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Computerized Code and Data: Making an Unauthorized Copy Can be Theft

Business Attorneys Fighting for Data and Code Computer Entry Personnel

Providing Commercial Litigation in Upstate New York Including the Sarasota, Albany and Troy Areas

computerized code

Computer experts sometimes point out that New York law, like that in most other states, lags far behind the changing technology. For example, when it comes to theft and larceny, existing Empire State law clearly covers the improper taking a piece of jewelry. The necklace is there one minute and gone the next – illegally “removed” by the thief. Can that same law apply to copying software code or data? Can the act of copying electronic material be theft, as well?

A recent decision by a New York appellate court involving the alleged “theft” of trading software code belonging to a Wall Street investment bank shows that if the copying is not authorized, it may indeed be theft.

Goldman Sachs Trading Program

The case involved what Goldman Sachs (“Goldman”) said was a theft of important software code related to its trading program. The alleged thief was a former employee who left Goldman to take a similar position with a competitor. On the last day he was at work, the programmer copied code to a hard drive, intending to use it later. The programmer was charged by New York authorities of violating N.Y. Penal Law §165.07, which makes it a crime to make a “tangible reproduction or representation” of secret scientific material “by means of writing, photographing, drawing, mechanically or electronically reproducing or recording.”

Was the Computer Code “Tangible?”

A New York jury convicted the programmer of theft, but he contended that he had taken nothing “tangible” from Goldman. The trial judge agreed, saying the transfer of the source code did not result in anything “tangible” being removed, so it fell outside the theft statute. One January 24, 2017, the appellate court reversed the trial judge and reinstated the guilty verdict. The programmer now faces jail time, but he has appealed the decision to the state’s highest court.

Companies Can Combat Code and Data Theft

Companies should take steps to safeguard the vital software code and data they maintain as part of their business enterprise. Here are three important steps to take to reduce your risk of loss.

Step One: Develop a Data Security Plan

Don’t be the type of business that fails to establish clear standards and communicate them to staff. The “theft” of unguarded data can be devastating, so establish a clearly understood data security plan. Don’t treat this task casually. Gather a team to implement the plan and evaluate the team’s performance in annual HR reviews. Focus particularly on existing employee procedures, recognizing that unlike the programmer in the Goldman case, employees typically copy code and data long before they ever leave.

Step Two: Limit Access to Important Data

Sometimes, code and data gets stolen because of carelessness in establishing access points. Require unique usernames and passwords for each authorized user. Limit access to data based upon a business need to have it. Pay particular attention to employees who work remotely. Require that such access be made via formalized virtual private network links or other safe mechanisms. Restrict the ability of an employee to access the business network with personal laptops and other devices.

Step Three: Initiate and Use Employee Non-Disclosure Agreements

Develop and utilize specific non-disclosure agreements and have one signed by anyone who has access to sensitive or important corporate data and source code. Have any such employee acknowledge in writing that he or she may not use, copy, or access any company data unless done so in compliance with company policies.

E. Stewart Jones Hacker Murphy: Experts in Business and Commercial Litigation

The law firm of E. Stewart Jones Hacker Murphy is known across the Capital District, Upstate New York, and statewide for formidable representation in business and commercial litigation. Our experienced trial lawyers handle a diverse range of litigation matters in state and federal courts, including disputes related to commercial trade secrets, breaches of non-disclosure agreements, and other complex business litigation.

Having represented clients for more than 100 years, we are one of the most highly respected law firms in upstate New York and the Capital District. Once we accept your case, we invest all the time and resources necessary to achieve the best possible outcome. Contact our commercial litigation attorneys today to learn how we may be able to help you. Call us now at (518) 274-5820 or complete our online form. The E. Stewart Jones Hacker Murphy law firm has an attorney available to assist clients 24 hours a day, seven days a week, 365 days a year – even on holidays.