Cases from Other federal statute

United States Court of Appeals for the Ninth Circuit
The Court of Appeals for the Ninth Circuit decides to rehear United States v. Nosal en banc, ordering district courts to ignore panel decision

On April 10, 2012, Chief Judge Alex Kozinski, writing for the Ninth Circuit Court of Appeals (en banc), issued a final decision in the case United States v. Nosal, narrowly interpreting the scope of the Computer Fraud and Abuse Act (CFAA). Chief Judge Kozinski’s opinion made clear his unwillingness to expand the reach of the CFAA for fear of criminalizing a wide range of seemingly innocuous behavior that Congress did not intend.

The particular facts of this case are not nearly as significant as the question of law and statutory interpretation presented, but briefly, the United States government brought charges against defendant David Nosal and his alleged accomplices for violations of the CFAA. Nosal was a former employee of executive search firm, Korn/Ferry International, while his suspected co-conspirators were current employees of the firm. The twenty-count superseding indictment alleged that current Korn/Ferry employees transferred confidential and proprietary information to Nosal from a confidential database of executives and companies, which was developed and maintained by Korn/Ferry and considered to be of great value to the company as against competitors.

The legal question presented was whether the employees “exceeded [their] authorized access” to the company computer system, within the meaning of the CFAA, when they transmitted confidential Korn/Ferry information to Nosal in violation of their employer’s computer use restrictions. The district court denied Nosal’s motion to dismiss the indictment at first, but later dismissed most of the counts against him after granting his motion to reconsider in light of the holding in LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009). However, a 2-1 panel decision of the Court of Appeals for the Ninth Circuit reversed the district court and reinstated counts of the indictment. The majority found factual distinctions from the present case to Brekka and held that “under the CFAA, an employee accesses a computer in excess of his or her authorization when that access violates the employer’s access restrictions.” 642 F.3d at 789.

On October 27, 2011, the Ninth Circuit Court of Appeals granted Nosal’s petition for rehearing en banc, clarifying that the previous three-judge panel decision would hold no precedential value. Oral arguments were heard on December 15, 2011, and despite the circuit split now created over the scope of the CFAA, the en banc court affirmed the district court’s dismissal of several counts of the indictment. The April 10, 2012 decision held that “exceeds authorized access” in the CFAA pertains to violations of restrictions on access to information, and not restrictions on its use.

The United States Court of Appeals for the Second Circuit
Second Circuit Limits CFAA in Cannibal Cop Case

About two years ago Alberto Valle, later known as the “Cannibal Cop,” was convicted of being involved in a criminal conspiracy to kidnap and violating the CFAA by using his work access as a New York City Police Officer to further his conspiracy. After his jury conviction, Valle filed a motion for acquittal on both charges. The district court granted his motion on the kidnapping charge, finding that there was a lack of sufficient evidence to establish the kidnapping conspiracy, but denied the motion on the CFAA charge. The Second Circuit then reviewed the case and found in favor of Valle because the language of the CFAA was ambiguous.
“The CFAA imposes both criminal and civil liability for anyone who ‘intentionally accesses a computer without authorization or exceeds authorized access,’ and in doing so ‘obtains…information from any protected computer.’”18 U.S.C. §1030(a)(2)(C). The crux of the decision and the circuit split is based on the meaning of the phrase “exceeds authorized access.” The First, Fifth, Seventh and Eleventh Circuit Courts have all held that the language in the CFAA is clear and has broader application- that “under the statute you’re not entitled to use your company access to obtain information for a purpose not permitted by your employer.” However, the Second Circuit in Valle joins the Fourth and Ninth Circuit in holding that the CFAA has a much narrower application- Valle’s activity does not violate the CFAA because Valle was authorized by his employer to access the information he accessed- it doesn’t matter that Valle’s purpose for seeking the information was outside the scope of his employer’s authority. Though the Second Circuit saw the merit in the view adopted by the First, Fifth, Seventh and Eleventh Circuits, the Second Circuit decided it must find in favor of Valle, the criminal defendant, because of the rule of lenity.
Read the full decision here. It looks probable that this issue will be analyzed by the Supreme Court due to the circuit split that has occurred. Stay tuned for more developments on the interpretation of the CFAA.

