Former Employee Sentenced to Prison for Trade Secret Misappropriation and Computer Fraud Related Misconduct
One of the more noteworthy employer/employee trade-secret misappropriation and Computer Fraud and Abuse Act (CFAA) cases came to an end earlier this week. Specifically, Mr. David Nosal wa sentenced on January 8, 2014 to one year and one day in prison. He was convicted for misappropriating his former employer's trade secrets and improperly accessing the employer's computer network.
We previously reported upon a trade secret misappropriation case and violation of the federal Computer Fraud and Abuse Act (CFAA) arising out of the employment relationship between David Nosal and his former employer. At the time we reported on this case, it was unusual in that the charges against Mr. Nosal essentially amounted to criminalization of violations of an employers' computer use policy.
Specifically, Mr. Nosal had been charged by U.S. prosecutors with one count of conspiracy, three counts of unauthorized access to a computer used in interstate or foreign commerce or communication, one count of unauthorized downloading and copying of trade secrets, and one count of unauthorized receipt and possession of stolen trade secrets.
Mr. Nosal had challenged these criminal charges primarily arguing that the CFAA was "aimed primarily at computer hackers" and that it "does not cover employees who misappropriate information or who violate contractual confidentiality agreements." This challenge resulted in an extensive and sometimes complicated procedural trail that saw the district court initially rejecting Mr.Nosal's arguments only to later accept the arguments and dismissing five counts of the six count indictment. From here the government appealed this decision to the Ninth Circuit Court of Appeals and later to an en banc appeal (an appeal to the full bench as opposed to a panel selected to hear the appeal) followed. Follow this link for a full explanation of the trial and appellate time-line.
Ultimately after dust from the the trial and appeals settled, the jury returned a guilty verdict against Mr. Nosal on all six counts of the indictment finding that he had conspired to gain unauthorized access to the computer system of his former employer, the executive search firm Korn/Ferry International, and to illegally obtain trade secrets belonging to Korn/Ferry. The jury also found Nosal guilty of three substantive computer intrusions in April and July 2005 and two substantives trade secret offenses that occurred in April 2005.
The Take-Away for Employers and Employees
The sentencing of Mr. Nosal is stark reminder to employees about the serious consequences that may result from trade secret misappropriation and engaging in unauthorized access to an employer's computer system.
The Nosal decision also eventually resulted in "clarifying" the scope of the CFAA (at least for employers and employees within the jurisdiction of the Ninth Circuit Court of Appeals) in that the Court held under the CFAA, "an employee accesses a computer in excess of his or her authorization when that access violates the employer’s access restrictions, which may include restrictions on the employee’s use of the computer or of the information contained in that computer."
For more information about trade secret protections or investigating trade secret misappropriation issues, including matters involving the Computer Fraud and Abuse Act, contact attorney Jason Shinn. He is a legal-technology nerd and has been retained as an expert in various legal matters involving computers and misconduct. He also routinely investigates employment-based workplace computer issues and misconduct, as well as making sure employer's meet their obligations when law enforcement needs to investigate suspected computer crimes involving employer provided computers and technology.