BLOGS: Trade Secrets Blog

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Thursday, March 31, 2011, 3/31/2011 09:25:00 AM

Senator Kohl Wants to Beef Up Criminal Penalties for Trade Secret Theft

By Todd

The Milwaukee Business Journal is reporting that U.S. Sen. Herb Kohl is sponsoring a federal bill to increase penalties for stealing company trade secrets or other proprietary information. The bill would increase the maximum sentence for stealing trade secrets from 15 years to 20 years. The bill also orders the federal Sentencing Commission to consider increasing penalties for economic espionage.

Kohl’s bill, dubbed the Economic Espionage Penalty Enhancement Act, builds off of earlier recommendations made by federal agencies, including the departments of Commerce, Homeland Security, Justice and State.

Tuesday, March 29, 2011, 3/29/2011 09:09:00 AM

McAfee Report: Hackers Are Targeting Corporate Trade Secrets Now

By Todd

The San Francisco Chronicle is reporting that a new study says thieves have shifted their focus to corporate data such as trade secrets and marketing plans, making it the "new currency" of the underworld economy.

The report, based on a global survey of more than 1,000 senior IT workers, follows recent headlines of hacker attacks on Nasdaq OMX Group, RSA Security and energy companies. When it comes to these targeted attacks, many companies have taken the approach that "it won't happen to us, and if it does, we'll just pay for it then," said Simon Hunt, a vice president and chief technology officer at McAfee, which is based in Santa Clara. "What's become evident over the past year is that it's happening more than people expected."

To illustrate the impact of these targeted attacks, the report noted how a quarter of the companies said a data breach - or the serious threat of one - caused them to either stop or delay a merger and acquisition or a new product rollout.

The survey also found that when an organization suffers a data breach or loss, only 3 out of 10 report all such instances to government agencies or authorities, or stockholders. About 6 out of 10 "pick and choose" the incidents they report.

"Companies certainly aren't doing all the reporting they should or that I think most people would like them to," said Scott Aken, vice president for cyber operations at SAIC.

Businesses are also "generally trying to store their data in locations where they're offered the best ability to pick and choose whether they have to notify (about) a breach or not," he added. "Some countries' laws are set up in such a way that maybe they don't have to report."

Among the report's findings:

-- Lost or breached data cost companies more than $1.2 million on average. That compares to less than $700,000 in 2008, when a similar study was done.

-- In the United States, China and India, organizations are spending more than $1 million a week on protecting sensitive data abroad.

-- Employees' lack of compliance with internal security policies was considered the greatest challenge to securing information.

As for the outlook, Aken of SAIC expects to see more of these sophisticated attacks. "We'll continue to see very well-coordinated attacks against big companies that have good security postures in place," he said.

Thursday, March 24, 2011, 3/24/2011 09:21:00 AM

Cornell Tells Publishers: We're Not Signing Any More Nondisclosure Agreements

By Todd is reporting that Cornell University in Ithaca, New York has announced it will no longer sign contracts with publishers that contain nondisclosure agreements inhibiting Cornell's ability to communicate with others about the price and licensing terms applicable to content such as journal subscriptions and databases. You can click here to read the Cornell press release:

“Libraries should be able to talk to each other about the details of these contracts. It’s as simple as that,” said Anne R. Kenney, Carl A. Kroch University Librarian. “When contracts are kept secret, institutions cannot negotiate effectively.”

As Cornell notes, NDAs often cover more than price, governing the way content can be used and how it’s accessed. Public institutions’ agreements can be requested through the Freedom of Information Act. Cornell has already put the new policy into action, deferring renewal on one contract until the NDA clause was removed and foregoing another publication because the publisher would not remove the clause.

This will be an interesting topic to follow. Sure, publishers want to protect pricing and terms negotiated with one customer from use by other customers and potential customers. But now the customers are striking back and refusing to purchase. We'll see who hangs strong and who doesn't.

NOTE: This blogger attended law school at Cornell and the picture above is of the law library.

