Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Almost instinctually, when learning that a present or former employee may have misappropriated trade secrets, employers quickly assess whether to take immediate action and seek temporary and permanent injunctions from civil courts. However, the recent federal criminal prosecution and sentencing of a Wall Street computer programmer underscores the importance of criminal trade secrets prosecutions to deter future misbehavior.
Sergey Aleynikov was indicted [pdf] in February 2010 “on charges related to his theft of proprietary computer code concerning a high-frequency trading platform from his former employer, Goldman Sachs.” In December 2010, Aleynikov was convicted after a trial in the Southern District of New York.
In March 2011, U.S. District Judge Denise Cote in Manhattan sentenced Aleynikov to serve eight years and one month in federal prison. Prior to sentencing, Aleynikov told the judge that “I never meant to cause Goldman any harm. I did not intend to harm anyone.” Judge Cote disagreed, however, concluding that “[h]e knew that what he was doing would harm Goldman Sachs.”
At its core, the claim of a misappropriation of trade secrets is one that alleges a very harmful act, one that goes to the life blood of most businesses. Businesses succeed in part due to the value of their trade secrets – such as customer lists, confidential formulas, proprietary computer code, or secret manufacturing processes – which provide a foundation for development of the products and services offered and sold by the business. When confronted with the potential theft of such trade secrets, employers are well advised to consider the full range of options, including criminal and civil actions, as they make critical decisions in the wake of such misconduct.
Under California law, the misappropriation of a trade secret is a crime and may be punishable by imprisonment. Likewise, theft of trade secrets is a federal crime under the Economic Espionage Act of 1996. Related crimes involve the theft or destruction of computer information, which may violate the California Penal Code and the federal Computer Fraud and Abuse Act, and the panoply of other state and federal criminal statutes may also be implicated in such cases, including mail and wire fraud statutes and RICO.
Employers have many avenues for enforcing and seeking remedies for trade secrets theft and literally “calling the police” may be one of the best choices under the circumstances. In future blog entries, we will explore the pros and cons of criminal versus civil enforcement of trade secret misappropriation.