Russian Hackers vs Giant Vampire Squids

Of course, the poor illustration to the left is a wildly inaccurate retelling of the current legal battle being waged between banking giant Goldman Sachs, the Federal Government, and Russian Computer programmer Sergey Aleynikov.  While I won't go into the detail  (you can find info here, here and here) these are the basics. 

In 2008, Mr. Aleynikov, computer programmer, Russian Immigrant, and stand-in for future Bond villain, went to work for Goldman Sachs. During his tenure at the "Giant Vampire Squid" of Wall Street, he came across (or illegally accessed) some code base relating to high frequency high volume trading algorithms. Later, proving once again that there is no better capitalist than a former communist, Sergey struck out on his own, joining a financial start-up.

 Goldman Sachs, who had been paying Sergey 400k a year, insisted that he had stolen the code and was using it to make money at the expense of Goldman Sachs making money. Furthermore, Goldman claimed that the code, improperly used, could lead to destabilization of the financial markets. 

(It is a good thing that Goldman Sachs is responsibly in control of "Market Destabilizing Technology" ; We wouldn't want that to fall into the wrong hands)

Getting in the way of Goldman Sachs and profit; or destabilizing the world financial markets are  great ways to get the Feds called down on you.  

In December 2010 Aleynikov was convicted of the two counts of theft of trade secrets and transportation of stolen property under The National Stolen Property Act, 18 U.S.C. § 2314, and the Economic Espionage Act of 1996, 18 U.S.C. § 1832. 

Even though Federal Probation Service suggested a 24 months sentence, the Court in Lower Manhattan sentenced him to 97 months in prison, plus three-years of supervised release and a $12,500 fine. Furthermore, three weeks before sentencing, Aleynikov was incarcerated on request of the government, as he was judged  a flight risk.

Much like land wars in Asia, and going against a Sicilian when death is on the line, one simply can't take code from Goldman Sachs and expect anything less than utter devastation.

However, Mr.  Aleynikov was not quite helpless. His attorney appealed his conviction, asking the Second Circuit to review the District Court's decision denying a motion to dismiss the indictment for failure to state a claim. The Second Circuit heard oral argument on his appeal and, later that same day, unanimously ordered his conviction reversed and a judgment of acquittal entered. 

A copy of the opinion is here.

In summary, the Russian immigrant played the oldest trick in American Jurisprudence...A technicality. 

He argued that the source code was not a "stolen" "good" within the meaning of the NSPA, and  the source code was not “related to or included in a product that is produced for or placed in interstate or foreign commerce” within the meaning of the EEA.  The code was for internal Goldman Sachs use, and was not a 'good' so much as a component of a service that was offered. A plain, reasonable reading of either statute failed to cover his actions.  The Appeals Court agreed, and reverse the judgment of the district court.

Of course that is not the end of the story. The current Congress, who can't even agree to send money to hurricane victims, quickly drafted and passed, the Theft of Trade Secrets Clarification Act.  Then, noted anti-capitalist and Anti-wall Street Crusader President Barack Obama signed the Act into law. 

The Act expands the EEA so that it casts a wider net over actions that constitute a trade secret.  The EEA now applies to trade secrets related to "a product or service used in or intended for use" in commerce.  Senator Patrick Leahy, the sponsor of the bill, said specifically the new language would encompass trade secrets like Goldman’s internal source code, which, though not for sale, "was part of a financial trading system that was used in interstate commerce every day."  Cong. Rec. S6978 (daily ed. Nov. 27, 2012). 

So there are 3 takeaways here. 

1. If you are Goldman Sachs and you don't like a law, call a Senator and you get a new one.

2. For non-Goldman Business. The scope of Federal Trade Secret protection has just been expanded greatly. It is advisable that you reference this law in any employment contracts or other Disclosure or retention agreements, just so that employees know that prison and fines await them.  

3. For non-Goldman Employees. You need to make sure that any code or documentation that you come across, does not find its way into your side, start-up projects. The threat of this law and the repercussions they entail are pretty serious and can easily derail a career. There will be employers that will cite this law against innocent employees, so the only way to protect yourself is to meticulously document where the code you are using is originating. No short cuts.