Wednesday, March 23, 2011, 3/23/2011 09:20:00 AM

Fourth Circuit Hearing Argument on Propriety of DOJ Suboenas in Trade Secrets Case

By Todd

A first here at Womble Trade Secrets Blog - we are blogging about another blog's post. The BLT (Blog of Legal Times) published a fascinating piece yesterday regarding an argument that has been heard by the United States Court of Appeals for the Fourth Circuit in Richmond. You can find their piece by clicking on the title to this post or here:

Anyway, the DOJ is apparently investigating Kolon Industries, a maker of high-strength fiber that competes with DuPont's Kevlar brand technology, as to Kolon's possible involvement in a scheme to misappropriate DuPont’s Kevlar brand technology or trade secrets regarding that technology. Former DuPont engineer Michael Mitchell pleaded guilty and was sentenced about a year ago to 18 months in federal prison for violations of the economic espionage act.

According to the DOJ, see, in 2007 Mitchell began to work as a consultant for Kolon. Kolon is a Korean company that makes a product named Heracron, which competes in the market with DuPont's Kevlar for use in a number of applications. In support of his plea, Mitchell acknowledged that on September 5, 2007, he emailed much of the contents of a DuPont proprietary spreadsheet document entitled "Denier Economics" to an official with Kolon. "Denier" is a term used to describe the weight per unit length (linear density) of a continuous filament or yarn. The Denier Economics spreadsheet contained sensitive business trade secret information related to DuPont's production capacity for Kevlar yarn in a variety of denier types.

Included in the information for each denier type were specific figures relating to annual production, unit capacity, spin speeds, and several factors relating to line efficiency (such as percentage yield and percentage up time). The Denier Economics spreadsheet was closely held and distributed to a small number of DuPont personnel on a need-to-know basis only.

Anyway, folks - this appears to all be related to what's going on at the Fourth Circuit and we'll report back what we can find out about this interesting issue.

Tuesday, March 22, 2011, 3/22/2011 08:48:00 AM

Former Goldman Sachs Computer Programmer Sentenced to 97 Months for Trade Secret Theft

By Todd

The FBI has released the following regarding the sentencing yesterday of Sergey Aleynikov to 97 months in federal prison for violations of the federal Economic Espionage Act:

PREET BHARARA, the United States Attorney for the Southern District of New York, announced that SERGEY ALEYNIKOV, a former computer programmer at Goldman Sachs & Co. (“Goldman Sachs”) was sentenced today in Manhattan federal court to 97 months in prison for stealing valuable, proprietary computer code of Goldman Sachs. A jury in Manhattan federal court previously found ALEYNIKOV guilty on December 10, 2010, of theft of trade secrets and interstate transportation of stolen property charges. U.S. District Judge DENISE L. COTE imposed the sentence on ALEYNIKOV.

Manhattan U.S. Attorney PREET BHARARA said: “Protecting the proprietary information of America’s companies is critically important. Today’s sentence sends a clear message that professionals like Sergey Aleynikov who abuse their positions of trust to steal confidential business information from their employers will be prosecuted and punished.”

According to the evidence presented at trial and at the sentencing hearing:

From May 2007 to June 2009, ALEYNIKOV was employed at Goldman Sachs as a computer programmer responsible for developing computer programs supporting the firm’s high-frequency trading on various commodities and equities markets. Since acquiring the system in 1999 for approximately $500 million, Goldman Sachs modified and maintained it and took significant measures to protect the confidentiality of its computer programs. Goldman Sachs’ trading system generated millions of dollars per year in profits for the firm. They took several measures to protect the system’s source code, including requiring all Goldman employees to agree to a confidentiality agreement.

In April 2009, ALEYNIKOV resigned from Goldman Sachs and accepted a job at Teza Technologies (“Teza”), a newly-formed company in Chicago, Illinois. He was hired to develop Teza’s own version of a computer platform that would allow Teza to engage in high-frequency trading. His last day of employment at Goldman Sachs was June 5, 2009.

