United States: No Expansion Of CFAA Liability For Monetary Exploit Of Software Bug

In the game Monopoly, lucky players landing on Community Chest might turn over the highly desirable "Bank Error in Your Favor, Collect $200″ card.  By the next turn, the proceeds are usually invested in properties and houses, yet, some might wonder whether accepting such a windfall was proper in the first place...or could lead to criminal charges.

This concept was tested when police arrested two video poker players who were exploiting a software bug that allowed them to multiply jackpots with just a sequence of pushed buttons.  See United States v. Kane, No 11-mj-00001 (D. Nev. filed Jan. 19, 2011).  The defendants were charged with violations of the Computer Fraud and Abuse Act ("CFAA"), a federal statute that prohibits computer hacking and unauthorized access into computer networks.  The question was whether the defendants "exceeded authorized access" when they took advantage of an exploit in a video poker machine to win hundreds of thousands of dollars.

The CFAA was enacted in 1984 and provides, in pertinent part, that anyone who "intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains. . . information from any protected computer" commits a crime. 18 U.S.C. § 1030(a)(2)(C). It defines "exceeds authorized access" as "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter." Id. § 1030(e)(6).

The Kane prosecution is a recent example of a "technology statute" being aggressively applied to issues or disputes that were not even conceived of when the statute was enacted. The CFAA was directed at classic computer "hacking" activities where it was easier to determine when an outsider lacked "authorized access" to a network.  But the language of the Act is susceptible to broader application, and it has been brought to bear in many contexts beyond the hacking scenario, including employee misappropriation of company data, unwanted copying or misuse of website data, and now, the "gaming" of video poker machines.

In Kane, the Government alleged that the defendants discovered an exploit in certain video poker machines that allowed the players, over the course of two years at different casinos, to falsely maximize the payouts for a winning hand.  Apparently, the defendant Kane uncovered the glitch in the machine after hours and hours of playing.  In short, once the "double up" feature of the poker machine was activated (i.e., an option that allowed players to make double-or-nothing bets), the defendants then legitimately played until they obtained a winning hand.  Then, after using a complex combination of game changes, bill insertions and cash outs — a sequence of pushed buttons — they would use the "double up" feature to change the stakes in the middle of the game to the highest denomination, and trigger a second jackpot. Because of a series of programming errors, the machine re-evaluated the original game at the new, higher denomination, paying a jackpot which paid out at a higher denomination than the defendants had initially wagered. [click here for Wired's excellent account of the entire caper].  The Government did not allege that the defendants physically tampered with the video poker machines.

After winning several large jackpots at a Las Vegas casino in one afternoon, the management became suspicious and summoned Nevada Gaming Control Board engineers who discovered the software anomaly in the machine.  The defendants were later arrested and charged with conspiracy to commit wire fraud and violations of the CFAA based upon allegations that they exceeded authorized access to a protected computer in furtherance of fraud.

The defendants had moved to dismiss the CFAA claims and last year the magistrate issued a report recommending that the district court dismiss those charges.  See United States v. Kane, No. 11-cr-00022 (D. Nev. Report and Recommendation Oct. 15, 2012).  The defendants asserted that the CFAA claim should be dismissed because: (1) a video poker machine is not a "protected computer" under the statute (i.e., a computer "which is used in or affecting interstate or foreign commerce or communication"); and (2) the defendants did not "exceed [their] authorized access" to the video poker machines.

In recommending dismissal, the magistrate first found that a video poker machine was not a "protected computer" under the statute because, unlike a computer network or online database connected to the internet, a video poker machine was a standalone computerized machine unconnected to interstate commerce. The magistrate also found that the defendants did not exceed authorized access to the video poker machine.  The court rejected the Government's argument that while the defendants were authorized to play video poker, the defendants were not authorized to configure play in a manner that produced false payouts not intended by the casino.  Unlike the employer-employee situation, where the use of computer use policies, password protection, encryption and system monitoring defines the level of "access," gamblers do not agree to any terms of use and the bounds of play are enforced by the video poker software itself.

The magistrate cited United States v. Nosal, 676 F.3d 854 (9th Cir. 2012), where an en banc Ninth Circuit upheld the lower court's dismissal of CFAA charges stemming from an ex-employee's misappropriation of proprietary documents in violation of his employer's computer use policy. [For additional information about the case, see our prior post].

In recommending dismissal of the CFAA charges, the magistrate stated that the phrase "exceeds authorized access" in the CFAA does not extend to violations of use restrictions:

Here, the Government has asserted that, although the Defendants were authorized to play the video poker machines and access information for that purpose, the way that they used the information exceeded their authorization. This argument is directly analogous to the government's argument in Nosal and it fares no better here. As Nosal makes clear, the CFAA does not regulate the way individuals use the information which they are otherwise authorized to access. Here, the Defendants' alleged actions did not exceed their authorized access.

Following the magistrate's report, the district court ordered supplemental briefing from the parties regarding whether the defendants exceeded authorized access under the CFAA in light of the Nosal ruling and whether the defendants' conduct could be comparable to hacking or misuse under the statute.  This past spring, the Government voluntarily dismissed the CFAA charges, leaving the defendants to face the wire fraud claims.  After several continuances, the trial is currently set for December 3, 2013 on the remaining counts.

As evidenced in Kane, the Ninth Circuit's Nosal ruling continues to have important implications for the availability of a federal cause of action for misappropriation of data, as well as cases involving unauthorized access to websites and other computerized services.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
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).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions