Source Code and Unlawful Use of Secret Scientific Material

In 1967, the drafters of the New York Penal Law sought to ensure that a defendant who makes a copy of secret scientific material, but does not take the original, would still be subject to criminal sanctions even though the defendant has not technically committed larceny. In the digital age where nearly everything is electronically stored, this poses new issues for courts to grapple with. In People v. Aleynikov (Ct. App. 5/3/2018) (Fahey, J.) (7-0), the Court of Appeals, affirming the Appellate Division’s order, held that the defendant made a “tangible reproduction or representation” of source code when he uploaded the code to the hard drive of a German server and subsequently to his personal computer.

Defendant Aleynikov was a former Goldman Sachs’ employee who left the firm to work at a new startup company, Teza Technologies. The defendant, tasked with developing Teza’s high-frequency trading infrastructure and software from scratch, decided to download Goldman’s infrastructure codes to use them at Teza. After the breach was found, the defendant was arrested by FBI Agents and after waiving his Miranda rights, admitted to downloading Goldman’s source code to an unblocked German website where the defendant then downloaded the codes to his personal laptop.

(The defendant was first charged in federal court, but his conviction was overturned by the Second Circuit.  He was then charged in state court.)

At his state trial, Defendant moved for a trial order of dismissal, arguing that the evidence was not sufficient to show that he had made “a tangible reproduction” of Goldman’s source code, or to show his “intent to appropriate . . . the use of” the code. The judge initially reserved judgment on the motion, and the jury convicted the defendant. Six years after conviction the Supreme Court granted defendant’s motion for a trial order of dismissal with respect to both unlawful use of secret scientific material counts and set aside the jury’s verdict. The Appellate Division reversed the Supreme Court order and reinstated the jury’s conviction.

Penal law § 165.07 states that “a person is guilty of unlawful use of secret scientific material when, with intent to appropriate to himself or another the use of secret scientific material, and having no right to do so and no reasonable ground to believe that he has such right, he makes a tangible reproduction or representation of such secret scientific material by means of writing, photographing, drawing, mechanically or electronically reproducing or recording such secret scientific material.” The trial court had focused on the tangible nature of the source code and narrowly read the statute to conclude that the source code was not a “tangible reproduction or representation” of the source code, within the meaning of the Penal Law because although “[a]n electronic image can become tangible when it is printed on paper[,] . . . computer code does not become tangible merely because it is contained in a computer.”

But the Court of Appeals framed the issue differently. The question was not whether source code was tangible, but whether the defendant made a tangible reproduction of source code when he uploaded source code to a server and then downloaded it to his personal electronic devices. The Court held that defendant did in fact make a tangible reproduction of the code when he copied the code onto the German website’s server’s physical hard drive where it took up physical space and was physically present to be uploaded to his personal computer.  (MK/LC)

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