United States v. Aleynikov

Brief Fact Summary.

Defendant was arrested and indicted for violating the National Stolen Property Act when, at the end of his employment at Goldman Sachs, heencrypted and uploaded more than 500,000 lines of source code he had written to a server in Germany. Defendant then downloaded the source code to a home computer and late transferred it to a flash drive and laptop. Defendant moved to dismiss the indictment. The district court denied the motion. The jury convicted Defendant. Defendant appealed.

Synopsis of Rule of Law.

The theft of intangible property does not constitute stolen goods, wares, or merchandise within the meaning of the National Stolen Property Act.

Facts.

Sergey Aleynikov (Defendant) was employed for two years as a computer programmer with Goldman Sachs. Defendant’s work focused on developing computer source code for the company’s electronic-trading system. Under the company’s confidentiality policy, Defendant was required to keep all the firm’s proprietary information—including intellectual property created by Defendant—confidential. The policy also prohibited Defendant from taking or using any intellectual property he created while employed by Goldman Sachs when Defendant’s employment ended. Defendant accepted a new position, and on his last day at Goldman Sachs, he encrypted and uploaded more than 500,000 lines of source code he had written while at Goldman Sachs to a server in Germany. When he returned home, Defendant downloaded the source code from the server to a home computer. Defendant later transferred the source code to a flash drive and laptop. Defendantwas subsequently arrested for violating the National Stolen Property Act (NSPA). At trial, Defendant moved to dismiss the indictment for failure to state an offense, which the district court denied. The district court held that, for purposes of the NSPA, the source code constituted goods that were stolen by Defendant. The court further denied Defendant’s argument that the NSPA did not apply to “intangible intellectual property,” such as the computer source code. The jury convicted Defendant, and Defendant appealed, arguing that the trial court erred when it denied his motion to dismiss.

Issue.

Whether the theft of intangible property constitutes stolen goods, wares, or merchandise within the meaning of the National Stolen Property Act.

Held.

No. The trial court’s ruling is reversed. The theft of intangible property does not constitute stolen goods, wares, or merchandise within the meaning of the National Stolen Property Act.

Discussion.

Tangible property must be taken for there to be deemed a good that was stolen, for purposes of the NSPA. The value or significance of a tangible good is not relevant to a determination of whether the NSPAhas been violated. At least two other federal circuit courts have also held that intangible property, such as source code does not constitute goods under the NSPA. If, however, the intangible property is transferred to a tangible form at the time of the theft, such as a photocopy or thumb drive, and the perpetrator completes the theft by taking the photocopy or thumb drive with him or her, the perpetrator may be convicted under the NSPA. In this case, Defendant stole intangible property in an intangible format. There is no evidence that Defendant stole anything tangible from Goldman Sachs. Defendant stole intangible source code by uploading it to an outside server in Germany. Although Defendant later transferred the source code to a thumb drive, the NSPAis not violated unless the intangible property is transferred to a tangible form at the time of the theft. Later storage of intangible property in a tangible form does not make the intangible property a stolen good.