On August 1, 2013, the Second Circuit affirmed Samarth Agrawal’s criminal convictions for violating both the National Stolen Property Act (NSPA) and the Economic Espionage Act (EEA) after he misappropriated SocGen’s high-frequency trading code at the time he was leaving the company. The Second Circuit’s decision in Agrawal is puzzling if not downright shocking to those familiar with the Second Circuit’s decision last April in United States v. Aleynikov. In that case, the Second Circuit held that the NSPA did not cover theft of intangible property, and that the EEA did not prohibit misappropriation of trade secrets unless the secret was designed to enter or pass in commerce. Since the defendant in Aleynikov had misappropriated Goldman Sachs’ code electronically, and since the proprietary code was never intended to pass in commerce, his convictions were overturned and he was released from prison. So what motivated the Second Circuit to leave Agrawal in jail for engaging in nearly identical conduct? The devil is in the detail.
The NSPA is a federal criminal statute that prohibits the transportation of “goods, wares, merchandise, securities or money” knowing the same to have been stolen. Last June, after the Second Circuit heard oral argument in Agrawal, we noted that the court was primed to consider the question left open by Aleynikov: whether a defendant could be convicted of the NSPA simply because he stole his employer’s property in tangible rather than electronic form. In Agrawal, the Second Circuit answered that question with a resounding, “yes.” The Second Circuit noted that, in contrast to Aleynikov who stole Goldman Sachs’ code by uploading and then downloading the code, Agrawal printed SocGen’s code on thousands of sheets of paper. According to the Second Circuit, “[t]his makes all the difference.” Although the court noted that there was little to distinguish Agrawal’s conduct from that of Aleynikov in terms of “moral culpability,” it felt constrained by the language of the NSPA: “it is Congress’s task, not the courts’, to define crimes and prescribe punishments.”
The Second Circuit also upheld Agrawal’s EEA conviction. The EEA in effect at the time of Agrawal’s conviction prohibited the theft of trade secrets “related to or included in a product that is produced for or placed in interstate or foreign commerce.” So, where did Agrawal go wrong with the EEA? Apparently nowhere. The high-frequency trading code he misappropriated from SocGen was no more intended to enter or pass in commerce as Goldman Sachs’ was. Indeed, the prosecution in both cases made “virtually identical” arguments in summation regarding the requirement that the stolen information relate to interstate commerce. The critical difference in Agrawal was simply that the district court presented that requirement to the jury on a “more obvious” theory: that the actual securities traded by SocGen, rather than the code itself, were the products “placed in” interstate commerce that were “related to” the stolen trade secret.
The Second Circuit’s decisions in Aleynikov and Agrawal should be greeted with skepticism by anyone concerned with the uniform application of criminal justice. The fact that Agrawal stands convicted of the NSPA because he printed out the proprietary code rather than having downloaded it is nothing short of absurd. What is worse, however, is the Second Circuit’s decision that Agrawal’s conviction under the EEA should stand based entirely on how the case was “put to the jury” by the district court. Although the EEA was amended in November of last year to address the Second Circuit’s Aleynikov decision, the Second Circuit was obliged to apply the version of the EEA as it existed at the time of Agrawal’s conviction, which was the same as the version of the EEA analyzed in Aleynikov. Indeed, Judge Pooler, who was also on the Aleynikov panel, dissented from the majority’s EEA holding in Agrawal, noting the “nearly identical fact pattern” in both cases.