  “Minds have wandered since the beginning of time and the computer gives employees new ways to procrastinate, by chatting with friends, playing games, shopping or watching sports highlights. Such activities are routinely prohibited by many computer-use policies, although employees are seldom disciplined for occasional use of work computers for personal purposes. Nevertheless, under the broad interpretation of the CFAA, such minor dalliances would become federal crimes.”

“Under the government's proposed interpretation of the CFAA, posting for sale an item prohibited by Craigslist's policy, or describing yourself as ‘tall, dark and handsome,’ when you're actually short and homely, will earn you a handsome orange jumpsuit.”

In reaching its conclusion, the Ninth Circuit acknowledged that its decision was at odds with numerous “decisions of our sister circuits” reaching different conclusions; e.g., the 5th, 7th and 11th Circuits.  But it simply asked that its “sister circuits” reconsider based on the content of the 9th Circuit opinion.

But the split of opinion in federal court is not simply a split among the circuits.  Notably, there was a dissenting opinion filed concurrently with the 9th Circuit’s decision in Nosal.

The Dissent

The dissent blasted the theoretical illustrations contained in the majority opinion.  “This case has nothing to do with playing sudoku, checking email, fibbing on dating sites, or any of the other activities that the majority rightly values. It has everything to do with stealing an employer's valuable information to set up a competing business with the purloined data, siphoned away from the victim, knowing such access and use were prohibited in the defendants' employment contracts.”

The dissent continued: “In ridiculing scenarios not remotely presented by this case, the majority does a good job of knocking down straw men, and far-fetched hypotheticals involving neither theft nor intentional fraudulent conduct, but innocuous violations of office policy.”

Offering its own analogy, the dissent observed that a bank teller is entitled to access a bank's money for legitimate banking purposes, but he may not take the money for himself.

In short, the dissent concluded that “it does not advance the ball to consider, as the majority does, the parade of horribles that might occur under different subsections of the CFAA.”  That is why courts have the authority to consider constitutional challenges to the manner in which statues are applied.

“The role of the courts is neither to issue advisory opinions nor to declare rights in hypothetical cases, but to adjudicate live cases or controversies....We need to wait for an actual case or controversy to frame these issues, rather than posit a laundry list of wacky hypotheticals.”

And so goes the internally conflicted thinking of the United States Court of Appeals for the Ninth Circuit.  One has to wonder, if the justices of the Ninth Circuit cannot agree among themselves whether to agree or disagree with other federal circuits, how long will it be before the U.S. Supreme Court has to weigh in on the matter?

Michael R. Greco is a partner in the Employee Defection & Trade Secrets Practice Group at Fisher & Phillips LLP.  To receive notice of future blog posts either follow Michael R. Greco on Twitter or on LinkedIn or subscribe to this blog's RSS feed.

US_v_Nosal.pdf (103.39 kb)

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.

© Fisher Phillips | Attorney Advertising

Written by:

Fisher Phillips
Contact
more
less

Fisher Phillips 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.
Custom Email Digest
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.