United States v. Agrawal
726 F.3d 235 (2013)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The interstate transport of intellectual property taken in a tangible format, such as computer code printed on paper, constitutes the theft of "goods, wares, or merchandise" under the National Stolen Property Act (NSPA). Additionally, theft of a trade secret that is part of an internal-use-only system can violate the Economic Espionage Act (EEA) if the trade secret is "related to" a product placed in interstate commerce, such as publicly traded securities.
Facts:
- Between 2007 and 2009, Samarth Agrawal worked as a quantitative analyst and later a trader at Société Générale's (SocGen) New York office in its High Frequency Trading (HFT) Group.
- In June 2009, while interviewing with a competitor, Tower Research Capital (Tower), Agrawal told them he had a complete understanding of a SocGen trading strategy and could build a similar system for them.
- On June 12, 2009, Agrawal gained access to the source code for SocGen's proprietary HFT systems, DQS and ADP.
- The following day, Agrawal printed over a thousand pages of the DQS code at SocGen's office, placed the papers in his backpack, and transported them to his apartment in New Jersey.
- Over the next few months, Agrawal accepted a lucrative job offer from Tower, printed hundreds more pages of SocGen's code, and provided Tower with handwritten notes derived from the stolen code to help them replicate the system.
- Agrawal resigned from SocGen in November 2009.
- On April 19, 2010, FBI agents arrested Agrawal at his New Jersey home and seized thousands of pages of the printed SocGen computer code.
Procedural Posture:
- A grand jury in the U.S. District Court for the Southern District of New York indicted Samarth Agrawal on one count of violating the Economic Espionage Act (EEA) and one count of violating the National Stolen Property Act (NSPA).
- Agrawal was tried before a jury in the district court.
- At the close of evidence, Agrawal moved to dismiss the indictment, arguing constructive amendment and prejudicial variance, which the trial court denied.
- The jury returned a guilty verdict on both counts.
- The district court sentenced Agrawal to concurrent 36-month prison terms.
- Agrawal appealed his conviction to the U.S. Court of Appeals for the Second Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the physical removal and interstate transport of proprietary computer code printed on thousands of sheets of paper constitute the transport of stolen "goods, wares, or merchandise" under the NSPA, and does the theft of such code violate the EEA's requirement that the trade secret be "related to" a "product... placed in interstate commerce" when the code is used to trade securities on national exchanges?
Opinions:
Majority - Judge Raggi
Yes, Agrawal's conduct violated both the NSPA and the EEA. Stealing computer code in a tangible format like printed paper constitutes theft of 'goods' under the NSPA, and the code was 'related to' securities traded in interstate commerce, satisfying the EEA's jurisdictional requirement. For the NSPA, the court distinguished this case from United States v. Aleynikov, where the theft was purely electronic and intangible. Here, Agrawal stole tangible property—thousands of sheets of paper belonging to SocGen. The NSPA applies when a physical item is stolen, even if its value is primarily derived from the intangible intellectual property it contains. For the EEA, the court again distinguished from Aleynikov. Instead of identifying the internal HFT system as the 'product' (which Aleynikov held was not 'placed in commerce'), the majority identified the publicly traded securities as the relevant 'product.' The court held that the stolen code 'related to' these securities because its sole purpose and value derived from facilitating their trade on national markets. This interpretation satisfied the EEA's jurisdictional element as it was written at the time.
Dissenting - Judge Pooler
No, Agrawal's conviction under the EEA should be reversed as it directly conflicts with the binding precedent of United States v. Aleynikov, although the NSPA conviction is proper. The majority improperly circumvents Aleynikov by adopting a new legal theory—that securities are the relevant 'product'—which was raised for the first time on appeal and is not supported by the indictment or trial record. The indictment and the government's original theory clearly identified SocGen's internal HFT system as the product, and Aleynikov squarely held that such a system, not intended for sale, does not satisfy the EEA's 'product' requirement. Furthermore, the majority's broad interpretation of the 'related to' nexus is so expansive it renders the statute's limitations meaningless and ignores Aleynikov's suggestion that the trade secret must 'make' the product. By upholding the EEA conviction, the majority is effectively ignoring the principle of stare decisis to achieve a desired result, retroactively applying the spirit of a congressional amendment passed after the conduct occurred.
Analysis:
This case significantly limited the impact of the Second Circuit's prior ruling in United States v. Aleynikov, which had created challenges for prosecutors in trade secret theft cases involving purely digital or internal-use intellectual property. By distinguishing Agrawal's conduct, the court clarified that printing digital information onto a physical medium and taking it makes the theft subject to the NSPA. More importantly, it provided an alternative theory for satisfying the pre-amendment EEA's jurisdictional element in the financial sector by defining the 'product' as the securities being traded, not the secret internal system itself. This decision closed perceived loopholes and affirmed that theft of valuable code, regardless of the method, could be prosecuted under existing federal statutes, even before Congress amended the EEA to explicitly broaden its scope in response to Aleynikov.
