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Code Not Physical Property, Court Rules in Goldman Sachs Espionage Case
Former Goldman Sachs programmer Sergey Aleynikov, who downloaded source code for the investment firms high-speed trading system from the company's computers, was wrongly charged with theft of property because the code did not qualify as a physical object under a federal theft statute, according to a court opinion published Wednesday.
“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 [National Stolen Property Act], the 2nd Circuit Court of Appeals wrote in its opinion (.pdf).
The three-judge panel in New York also ruled that Aleynikov was wrongly charged with espionage, since the code was not a product designed for interstate or foreign commerce, a requirement under the Economic Espionage Act with which he was charged and convicted. The court found that Goldman system was neither produced for nor placed in interstate or foreign commerce, nor did the company have any intention of selling its system or licensing it to anyone.
The opinion finally provides explanation for why the judges delivered a surprise ruling last February that reversed Aleynikov conviction and sprung him from prison a year after he had begun to serve an eight-year sentence.
The ruling also deals a blow to the government ability to prosecute others for similar thefts of trade secrets under the EEA.
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Former Goldman Sachs programmer Sergey Aleynikov, who downloaded source code for the investment firms high-speed trading system from the company's computers, was wrongly charged with theft of property because the code did not qualify as a physical object under a federal theft statute, according to a court opinion published Wednesday.
“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 [National Stolen Property Act], the 2nd Circuit Court of Appeals wrote in its opinion (.pdf).
The three-judge panel in New York also ruled that Aleynikov was wrongly charged with espionage, since the code was not a product designed for interstate or foreign commerce, a requirement under the Economic Espionage Act with which he was charged and convicted. The court found that Goldman system was neither produced for nor placed in interstate or foreign commerce, nor did the company have any intention of selling its system or licensing it to anyone.
The opinion finally provides explanation for why the judges delivered a surprise ruling last February that reversed Aleynikov conviction and sprung him from prison a year after he had begun to serve an eight-year sentence.
The ruling also deals a blow to the government ability to prosecute others for similar thefts of trade secrets under the EEA.
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