Code 'not physical property', court rules in Goldman Sachs espionage case
Summary: Code cannot be stolen under federal law, a court has ruled, in the case of a former Goldman Sachs employee who had his conviction for code theft and espionage overturned.
A U.S. federal court has ruled that programming code cannot be stolen under federal law.
In the case of former Goldman Sachs employee Sergey Aleynikov, an appeals judge found he was wrongly charged with the theft of programming code, and as a result had his conviction overturned.
42-year-old Aleynikov was convicted in December 2010 of downloading Goldman Sachs' high-frequency trading (HFT) code used on equity markets, and alleged to have emailed fragments of code to his personal email account. After working at the banking giant, he left to develop his own HFT platform for a Chicago-based startup.
HFT uses complex algorithms to exploit the minute price discrepancies in the market, and engage in rapid trading. It can generate millions of dollars on a daily basis.
He was charged under the National Stolen Property Act, which criminalises the theft of trade secrets. He was sentenced to 97 months in jailed and fined $12,500.
He was acquitted in an appeals court after the judges found that Aleynikov had been wrongly charged under the Economic Espionage Act, sister site CNET reports, which served as a blow to the U.S. Department of Justice, which makes such cases a high priority.
But despite his acquittal, the appeals court remained quiet on the reason why, and said it would disclose the reason "in due course".
Chief Judge Dennis Jacobs wrote in the court's unanimous decision: "Because Aleynikov did not 'assume physical control' over anything when he took the source code, and because he did not thereby 'deprive [Goldman] of its use,' Aleynikov did not violate the NSPA."
"We decline to stretch or update statutory words of plain and ordinary meaning in order to better accommodate the digital age," Jacobs added.
"The enormous profits the system yielded for Goldman depended on no one else having it," Jacobs ruled. Highlighting that the code was not to be sold on or licensed to others, he added: "Because [the high-frequency trading system] was not designed to enter or pass in commerce, or to make something that does, Aleynikov's theft of source code relating to that system was not an offense under the EEA."
Image credit: Seth Rosenblatt/CNET.
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Talkback
Wow!
ZDNet is missing the point
In the case of this "theft", Goldman Sachs could still do everything that the code was intended to do. The court ruled that Goldman's claim of loss from "competition" in market trading was specious. I would imagine part of that resulted from the fact that GS isn't about to demonstrate what kind of economic impact using this software could have in moving the markets to a trader's advantage.
For Goldman Sachs, that'd effectively be opening Pandora's Box.
So the "taking" didn't deprive GS of control of its property, the code itself. And the use of it had no demonstrated impact on the originators -- at least none that GS was willing to document it was benefiting from -- in a public forum like a court of law. So, in street basketball terms, "No harm, no foul."
I'm no lawyer -- I don't even play one on TV. But whenever the court finds a way to document this ruling, I think you're going to find that it's pretty narrow and that commercial software developers are in no danger. ZDNet is overstating the case, not the court.
Goldman-Sahcts is a mad because someone else now knows how to steal
No one should feel the least bit sympathy for Goldman-Sachts about this because it is a predator on the system and admitted as much when it admitted that this stolen code was used to plunder the system and steal money thru tiny cracks in the trading process. This is no different than if a successful con-man tried to sue prot??g?? who learned some secret con method from this guy and then left to do the con on his own.
It would be one thing if Goldman-Sachts actually provided some wealth to the process but it???s just a pirate and the fact it can do it legally does not change the fact tat it steals from the system and now its upset that someone else has the secrete to how to steal from the system.
MS & Apple
Not at all
Computer Trading needs to be eliminated
I'm sure it was in his contract
Criminal conviction or acquital does not preclude civil suit
Just because the court held that his conduct was not a CRIME does not mean that he did not violate his contract with goldman sachs, or offend intellectual property laws, which would expose him (and maybe the competing company in Chicago) to money damages or maybe a court ordered injunction. If we learned anything from the OJ Simpson case, it's that criminal convictions and civil liability are not the same thing. If his contract forbid lifting the code, he can be sued by Goldman (and I would bet he already has been).
Fascination.
not really
I used to have the only copy of the Magna Carta
In the interests of leaving 1984 in the previous century where it belongs, I will refrain from expressing my participation in any Two Minutes' Hate directed at Goldman Sachs by The Party.
Anything that makes Goldman Sachs unhappy should be rewarded, not punished.
Like them or not, GS paid the R&D on the software
The code is theirs. This is going to get thrown out.
nope
Unauthorized access to a computer
Regarding "double jeopardy", that means that the [i]same[/i] sovereign can't bring the same charges against a person a second time. The U.S. has [i]dual sovereigns[/i]. Therefore, state charges are not precluded even if they arise from the same activity that led to federal charges.
Routine practice is that if federal charges are brought the state normally doesn't bring charges even if it could. Common practice among people filing criminal complaints is that if they file a federal complaint they don't also file a state complaint. But those are just "common practice". Nothing requires them. Particularly with a situation like this, it is probably that Goldman, Sachs will now file state charges. And considering that this is probably under New York law, the District Attorney will pursue such a complaint.
Unauthorized access to a computer...
Because,
Where does this go?
impossible to prove