Beginning at approximately 5:20 p.m. on June 5, 2009—his last day working at Goldman Sachs—ALEYNIKOV, from his desk at Goldman Sachs, transferred substantial portions of the firm’s proprietary computer code for its trading platform to an outside computer server in Germany. He encrypted the files and transferred them over the Internet without informing Goldman Sachs. After transferring the files, he deleted the program he used to encrypt them and deleted his computer's “bash history,” which records the most recent commands executed on his computer.

In addition, throughout his employment at Goldman Sachs, ALEYNIKOV transferred thousands of computer code files related to the firm’s proprietary trading program from the firm’s computers to his home computers, without the knowledge or authorization of Goldman Sachs.
On July 2, 2009, ALEYNIKOV flew to Chicago, Illinois, to attend meetings at Teza’s offices, bringing with him his laptop computer and another storage device, each of which contained Goldman Sachs’ proprietary source code. He was arrested on July 3, 2009, as he arrived at Newark Airport following that visit.

In addition to the prison sentence, Judge COTE ordered ALEYNIKOV to serve three years of supervised release following his prison sentence. Judge COTE also ordered him to pay a $12,500 fine.

During the sentencing proceeding, Judge COTE said, “[Aleynikov’s] conduct deserves a significant sentence because the scope of his theft was audacious—motivated solely by greed, and it was characterized by supreme disloyalty to his employer.”

Friday, March 18, 2011, 3/18/2011 10:37:00 AM

Tekmira Sues Alnylam Seeking Over $1 Billion As Damages For Trade Secret Theft Allegations

By Todd

Xconomy is reporting that Tekmira Pharmaceuticals, the Vancouver, BC-based maker of technology to deliver RNA interference therapies, has filed a lawsuit against Cambridge, MA-based Alnylam Pharmaceuticals seeking damages of more than $1 billion because of what Tekmira’s CEO calls “relentless and egregious” misappropriation of trade secrets. You can read the complaint here:

The two companies have been partners for years, as Alnylam is considered one of the leaders in RNA interference therapy—which seeks to specifically silence disease-related genes—while Tekmira is a leading developer of lipid nano particle delivery technologies that are thought to help get the RNA-silencing therapies where they need to go in cells. The two companies struck a formal licensing agreement in 2007, followed by a further manufacturing supply deal in 2009. Delivery of RNAi treatments, scientists say, remains one of the major challenges that must be solved for this field to reach its potential in fighting diseases that aren’t adequately treated by today’s small molecules or protein therapies.

Over time, Tekmira alleges, Alnylam has misused the information it obtained under the agreements, which provided Alnylam the right to use the lipid nanoparticle technology. Tekmira claims that Alnylam abused its status as a collaborator by attempting to copy the Tekmira methods for its own proprietary delivery technology, and by sharing Tekmira’s delivery technology with a third party without Tekmira’s consent. Alnylam has sought patent protection on some of the methods which Tekmira has already patented - at least according to Tekmira.

Despite repeated requests for Alnylam to stop, Murray said in the conference call, “This illegal activity continues today.” Tekmira’s current lipid nanoparticle technology represents $200 million of cumulative investment over the years. And, the technology is vitally important to Alnylam as it is the method the Cambridge firm uses to deliver its lead RNAi drug candidate that circulates through the bloodstream—ALN-VSP for liver cancer.

“We concluded enough is enough,” Murray said on the conference call. In the statement, he said, “Tekmira’s goal for this litigation is to regain—as soon as possible—control over our proprietary lipid nano particle technology and preserve its full value.”

Alnylam released a statement saying, in part: “Alnylam has had a longstanding relationship and business partnership with Tekmira dating back to at least 2006, which includes significant past and ongoing funding of Tekmira as well as a significant equity position held by Alnylam in Tekmira. Alnylam received no prior notification of this complaint or dispute.”

