Ninth Circuit’s Computer Hacking Trade Secret Case May Go Higher

The Ninth Circuit’s en banc decision in United States v. Nosal recently narrowed the reach of the Computer Fraud and Abuse Act (CFAA).  In Nosal, the Court held that the CFAA’s prohibition on people using a computer to “exceed authorized access” was limited to computer hacking type scenarios, not scenarios where employees have access to computers but exceed the scope of the access by looking at materials outside their scope of employment or approved parameters.

In Nosal, the defendant had log-in credentials to access work computers but exceeded the company policy by accessing materials that were confidential and outside the scope of his permitted access.  The district court held him liable under the CFAA.  In reversing, the court specifically rejected the attempt to broaden the statute form an anti-hacking one to a generalized federal trade secret misappropriation one:  “The government’s interpretation would transform the CFAA from an anti-hacking statute into an expansive misappropriation statute.”

Judge Kozinski wrote the engaging opinion, noting that “Under the government’s proposed interpretation of the CFAA, posting for sale an item prohibited by Craigslist’s policy, or describing yourself as “tall, dark and handsome,” when you’re actually short and homely, will earn you a handsome orange jumpsuit.”

Judges Silverman and Tallman dissented, taking issue with Judge Kozinski’s hypotheticals: “In ridiculing scenarios not remotely presented by this case, the majority does a good job of knocking down straw men—far-fetched hypotheticals involving neither theft nor intentional fraudulent conduct, but innocuous violations of office policy.”  The dissent also noted that the Ninth Circuit has now created a split with the Third, Fifth and Eleventh circuits, where an employee who knowingly exceeds a company’s clear restrictions on access is in violation of the CFAA.

This case will almost certainly generate a Supreme Court cert petition, but for now the scope of the statute’s reach in civil (and criminal) litigation has been severely circumscribed.

About the author

One LLP is an elite intellectual property and entertainment law boutique with offices in Los Angeles and Orange County. The firm is especially known for handling high-profile copyright, trademark, patent and business litigation.