In the most recent ruling in a lengthy and procedurally complex criminal case, a New York trial court dismissed a computer programmer’s criminal conviction under New York’s Unlawful Use of Secret Scientific Material law for copying his employer’s computer code. In People v. Aleynikov (No. 04447/2012, New York Supreme Court, New York County), Judge Daniel Conviser wrote in his 72-page opinion that, while Defendant Aleynikov “doubtless acted wrongly” by copying his employer’s computer source code before starting another job, prosecutors “did not prove he committed this particular obscure crime.”

Defendant Sergey Aleynikov was employed as a computer programmer at Goldman Sachs Group Inc. (“Goldman”) designing computer source code for the investment bank’s high frequency trading platform. In 2009, Aleynikov resigned from Goldman to accept a job at a new high-frequency trading firm. During his last week at Goldman, Aleynikov uploaded 32 MB of computer source code from the Goldman high frequency trading system to a server in Germany, and then later downloaded it to another server his new place of employment.

Unsurprisingly, Goldman considered its computer source code to be proprietary and valuable intellectual property, and took significant steps to ensure that code was not transferred or used outside the firm. Nonetheless, after Aleynikov’s duplication and transfer of the source code, Goldman continued to use it and never lost income by virtue of Aleynikov’s actions. There was no evidence that Aleynikov ever sold (or attempted to sell) the source code. Aleynikov admitted that he made copies of the sections of Goldman’s source code he thought could be helpful to him in building his new employer’s high frequency trading platform.

Aleynikov was first arrested by federal officials in 2009 and charged in federal district court under the National Stolen Property Act and the Economic Espionage Act. The jury initially convicted him in 2010 of violating the Economic Espionage Act and sentenced him to eight years in jail, but the the Second Circuit reversed that conviction in 2012, holding that the source code Aleynikov uploaded did not constitute stolen “goods,” “wares,” or “merchandise” as defined by the National Stolen Property Act. With respect to the Economic Espionage Act, the Court held the statute was not violated because the high frequency trading systems were neither “produced for” nor “placed in” interstate or foreign commerce as required by the Act.

Approximately six months later, Aleynikov was arrested again and charged in New York state court for copying the code, this time under New York’s Unlawful Use of Secret Scientific Material and Unlawful Duplication of Computer Related Material laws. In that case, the jury convicted Aleynikov of unlawful use of secret scientific material after a two-week trial and more than a week of deliberation. Aleynikov moved for an of dismissal.

The starting point for the Court’s analysis was the words of the statute itself. Penal Law 165.07, enacted in 1967, states:

A person is guilty of unlawful use of secret scientific material when, with intent to appropriate to himself and 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 and representation of such secret scientific material by means of writing, photographing, drawing, mechanically and electronically reproducing and recording such secret scientific material.

The threshold question was whether the act of uploading computer source code created a “tangible reproduction” within the meaning of the statute. Guided by the fundamental principle of statutory construction that a court must assume every word in a statute has a meaning and was inserted for a purpose, the question hinged on the meaning of the word “tangible.”

While the Court noted that the dictionary definition of “tangible” included both “having or possessing a physical form,” and “capable of being understood by the mind,” it quickly dismissed the possibility that the Legislature could have meant that second definition. As Judge Conviser noted, the language of the statute requires a defendant to have the “intent to appropriate,” that is, the intent to steal something of economic value (a point later discussed at some length). Judge Conviser reasoned by way of question: why would the Legislature have specified that the thing stolen must be “tangible” if it meant “cognizable by the mind?” What economic value would there be in something that was not “cognizable to the mind?” “The Legislature surely did not insert the word ‘tangible’ into the statute to clarify that the secret scientific material had to be ‘real and not imaginary’ in order to result in a felony conviction.” Slip. op. at 34. Thus, Judge Conviser reasoned that the word “tangible” in this context could only mean “having or possessing a physical form.”

The State argued the word “tangible” may have been used to distinguish a person’s “memory” or “speech” from the manifestation of information in a more concrete form. Here, too, the Court reasoned that the Legislature obviously would not criminalize a person’s memories or speech. It was assumed therefore that the Legislature did not insert the word “tangible” into the statute to clarify that having a memory about confidential information is not a crime.

The State additionally noted that the statute explicitly covered the act of “electronically reproducing or recording” secret scientific material and that the Defendant clearly did that. While the Court conceded that any transmission of data through a computer system could be said to have made an “electronic reproduction” of it, this construction also rendered the word “tangible” in the statute meaningless. “If Aleynikov made a tangible electronic reproduction in this case, what would an intangible electronic reproduction have looked like? More to the point, what would an intangible electronic reproduction have looked like when the statute was enacted in 1967?”

The Court found that the weight of authority held that computer source code is intangible. First, the Court noted that in Aleynikov’s earlier federal case, the Second Circuit Court of Appeals found that the source code at issue was not “goods,” “wares,” or “merchandise” under the National Stolen Property Act. The Second Circuit reiterated that conclusion in United States v. Agrawal, 726 F.3d 235 (2d Cir. 2013). There, the defendant printed out his former employer’s source code and then argued that source code is, by definition, intangible. The Second Circuit disposed of that claim by noting that the defendant printed the source code on paper. The New York Court of Appeals had also addressed the question of tangibility of computer data in People v. Kent, 19 NY3d 290 (2012). There, the court held that a person who had simply viewed child pornography without knowing that such pornography had been stored in his computer’s cache could not be guilty of promoting or possessing the material. The court found that digital images are intangible. “Computer code does not become tangible merely because it is contained in a computer.” Slip. op. at 44. The court cited numerous other state cases that supported this interpretation.

Finally, the Court declined to address the State’s concerns about public policy. The State argued that it makes little sense to allow Aleynikov to escape criminal liability simply because he took Goldman’s code by electronically transmitting it rather than printing it on a piece of paper. The Court, however, held firm that the statute must be read as it is written. “We decline to stretch or update statutory words of plain and ordinary meaning in order to better accommodate the digital age.” Slip op. at 48.

The next significant question addressed by the Court was what “intent to appropriate the use of scientific material” meant within the meaning of the statute, and what the State was required to prove to win a conviction. The question depended on whether “intent” meant the defendant’s intent to obtain only the value of the material he duplicates, or whether it meant the defendant intended to obtain a majority of the full value of that asset. The Court followed the latter definition, guided by the language of the larceny statute. As the Court viewed it, stealing involves more than simply deriving value from something to which one is not entitled. Rather, to steal is to deprive the owner of most of that thing’s value.   The Court found that the evidence of record did not support the claim that Aleynikov acquire the major portion of the source code’s economic value or benefit, or deprived Goldman of it.


Judge Conviser noted that New York’s state senate recently passed a bill on theft of computer data that would likely have made what Aleynikov did a crime. The court likened prosecuting Aleynikov under the 48-year-old law with trying to fit a square peg in a round hole to achieve that goal. Goldman may still choose to pursue Aleynikov for civil penalties.