“We firmly believe that the complaint filed by Tekmira is without merit or foundation, and we intend to fully defend ourselves in this matter,” said Barry Greene, President and Chief Operating Officer of Alnylam, in the statement. “Given the longstanding supportive and fully collaborative relationship we have had with Tekmira, it is surprising and extremely unfortunate that they have chosen to voice concerns through unexpected litigation rather than constructive business dialog, and to shift resources away from the scientific and clinical advancement of RNAi therapeutics, which should be the sole focus at this time.”

Thursday, March 17, 2011, 3/17/2011 10:43:00 AM

"Never Mind . . . . " Renault Exonerates Three Accused, and Terminated, Employees Finding No Evidence of Trade Secret Misappropriation

By Todd

Gilda Radner used to have a character named "Emily Litella" who used to go on and on and then realize she was way off base. Here's an example:

"What is all this fuss I hear about the Supreme Court decision on a "deaf" penalty? It's terrible! Deaf people have enough problems as it is!"

The news anchor interrupts Litella to point out her error: "That's death, Ms. Litella, not deaf ... death."
Litella would wrinkle her nose, say something like, "Oh, that's very different...." then meekly turn to the camera and say, "Never mind."

Well, The Wall Street Journal is reporting that French car maker Renault SA said Monday it has exonerated three executives who it accused of leaking sensitive proprietary information and fired because an investigation by French authorities found no evidence of the alleged wrongdoing. In fact, Renault admits the three are entirely innocent.
In a statement, Renault said its top two executives Chief Executive Carlos Ghosn and vice chairman Patrick Paleta will personally apologize to the three and that reparations will be made. Given the enormous media attention Renault's charges of industrial espionage generated, it's likely the payments for damage done to the three men's reputations will mount well into the millions. In order to address that financial hit — and accept moral responsibility for having aired the company's mistaken accusations — Ghosn said he and any other managers "who from near or afar were involved in this affair" would renounce the bonuses they were granted for 2010 (Ghosn's bonus alone was $2.2 million) as well as 2011 stock options earned. And while Ghosn expressed his willingness to have the wrongly dismissed men returned to their jobs — two of the three say they might consider the offer once damages are paid — he rebuffed calls that he and his chief operating officer, Patrick Pélata, resign over the matter.
Time is reporting that French investigators continue to look into what they believe was an inside scam to swindle the company out of what could be a surprisingly modest amount of money. The main target of those suspicions: the head of Renault's own security division, who lead the internal inquiry against his three colleagues.
This isn't over, folks.

Tuesday, March 15, 2011, 3/15/2011 10:32:00 AM

Prosecutors Seeking Ten Year Sentence in Goldman Sachs Trade Secret Theft Case

By Todd

Having sucessfully prosecuted and obtained a conviction against Sergey Aleynikov, federal prosecutors are reportedly asking that he be sentenced to ten years in prison. The Wall Street Journal is reporting that sentencing litigation continues. "Aleynikov was simply a thief motivated by greed, someone who sought to benefit from the valuable intellectual property of his employer to make money for himself and his new company," Assistant U.S. Attorney Rebecca A. Rohr said in a court filing late last week.

In court papers, prosecutors said Mr. Aleynikov should be sentenced within a guidelines range of eight years and one month to 12 years and one month. Late last month, a federal judge ordered that Mr. Aleynikov be jailed pending sentencing after prosecutors contended he was an increased flight risk in part because of the lengthy sentence he faces and his connections to his family in the U.S. are strained. Mr. Aleynikov holds dual Russian and U.S. citizenship and is separated from his wife.

However, Kevin Marino, a lawyer for Mr. Aleynikov, said in a separate filing that Mr. Aleynikov should be sentenced to probation. In part, Mr. Marino argued that Mr. Aleynikov intended only to use portions of the downloaded code that were "open source," or freely available code.

The jury never heard evidence that Mr. Aleynikov stole the entire high-frequency trading platform or attempted to sell it to a competitor, Mr. Marino said. The evidence at most showed he intended to use the source code to make it easier for him to build a high-frequency platform, Mr. Marino said.

