Trade Secrets Defendant Set Free

Here’s an interesting story from the New York Times DealBook on the case of a man convicted under the Economic Espionage Act of stealing trade secrets but ordered freed from prison by the United States Court of Appeals for the Second Circuit in Manhattan.

There’s been lots written about recent developments in the case of Sergey Aleynikov, but so far the Court hasn’t elucidated.

Aleynikov, you may recall (we wrote about him here and elsewhere), was a former Goldman Sachs programmer who stole the company’s proprietary trading code and tried to take it to his new employer.

He was convicted and ultimately sentenced to 97 months in prison.

Just after the oral argument on his appeal, the Court ordered him released stating that the opinion explaining its reasons would follow “in due course.”

While no one is sure why the Court took the unusual step, the betting is that they determined that source code embedded in proprietary software not itself a product for sale is not covered under the Economic Espionage Act, 18 U.S.C. § 1832, which covers only trade secrets “related to or included in a product that is produced for or placed in interstate or foreign commerce.” The conviction under the Interstate Transportation of Stolen Property likely was bounced for similar reasons.

DealBook thinks the case could end up in the Supreme Court. I’d bet not.

In any case, this may be an example of a substantial hole in criminal trade secrets protections under U.S. laws.