Court Rules Downloading Source Code is Not the Same as Stealing Physical Property

Paul Lilly

Former Goldman Sachs programmer Sergey Aleynikov is a free man after the U.S. Court of Appeals for the Second Circuit in New York deemed that stealing source code isn't the same as stealing physical property, and therefore Aleynikov was wrongly charged under the National Stolen Property Act (NSPA). If Aleynikov is to be punished, it will have to be based on copyright law and other intellectual property (IP) legislation, the judge said. Let's retrace Aleynikov's steps.

Aleynikov found himself in hot water after downloading proprietary source code from Goldman Sachs' high-frequency trading (HFT) computers and then uploading the code to servers in Germany before hightailing it out of Wall Street in 2009, PCWorld reports via IDG News . He was subsequently convicted of espionage under the Economic Espionage Act (EEA) of 1996 and found to be in violation of the NSPA by a jury trial, landing him a 97-month prison sentence with a three years of supervised release and a $12,500 fine. The appeals court overturned the ruling.

"Because Aleynikov did not 'assume physical control' over anything when he took the source code, and because he did not thereby 'deprive [Goldman] of its use,' Aleynikov did not violate the NSPA," Chief Judge Dennis Jacobs wrote in the three-judge panel's unanimous decision, according to CNet . "We decline to stretch or update statutory words of plain and ordinary meaning in order to better accommodate the digital age."

Jacobs did acknowledge that the downloaded code was valuable and that "the enormous profits the system yielded for Goldman depended on no one else having it," but since the system "was not designed to enter or pass in commerce, or to make something that does, Aleynikov's theft of source code relating to that system was not an offense under the EEA."

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