"Nevertheless, the government now seeks to have Aleynikov punished as though he had not only stolen Goldman's entire platform, as it originally claimed, but also had sold that platform to a Goldman competitor who used it to cause Goldman monetary damages of $20 million," Mr. Marino said. "That is simply not a fair reading of the jury's verdict."

Mr. Marino also said the consequences Mr. Aleynikov has already suffered should be a sufficient deterrent to others who might steal intellectual property, including "the loss of Mr. Aleynikov's job, the destruction of his reputation and the breakup of his family."

We'll report back once a sentence is rendered.

Monday, March 14, 2011, 3/14/2011 11:11:00 AM

Connecticut Court Says Law Firm's Former Associate Didn't Steal Trade Secrets

By Todd

Here's a relatively new one - the Connecticut Law Tribune is reporting that claims filed by the estate of a deceased attorney against his former associate were dismissed by the Connecticut trial court.

David Poirot was hired by Stephen F. Meo shortly after graduating from the University of Connecticut School of Law. He served as an associate for Meo for 14 years, and said he got along well with both Steven Meo and his wife, Eloise Marinos.

Meo was hospitalized for a heart condition in October 2005. Poirot said he stayed at the office during Meo’s illness and sent letters to clients after his death giving them the option to retain his services. Meo died in April 2006, and the litigation commenced. He informed a trustee handling the Meo estate of all former Meo clients he was working with and files he had taken from the office.

In her ruling on the trade secret claims, Judge A. Susan Peck found that plaintiff Marinos had failed to show that the material allegedly taken was a trade secret under the Connecticut Uniform Trade Secrets Act. The law defines a trade secret as one that is not generally available, is the subject of reasonable efforts to maintain secrecy. and has an independent economic value derived from that secrecy.

“With respect to the retainer agreement and the personal injury intake checklists, these are standard form documents which do not contain or constitute trade secrets,” Peck’s ruling stated.
The judge also concluded that the personal injury checklist was boilerplate in nature and that there was no independent economic value in or effort to keep secret the client case file management system. Two client case files did not contain trade secret information nor have independent economic value, according to the ruling.

The court also issued judgment in favor of Poirot on separate allegations of breach of the duty of loyalty and computer crimes, finding that the plaintiff had failed to produce required evidence of measurable damages. Judgment was issued for Poirot on a conversion count based on the court’s finding that the claims were aired and decided in prior litigation over fees and were barred by the doctrine of res judicata.

The court also found the doctrine barred civil conspiracy counts against Poirot and Johnson. Separate allegations that they violated the Connecticut Unfair Trade Practices Act did not survive because the plaintiff failed a required showing of an ascertainable loss.

Marinos was represented in the most recent action by New Haven attorney John R. Williams, who declined to comment for this article. In a notice of appeal, Williams questions whether the judge erred in ruling that proof of actual damages was required to sustain actions for breach of the duty of loyalty and computer crimes and by finding that the plaintiff failed to provide sufficient proof to permit any of her claims to be tried. He also will argue that the claims were not barred by the doctrine of res judicata and that proof of an ascertainable loss was not necessary for a claim under the unfair trade practices statute.

Thursday, March 10, 2011, 3/10/2011 12:10:00 PM

Seattle's Best Says Borders' Store Closings Exposes Its Trade Secrets to Potential Loss

By Todd

The Wall Street Journal is reporting that Starbucks Corp.’s Seattle’s Best Coffee unit said Borders Group Inc.’s plans to reject store leases and abandon property could damage the java seller’s brand name and expose its trade secrets.

Seattle’s Best lodged a protest to the book retailer’s move to close about 200 stores with the U.S. Bankruptcy Court in Manhattan because the plan doesn’t properly address how address the Seattle’s Best cafés that operated in most of those Borders locations will be dealt with.

Seattle’s Best said its “interests will be materially affected by the closing” of Borders stores and it “may need to take steps to protect those interests, particularly with respect to its trademarks, trade dress, and trade secrets.”

