A peculiar case relating to IP theft arose last week: Wall
Street programmer Sergey Aleynikov was convicted of stealing
proprietary source code from his former employer, Goldman Sachs,
under corporate espionage laws. It's an unusual case because of
controversial criminal charges levelled at Aleynikov in what would
normally amount to a civil dispute, shining a spotlight on the
issues around IP theft.
Aleynikov worked at Goldman Sachs as a software programmer,
helping to code their high frequency trading (HFT) system. HFT
systems use computer algorithms to make ultra-fast, automated
trades on the stock market. In 2009, Aleynikov left Goldman Sachs
for Teza Technologies, a hedge fund looking to set up a competing
HFT system (for a substantial pay-rise). But before he left,
Aleynikov made copies of his source code from the trading system he
helped develop, and saved them to his laptop and on a server. He
also deleted the network's 'bash code', which keeps a
record of executed commands, in an attempt to obscure his
"In any other case, a conviction after
near mistrial by food fight might seem like a plot twist that only
Hollywood could dream up. But in the on-again-off-again legal
odyssey that is the People v. Aleynikov, it was merely the latest
in a long line of peculiar episodes."
The New York Times
1 May 2015
Soon afterwards he was arrested by the FBI, and charged with
offences under the US federal Espionage Act and the
National Stolen Property Act. After serving one year of
his eight year prison sentence, he was released after his
conviction was overturned on appeal. But in a further twist, last
year he was once again charged, this time by the New York County
District Attorney's Office under similar New York state laws.
Aleynikov rejected a plea bargain which would have kept him out of
prison, and last week was found guilty of 'unlawful use of
secret scientific material', but acquitted on two other similar
The corporate espionage legislation has existed for decades and
was not intended for computer related theft. The defence argued
that their relevance to computers was a stretch, because unlike a
theft of, say, gold bars, Aleynikov's copying of the source
code didn't deprive Goldman Sachs of its ability to continue to
generate profits from it. Aleynikov's attorney continues to
argue that while his actions likely constitute a breach of
Goldman's corporate confidentiality policies, they should have
been pursued through a civil suit for breach of contract rather
than 'misguided' criminal charges.
As a side note, last week's trial also made headlines after
a bizarre fight between two of the jurors. After noticing that her
lunchtime sandwich was missing avocado, one juror accused the other
of tampering with her food and demanded a blood test to determine
whether she had been poisoned. But the presiding judge dismissed
the two jurors after calling the accusations 'completely
unfounded' and the trial ultimately continued with a 10-member
Aleynikov has launched civil suits against both Goldman Sachs
and the FBI agents who arrested him. His latest criminal verdict
may also be overturned by the presiding judge, whose comments are
due in three weeks, with further appeals likely. We look forward to
seeing what happens, and any implications for IP theft in
At KordaMentha Forensic, we regularly assist businesses in
detecting and providing evidence of IP theft and other dispute
related services. In our experience, theft of intellectual property
by departing employees can be surprisingly expensive to businesses.
Specifically, issues involving proprietary source code are becoming
more commonplace as businesses become more reliant on electronic
and data related information, reports, techniques and
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As a licensor or a licensee, here are some tips you should consider when negotiating your next licence agreement.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).