Computer Fraud and Abuse Act

Thomson Reuters Practical Law published a Practice Note co-authored by Peter A. Steinmeyer and Robert D. GoldsteinMembers of the Firm, “Hiring from a Competitor: Practical Tips to Minimize Litigation Risk.”  This Practice Note discusses potential statutory and common law claims when hiring from a competitor, the need to identify any existing

James P. Flynn
James P. Flynn

In the recent case of United States v. Nosal, the United States Court of Appeals for the Ninth Circuit confirmed the applicability of both the Computer Fraud and Abuse Act and the Economic Espionage Act as safeguards against theft of trade secrets by departed former employees.  Importantly,

A California legislator recently introduced two bills in Congress which, if passed, could have profound effects for companies seeking to pursue claims relating to trade secrets and confidential information – one bill would create a new private right of action under federal law for trade secret theft, while the other bill would appear to limit plaintiffs’ abilities to pursue existing remedies for computer fraud and abuse.
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Practitioners in the area of trade secret protection and employee mobility law are still trying to sort out the impact of a federal court jury verdict in San Francisco last month finding former Korn Ferry executive David Nosal guilty of two criminal counts stemming from his alleged misappropriation of the Company’s proprietary information after his departure.
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Last week, the U.S. Court of Appeals for the Fourth Circuit issued a decision regarding the scope of liability under the Computer Fraud and Abuse Act (“CFAA”), and sided with the Ninth Circuit in adopting a narrow reading of the statute. In affirming dismissal, the Fourth Circuit adopted “a narrow reading of the terms ‘without authorization’ and ‘exceeds authorized access’ and held that they apply only when an individual accesses a computer without permission or obtains or alters information on a computer beyond that which is authorized to access.” The Fourth Circuit further rejected any CFAA liability grounded on an agency theory, noting that such a theory for liability has far-reaching effects unintended by Congress.
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An action pending in federal court in New York demonstrates that the Computer Fraud and Abuse Act (“CFAA”) should not simply be added to an employer’s complaint against its former employees and a competitor, primarily alleging common law claims sounding in misappropriation of trade secrets and unfair competition, in connection with the alleged poaching of the employer’s clients. In a recent decision, the Court dismissed the state law claims, finding that they formed the real body of the case, and retained jurisdiction over the CFAA claim. The CFAA claim is now the subject of defendants’ motion to dismiss, on the grounds that the former employees had authorized access to the computer systems of the employer, and therefore the statutory prerequisites to state a claim were not met.
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A lawsuit recently filed in the United States District Court for the Eastern District of Virginia could be of interest to employers and attorneys alike who are following the split in the courts across the country as to whether computer access while an employee meets the statutory test for “without authorization” under the Computer Fraud and Abuse Act.
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This week, in LVRC Holdings LLC v. Brekka, the Ninth Circuit Court of Appeals issued a published opinion rejecting an employer’s argument that its former employee violated the Computer Fraud and Abuse Act when he emailed company client lists and financial data to himself for personal use.
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