The coffee company didn’t specify the nature of those trade secrets–perhaps how to whip up the perfect latte? But it did say that it provided training and “proprietary information” to the Borders employees who worked the cafés so that Seattle’s Best “beverages are prepared in accordance with SBC trade secrets.”

We'll keep an eye on this one for you.

Wednesday, March 09, 2011, 3/09/2011 09:22:00 AM

Renault's Response in Alleged Trade Secret Theft Case Deemed Hasty by Wall Street Journal

By Todd

We blogged about this case upon the reports of the suspension of three key employees at Renault: They've since been dismissed by Renault.

The Wall Street Journal yesterday had a front-page piece that was fascinating in its reporting and coverage of the post-allegation developments in this Renault matter. The company, its CEO and Chief Operating Officer all look to have some egg on their face in that their original accusations are not exactly panning out in fact.

You need to read this piece - it is well written. We appreciated this reporting especially:

"The investigation led to three bank accounts, which Renault investigators assumed were the repository for cash received in exchange for corporate secrets. One had been opened in March 2009 in Switzerland and was funded by money coming from a firm in Cyprus, these people said. A second had been opened in February 2010 in Liechtenstein, and received money from another Cyprus-based company. This second account was used to transfer money to a third account, in Switzerland, via a Swiss company, these people added. It is unclear who alerted Renault to the existence of these accounts."

But, alas - this is also part of the piece:

"Two months [following the allegations], the investigation is looking more like the work of the Keystone Kops. There are growing signs that Renault pulled the trigger too fast, according to interviews with law-enforcement officials, executives, lawyers and outside consultants. So far, the French car company has come up with little proof, these people say. For example, police investigators found no secret bank accounts connected to the three managers, some of these people say."

We'll keep an eye on this one for you.

Monday, March 07, 2011, 3/07/2011 09:55:00 AM

Madoff Client Lists and Holdings Create New Trade Secrets Battle Between Banks and Madoff Trustee Irving Picard

By Todd

Bloomberg is reporting that a new spat is generating over Madoff Trustee Irving Picard's proposal to a federal judge that would permit the Trustee to disclose and share a large amount of information the banks consider trade secret protected. Apparently the Trustee and the banks have executed confidentiality agreements that prohibit the Trustee from using information shared with his office in certain ways - and the banks now claim that he wants the Court to modify those agreements over the objections of the banks.

The banks said the trustee has no right to “abrogate” a yearlong agreement to protect trade secrets by revising his rules for handling confidential information. If Picard has his way, the bank’s anti-money-laundering policies, risk-assessment methods and internal reviews might be shared with every major financial institution in New York and thousands of other parties, JP Morgan argued.

Citigroup called Picard’s proposal “fatally flawed.” Thousands of pages of documents it delivered to Picard since receiving his July 2009 subpoena might be passed around, including pages identifying “potential and actual transactions” contemplated by Citigroup, the New York-based bank said in a court filing. The documents were delivered under a confidentiality agreement with Picard that he is seeking to undo, it said.

We'll keep an eye on this one for you.

Wednesday, March 02, 2011, 3/02/2011 11:11:00 AM

It's An Ill Wind in Great Britain: Goldenfry Foods Wins Large Trade Secrets Verdict Against Frontier Foods

By Todd is reporting that Goldenfry Foods has a won a legal judgement against three former employees who misused trade secrets to establish a breakaway company and appropriate a £5m supermarket contract for gravy granules.

The three co-defendents and the company they owned, Frontier Foods, faced a multi-million pound bill for legal costs and damages as a result of this action, after an initial liability judgement in mid January 2011.

However, the new High Court verdict means that these expenses have been waived by Goldenfry in favour of a two-year agreement that means the individuals cannot compete in the UK gravy products market.

Matthew Howarth, partner and head of commercial litigation at Gordons law firm, which advised Goldenfry in this case, told that the long court battle (in a case which began in December 2007) had raised complex issues.

