People v. Aleynikov
2017 NY Slip Op 449, 48 N.Y.S.3d 9, 148 A.D.3d 77 (2017)
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Rule of Law:
Electronically copying secret scientific material, such as computer source code, and saving it onto a physical storage medium like a hard drive constitutes making a 'tangible reproduction' under New York Penal Law § 165.07. The intent to 'appropriate its use' is satisfied by evidence showing an intent to exercise permanent or virtually permanent control over the material's use.
Facts:
- Sergey Aleynikov was employed by Goldman Sachs as a computer programmer, writing and maintaining software for the company's valuable high-frequency trading system.
- Goldman Sachs implemented numerous security measures to protect the secrecy of its proprietary source code, and all employees, including Aleynikov, signed confidentiality agreements.
- In the spring of 2009, Aleynikov accepted a job with Teza Technologies, a startup competitor, for a salary roughly three times what he earned at Goldman.
- On June 1 and June 5, 2009, his last days of employment, Aleynikov used a program he wrote to copy thousands of proprietary source code files from Goldman's repository.
- He compressed, encrypted, and uploaded these files to an external server based in Germany.
- Aleynikov then downloaded the code from the German server to his personal computing devices and shared some of it with his new employer, Teza.
- To conceal his actions, Aleynikov deleted the program he used for the transfer and his 'bash history' (a log of computer commands) from his work computer.
- When initially questioned by the FBI, Aleynikov denied transferring any proprietary information but later admitted to uploading the material, downloading it to his home devices, and erasing his tracks because he knew it violated company policy.
Procedural Posture:
- Defendant Sergey Aleynikov was first prosecuted in federal court, where a jury in the U.S. District Court for the Southern District of New York convicted him under the National Stolen Property Act.
- On appeal, the U.S. Court of Appeals for the Second Circuit reversed the federal conviction, finding the intangible source code did not qualify as a stolen 'good' under the federal statute.
- The New York County District Attorney then charged Aleynikov under state law with unlawful use of secret scientific material.
- Following a trial in the Supreme Court of New York County (the state's trial court), a jury convicted Aleynikov on one count of unlawful use of secret scientific material.
- After the verdict, the trial court judge granted Aleynikov's motion for a trial order of dismissal, setting aside the jury's verdict on the grounds of legally insufficient evidence.
- The People (the prosecution) appealed the trial court's order of dismissal to the Supreme Court, Appellate Division, First Department (an intermediate appellate court).
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Issue:
Does electronically copying proprietary computer source code onto a server's hard drive constitute making a 'tangible reproduction or representation' with the 'intent to appropriate its use' in violation of New York's unlawful use of secret scientific material statute (Penal Law § 165.07)?
Opinions:
Majority - Richter, J.
Yes. Electronically copying proprietary computer source code onto a hard drive constitutes a 'tangible reproduction or representation' with the 'intent to appropriate its use' under the statute. The evidence was legally sufficient to support the jury's verdict. The court reasoned that although source code as an idea is intangible, the act of saving it onto a 'physical' hard drive where it takes up 'physical space' creates a tangible reproduction. The dictionary definition of 'tangible' is something having physical form, and expert testimony confirmed that data physically resides on a hard drive. The statute's plain language, which explicitly includes 'electronically reproducing,' is broad enough to encompass modern technology, and it would be incongruous to require a paper printout for liability. Regarding intent, the court found sufficient evidence that Aleynikov intended to exercise 'permanent control' over the use of the source code, satisfying one prong of the statutory definition of 'appropriate.' His surreptitious actions, transfer to a competitor, and attempts to cover his tracks demonstrated an intent to permanently use the code, not merely borrow it.
Analysis:
This decision is significant for its application of a pre-digital era statute to a modern cybercrime involving intangible intellectual property. It establishes that the term 'tangible reproduction' in New York law is broad enough to include digital copies of data stored on physical media, preventing defendants from using a 'digital loophole' defense. This ruling strengthens the ability of state prosecutors to pursue trade secret theft cases, especially where federal statutes may not apply, as demonstrated by the prior reversal of Aleynikov's federal conviction. The case signals that courts will interpret older criminal statutes flexibly to address harms caused by new technologies, ensuring the law keeps pace with innovation.
