United States: 500,000 Lines Of Source Code: The New "Intangible Property"

Sergey Aleynikov's six-year trade secret odyssey through all possible configurations of litigation, civil and criminal, federal and state, may at long last have come to an end after the New York Supreme Court recently overturned his only surviving criminal conviction for unlawful use of secret scientific material. We here at Trade Secrets Watch have closely tracked Aleynikov's journey, recently reporting on his newest victory, and previously covering his convoluted trials and tribulations. In particular, prior to the recent New York Supreme Court decision, the Second Circuit overturned Aleynikov's convictions under the Economic Espionage Act (EEA) and the National Stolen Property Act (NSPA), which also led to a change in the EEA legislation.

Importantly, Manhattan Supreme Court Justice Daniel Conviser's 72-page opinion underscores the severe difficulty of obtaining state court trade secret theft convictions in an era where rampant technological development outpaces decades-old legislation. Justice Conviser's opinion hinges on the word "tangible" in an archaic law in finding that the electronic transmission of source code from one computer to another does not constitute a "tangible" reproduction of the allegedly misappropriated code. This holding, which follows the federal court's 2012 holding overturning an earlier conviction, places valuable trade secrets at a tremendous risk as society becomes increasingly electronic and cloud accessible.

Justice Conviser's recent opinion—echoing the federal court before him—ruled that New York's outmoded criminal trade secret statute, which has not been amended since its enactment in 1967, did not apply to Aleynikov because transferring source code electronically from point A to point B does not constitute "tangible reproduction" of the code. New York's unlawful use of secret scientific material statute requires a "tangible reproduction or representation of such scientific material."

"Tangible" is nowhere defined in the statute nor in (the scarce) supporting case law. Instead, Justice Conviser analyzed dictionary definitions, including the infamous Black's Law Dictionary, to conclude that the term "tangible" means "the manifestation of a thing in the physical world." In other words, tangible requires having a physical form. The Court held the prosecution did not submit evidence proving the source code "could be touched" or had any physical characteristics, even though the source code existed on servers in New York, Germany, and later on Aleynikov's computer in New Jersey. According to the Court, "computer code does not become tangible merely because it is contained in a computer."

Both Aleynikov cases raise challenging issues for intellectual property owners and government prosecutors prosecuting trade secret theft, especially in the modern technological world we live in. Indeed, Justice Conviser is acutely aware of this risk as he stated, "in today's world, an electronic transmission may be much more potentially damaging to the holder of valuable intellectual property than a paper record."

At this point, trade secrets owners and prosecutors are hanging their heads in defeat at the seemingly dim prospect of ever obtaining justice when there isn't a tangible misappropriation of the trade secret. However, a patent law principle—the Beauregard claim—may provide a sliver of hope to utilizing some existing criminal trade secret laws, and perhaps create new ones, to mitigate the increased risk of electronic transmission of proprietary information.

A Beauregard claim is a computer readable medium ("CRM") claim that protects intellectual property, such as source code for performing steps of a process, embodied within computerized systems or devices. A CRM claim is not one of the statutory defined categories of patentable inventions, 35 U.S.C. § 101 ("process, machine, manufacture or composition of matter"). Instead, a CRM claim is a judicial creation, established to comport with the statutory language in response to technological evolution, and consistent with the policy underlying the Patent Act. With a CRM claim, a patent holder can pursue infringement claims under Beauregard to protect source code—the very thing Judge Conviser said was intangible.

In fact, a plaintiff can pursue the claim without actually proving that the infringer used the source code, provided that the source code could perform the subject matter recited in the CRM claim. For example, in Finjan, Inc. v. Secure Computing Corp., the Federal Circuit affirmed a finding of infringement for the sale of software that was capable of infringing, even though the infringing features were disabled. It did not matter if the defendant was actually using the infringing feature. Rather, the deciding question was whether the software embodying the infringing feature is simply capable of infringing patent holder's protectable software code. The fact that the features were disabled, the Finjan court said, "does not detract from or somehow nullify the existence" of a finding of infringement because "to infringe a claim that recites capability and not actual operation, an accused device need only be capable of operating in the described mode."

Finjan is particularly instructive in the trade secret context because information transferred electronically can still embody highly valuable info—and in Aleynikov's case, massive quantities of proprietary source code information—even if the information is not transcribed in a physical medium. Transferring data electronically from point A to point B, in the words of Finjan, should not "detract from or somehow nullify the existence" of trade secret theft. Yet, by distinguishing between "tangible" and "intangible," and finding that source code only has value when it exists in a physical medium, current criminal trade secret statutes may be too narrowly construed and/or are failing to adequately protect critical corporate secrets, and could actually increase the risk of employees transmitting data electronically. In a world monopolized by electronic data, criminal trade secret statutes would provide for more protection if the statutes focused on substance and not form in protecting a company's secret recipe.

Twitter: @TS_Watch

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.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.