Broader industry concerns

This was due, he explained, to difficulties conceptualising the law surruounding restrictive covenants and what former employees are allowed to carry away from a given employer “in their heads”.

"New employers cannot take take trade secrets [when employing staff from rival firms] but they can take enhanced skills and knowledge; however, there's a fine line between the two sometimes that can be difficult to spot," he said.

Wetherby-based Goldenfry successfully argued that Frontier could not have met the supermarket supply contract without using trade secrets, said Howarth, who stressed the wider concern within research and development (R&D) focused industries about senior employees leaving and making use of insider knowledge.

"Goldenfry was faced with those trade secrets being actively used against the company by Frontier who were able to secure a contract because of it," he said.

"We had a situation where the last individual left [Goldenfry] in January 2007, and Frontier secured the contract in March/April of that year. We argued successfully that no-one could achieve that from scratch."

Smoking gun...

Howarth added that delays relating to non disclosure of R&D information requested by the court - that helped Frontier win the contract - and suspicions that existing data was based on trade secrets, suggested a "smoking gun."

After the liability ruling in January against Frontier and senior staff members Malcolm Austin, Paul Chapman and Rob Waddell, the defendents faced an indeterminate costs and damages bill.

But Howarth confirmed that Frontier entered administration shortly after this liability judgement was passed, with Goldenfry subsequently purchasing the firm’s assets from the administrator and signing the two-year non-competition agreement with the defendents this week.

BLOG EDITOR'S NOTE: Sounds like the British courts were dealing with the Anglicized version of the inevitable disclosure doctrine and found that it DID apply to these former employees. The "loser pays" system in Great Britain sounds like it bankrupted the defendants and the outcome of the litigation is that Goldenfry effectively cooked its former employees and competitors.

Tuesday, March 01, 2011, 3/01/2011 09:18:00 AM

Former Societe Generale Trader Gets Three Years For Trade Secret Theft

By Todd

Bloomberg is reporting that former Societe Generale SA trader Samarth Agrawal was sentenced to three years in prison for stealing the bank’s high-speed trading software.

A federal jury in Manhattan in November found Agrawal, 27, guilty of theft of trade secrets and of transporting stolen property in interstate commerce after a two-week trial. U.S. District Judge Jed S. Rakoff sentenced him yesterday.

“In the case of this defendant, we have an essentially good guy who did something very bad,” Rakoff said in ordering a prison term of less than the 63-month to 78-month sentence called for under federal guidelines.

Rakoff said he gave Agrawal credit for accepting responsibility for his crime and for having led an honest life before the theft. In addition to the prison term, Rakoff sentenced Agrawal to two years of supervised release. Agrawal may be deported to his native India after his release from prison, Rakoff said.

At trial, Agrawal testified under questioning by his own lawyer that he shared information about Societe Generale’s trading software with a Manhattan hedge fund, Tower Research Capital, LLC, where he hoped to create a similar system. Rakoff said at the time that he was “puzzled” by Agrawal’s testimony and that he assumed it was part of a “sympathy defense.”

Admitted Crime

“He was essentially admitting all of the elements of the charge as the court interpreted the indictment,” Rakoff said yesterday.

Agrawal also testified that his superiors at Societe Generale encouraged him to work at home because spending too many nights and weekends in the office would raise “red flags” for company security. He said that was why he printed copies of the computer codes in June 2009 to study at home.

Agrawal was hired in 2007 in New York by the Paris-based bank to be a quantitative analyst. He was promoted to trader and given access to the company’s high-frequency trading software in April 2009, according to prosecutors.

Later, during 10 to 12 meetings with Tower executives, he shared some aspects of a Societe Generale trading program called DQS, for “distributed quotation system,” Agrawal said. He said he used Societe Generale’s codes because he wanted the job at Tower and because he would have had to build a similar system once hired by the hedge fund.

“That is SocGen’s trade secret and I stole it,” Agrawal said in a statement to Rakoff before he was sentenced. “And I should not have.”
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