United States District Court for the District of Arizona
Arizona Requires Specificity in Trade Secret Description

The United States District Court for the District of Arizona applied Arizona’s Uniform Trade Secrets Act legislation to grant Tuscon Embedded Systems Inc.’s ("TES") motion for summary judgment on April 8, 2016. TES sued Turbine Powered Technology for Turbine’s alleged failure to pay TES for parts used to modify Turbine’s engine product into a one-megawatt generator. Turbine counter-sued, claiming that TES had stolen its trade secrets, including “parameters and settings, including timing, temperatures, flow rates, horsepower settings, pressures” and instructions on making and operating the modified engines. The court granted TES’s summary judgment motion because Turbine’s description of the trade secrets were not legally sufficient.

The court noted that when describing claimed trade secrets, “catchall phrases” typically can’t reach the level of specificity required to establish the substance of a legally protectable secret and survive a summary judgment motion. This decision is in line with the U.S. Court of Appeals for the 9th Circuit’s decision in Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161 (9th Cir. 1998), which held that “dimensions and tolerances” are too vague to clearly establish the substance of the trade secret.

United States District Court for the Central District of California
Doll Designer Alleges Hasbro Violated DTSA with “My Little Pony”

Plaintiff Elinor Shapiro (“Shapiro”) alleges that Defendant Hasbro, Inc. (“Hasbro”) misappropriated her trade secrets regarding new versions of the popular doll “My Little Pony.” Shapiro works as a doll creator and made a submission to Hasbro for a new line of pony dolls that are clear, filled with glitter, and light up. The submission included a presentation, marketing plan, and prototypes. Roughly 17 months later, Hasbro released a new line of “My Little Pony” dolls that are clear, light up and filled with different colored glitters. Shapiro argues that this was a misappropriation of information she presented, and has filed two lawsuits against Hasbro.

Shapiro’s first lawsuit, Shapiro v. Hasbro Inc. et al.,, No. 2:15-cv-02964, which is set to go to trial in September 2016, alleges multiple claims including copyright infringement, breach of contract, and multiple California trade secret law violations. Shapiro filed the second lawsuit, Shapiro v. Hasbro Inc. et al., No. 2:16-cv-05750, on August 2, 2016. The second suit drops the copyright infringement claims and focuses more on trade secrets, including a claim under the Defend Trade Secrets Act (DTSA), which took effect in May 2016.

The complaint for Shapiro’s latest lawsuit can be found here: http://tsi.brooklaw.edu/cases/shapiro-v-hasbro-inc-et-al/filings/shapiro-v-hasbro-inc-et-al

United States District Court for the Southern District of Iowa
Chinese National Sentenced to Three Years for Conspiring to Steal Trade Secrets

On October 5, 2016, U.S. District Judge Stephanie M. Rose sentenced Mo Hailong (“Robert Mo” or “Mo”) to 3 years in prison for conspiracy to steal trade secrets from DuPont Pioneer and Monsanto. Mo was a legal resident living in Florida at the time of his arrest.

In the plea agreement, Robert Mo admitted he participated in a long-term conspiracy to steal trade secrets from DuPont Pioneer and Montsanto. Mo stole genetically modified seeds from both companies and sent them to scientists in Beijing, China. He was one of three other men from China arrested in 2013 for sending stolen, genetically modified seeds to China to be counterfeited. The stolen seeds are for a strain of corn that is one of the agricultural industry’s most valuable secrets.

The Judge opted to sentence Mo to prison time rather than community service to deter Chinese companies from engaging in such criminal behavior. In addition to sentencing Robert Mo, the Court ordered the forfeiture of two farms in Iowa and Illinois that Mo purchased with others during the course of the conspiracy.