President Obama Acts to Clarify Federal Trade Secrets Law

by Miller & Martin PLLC

On December 28, 2012, President Obama signed the “Theft of Trade Secrets Clarification Act of 2012.”  This new law clarifies the scope of the “Economic Espionage Act of 1996” (18 USC §§1831-39).  The enactment of the new statute is in direct response to a decision by the Second Circuit Court of Appeals in United States v. Aleynikov, 676 F3d 71 (2nd Cir. 2012).
There are various federal measures that offer protections (under threat of criminal sanction) from the theft of corporate assets.  Some of these protections specifically apply to trade secrets that may be of great value to competitors in the marketplace. 
In the Aleynikov case, Mr. Aleynikov had been employed by Goldman Sachs and Company as a (highly-paid) computer programmer.  During the course of his employment, he assisted in the development of source code for Goldman’s proprietary high frequency trading (HFT) system, which was used by the Company in securities and commodities trading.  In essence, the program facilitated Goldman’s ability to make large volumes of trades within extraordinarily short time periods. 
On the last day of his employment in 2009, Aleynikov encrypted and uploaded over 500,000 lines of source code for the HFT system to a foreign server.  After uploading the source code, Aleynikov deleted the encryption program and erased the history of his computer commands in an effort to cover his tracks.  When he returned home, he downloaded the encrypted source code for use in his new employment with a Chicago-based company that was seeking to create its own HFT system.  The following month, after returning from Chicago for a meeting with his new employer with a flash drive and laptop containing portions of the Goldman HFT source code, Aleynikov was arrested by the FBI.
A jury convicted Aleynikov of violating the Economic Espionage Act and the National Stolen Property Act.  He was sentenced to 97 months of incarceration plus three years of supervised release.  Aleynikov appealed the decision, arguing that the Economic Espionage Act had been construed more broadly than this law permitted. 
The Second Circuit Court of Appeals agreed with him. 
In overturning Aleynikov’s conviction, the Second Circuit noted that the Economic Espionage Act required that the converted trade secret “must be related to or included in a product that is produced for or placed in interstate or foreign commerce.”  The Court ruled that “Goldman’s HFT system was neither ‘produced for’ nor ‘placed in’ interstate or foreign commerce -- it was designed to be used internally.  Goldman had no intention of selling its HFT system or licensing it to anyone.”
In an effort to remedy the resulting injustice, the Theft of Trade Secrets Clarification Act of 2012 was signed by President Obama on December 28, 2012.  The prior language of the Economic Espionage Act that was stricken and the requirement that a product must be “produced for or placed in interstate or foreign commerce” was replaced with language which now states that the new law protects “a product or service used or intended for use in” interstate or foreign commerce. 
The new law expands the Economic Espionage Act in two significant ways.  First, services as well as products are now covered by the Act.  Second, covered trade secrets now include trade secrets found in products or services “used in or intended for use in” interstate or foreign commerce.  Thus, the new law’s protections attach not only to assets sold or licensed to third parties but also to those which may be used by an employer to provide services to others. 
Given the burgeoning importance of technology in an economy that is increasingly service-driven, this new law may be significant, as companies may now have protection for proprietary software which is developed for their internal use, regardless of whether that software is placed into “interstate or foreign commerce” through sale or license to third parties.
If you have questions concerning this new law, or the protection of workplace assets generally, please contact Christopher Parker or any other member of our Labor & Employment Law Practice Group.

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.

© Miller & Martin PLLC | Attorney Advertising

Written by:

Miller & Martin PLLC

Miller & Martin PLLC 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):

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.


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 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:

- 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.