Sergey Aleynikov, the ex-Goldman Sachs computer programmer convicted of stealing high-frequency trading source code, has once again succeeded in reversing a criminal conviction related to his infamous code-copying acts. Federal prosecutors had previously charged, tried, and won a conviction of Aleynikov for violations of the federal National Stolen Property Act (NSPA) (18 USC § 2314) and Economic Espionage Act (18 USC § 1832). However, in 2012, the Second Circuit reversed both convictions. See United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012). That in turn prompted Congress to amend the Economic Espionage Act to close the loophole that allowed Aleynikov to walk.
Aleynikov was then prosecuted by the Manhattan District Attorney. In May of this year, a New York jury found Aleynikov guilty of one count of Unlawful Use of Secret Scientific Material under New York Penal Law § 165.07. See our blog post regarding the trial here.
During the trial, Aleynikov made several motions for dismissal at and after the close of the prosecution’s case on the basis that the state did not prove he made a “tangible reproduction or representation” of, nor had the “intent to appropriate,” secret scientific material as required by the statute. On Monday, Judge Conviser granted Aleynikov’s motion in detailed 71-page opinion.
The court held that Aleynikov had not made a “tangible reproduction” of the source code when he sent a digital copy to a foreign server. The court also held that the state’s evidence of intent was insufficient, noting that the state was “required to prove that Aleynikov had the conscious objective or purpose to acquire most of the source code’s value for himself or his new employer.” While the state demonstrated that Aleynikov intended to obtain some value from the stolen code, the court observed that the intent to “obtain some value from an asset is not the equivalent of intending to sap it of the major portion of its economic benefit.”
In the final pages of his opinion, Judge Conviser noted the significance of this case to criminal prosecution of trade secret theft and the legislative response is has sparked. He observed that “[w]hen Aleynikov’s federal conviction was overturned, Congress amended the law to cover his conduct…. If the Legislature determines the instant result is unjust they may obviously change the law again. Indeed, the New York State Senate acted to do so less than two weeks ago.” Despite noting this pattern, the court was unwilling to maintain Aleynikov’s conviction, putting the proverbial ball in the New York Legislature’s court: “[w]e update our criminal laws in this country…through the legislative process…. Defendants cannot be convicted of crimes because we believe as a matter of policy that their conduct warrants prosecution.”