america versus  is important that we keep in mind the underlying rationale for why the court in the valley held the way intangible rights by their nature being if ariel difficult to quantify are inherently dangerous we recognize this because in each given case the rubric and the standard for determining whether or not a property interest sounds and exists is impossible to quantify the government suggests that if it's subjectively believed by the employer by the business that they have a secret that they have a confidence that they have some reason for keeping this information outside of public knowledge that that alone is sufficient but by that rubric we are all at jeopardy any given moment of being taken to jail byron point or something more concrete has to be in place if we're going to allow this kind of a prosecution to go forward with their velocity take explicit extensive measures to protect this information that wasn't public well your hon think that again it's difficult to quantify what specifically we mean when we were talking about what measures were taken yes velocity had a non competition clause that non competition clause included an expectation that certain aspects of the business were to be designated that the information contained in the vi is confident well it's not true but i think it's a critical we've got for a moment your honor that this business philosophy ran essentially two different kinds of broad sweeping sales one was very small parts microchips that sort of thing the other was this p c p component to the business which include big items monitors hard drives that sort of thing in the p c b side of the business we're talking about prices that are not static these are prices that fluctuate within minutes within hours within days the v i x system from velocity its primary function as far as i can deduce from the record was to assist in the board component side of the business the p c p side of the business was such that the historic pricing doesn't really give the salesman any added knowledge for  particular deal because it's a very subjective question on this day at this hour how many of these products are available and from whom but that's harnessed a price that's having as to be competitive well i think for the purposes here what the v i i system really tells us is where is the loss of these bottom line what does velocity need in order to make a profit from this transaction based upon the purchase order they're receiving from dell and i say dell obviously it could be others but mr eggers account is principally with dell what about that is specifically confidential yes there's a confidentiality agreement but what the price that dell is wanting to pay for the good isn't velocity secret to keep and that invoice out to a number of different potential sellers of the good the historical pricing of what the lawsuit paid for that good in the past is of no particular help because we're only concerned with what this good costs right now so i think it's more helpful to look at the v i i system as you're suggesting that the history of the price of a product is not helpful when you look at it with the present value of a well there's no reason there's no evidence of the record to suggest that that was the exclusive source of that information i mean these are goods that are being traded in the digital age the price of a hard drive or a monitor is ascertainable from thousands of different sources and historical data can be compiled by just simply consulting the internet looking at what it's going for on websites like e bay looking for i mean even just calling up other salesman saying what they're getting from dell for those parts but what i'm suggesting is not that there wasn't there there were a series of protections the velocity put in place for these things their work we readily concede the loss of the dead attempt to treat this information differently however it's unrealistic for us to say that velocity had exclusive possession of that interest because this information is readily available the nature of the price a system communication in order for us to be able to agree to a price the price communicates information to us and i think that in this case because we're talking about non static goods there is really no way to velocity had a secret sauce that it had exclusive right or that had a monopoly on this information this is that information was publicly available and so i think but i think more important than that and getting to the heart of your honor's question simply because an employer designates an item as being subject to a confidentiality and non competition clause is that going to be our test for when this becomes a wire fraud and mail fro prosecution i certainly agree that the conduct of mr haggar justified a lawsuit justified civil action that's why we have contracts in order to let business move forward we have to be able to also contemplate th businesses and individuals will intentionally breach contracts because that may be in their best financial interests that's in my way of thinking the way that the court system facilitates the free market is by allowing a civilized way for individuals to opt out of an agreement to bridge that agreement and for the court to decide the damages or potentially liquidated damages that should not be our task for whether or not we have misappropriated confidential information for fraud for criminal prosecution which is the question we're called here today so how is this different from current what happened in government well your honor i think that it's different in a number of respects and carpenter we're talking about the actual finished good being misappropriated when the author of the heard on the street column took that information leaked it to the individuals making the trades and then profited himself from those trades he was actually diminishing the value of the finished product of the good he was affecting the market price and using that information before it was supposed to be released to the general public and sold to the customers of the wall street journal in this situation we're not talking about a finished good a finished product we're talking about loosely held information information that could have been acquired from the v i i system as the court suggests but also could have been acquired from a number of other sources and we're talking about something that there is no evidence in the record to suggest actually affected the pension price of the good philosophy made a profit at the margin that it wanted to make a profit but it isn't the essence of the holding incorporated thing intangible property was covered by the mail and extension not what it affected well your honor i think that if that is the question we see carpenter come out right after mcnally within the same year within months of each other it appears that there it is i direct response to mcnally when that opinion is written but what i think we we have to grasp here is also if carpenter is intended to be taken as an exception to mcnally yes intangible rights is too broad but we're going to allow this subset to still survive the question still remains what did skilling do to that because this isn't a pure common law interpretation question the common law would suggest that statute congress enacted to respond to mcnally and mcnally explicitly obviated a number of intangible rights theories of fraud prosecution and as justice even suggested in his dissent that included the abuse and misuse of confidential information now i think that we can infer that at the time that carpenter mcnally were penned there was a decision to try and create back what mcnally had done in carpenter but whether or not that has continued in light of skilling in light of the enactment of the honest service for services fraud provision is an unanswered question the i cannot identify a case that has addressed this question since skilling nor could the government the government refers to several cases many of which are pretty scathing but it also lists ali in the half of which also fail to consider the relationship between there is no there is no guidance here this is a a new question a question of first impressions and skilling came down and the question we then have to ask is was carpenter a reactionary opinion was it designed to respond to mcnally or was carpenter meant to stand the test of time in light of the fact that congress reacted directly to mcnally on its own from i would submit that the court must yield to the statutory language that the congress has spoken and that there south silence as to intangible rights questions answers the question there is no such claim but again you honour's i don't believe we have to go that far to make this fight because again in this case the evidence is not sufficient to conclude that he appropriate that confidential information to conclude that he took a thing of value or probably in an opinion united states versus loney this court equated directly property to a thing of value we can talk about the fact that there was a confidentiality agreement we can talk about the fact that this was a listed item that some of these things were considered to be confidential but what is the value as when we really stop and package it we talk about historical prices even in a non static situation what value would we ascribe to the price of a widget six months ago the fact that this company knows what that widget costs a client seem to find value in it well the fact that something can be converted to a valuable use i think is a distinction there's a different there's difference between that and value intrinsic to itself this desk the bench these are items of value whether or not the property was a use or in connection with the were in the truck what was presented with this question judged and the court struggled with the issue for the court turn on the for the same reasons that this kind of an intangible right is recognizable under oath that was the trump words conclusion based upon really only carpenter the whole conversation from the motion to dismiss all of the charge was about whether or not carpenter is still good law whether carpenter applies and i would submit that carpenter is not good law that if it is good law it doesn't apply because it talks about finished good the final marketable i certainly agree and i think that that kind of judicial confirmation is important but i think that the court is potentially in a catch twenty two here because we have to harmonize scaling carpenter and the on the services fraud the holding of skilling is an attempt to pare this question back down to what are the essential claims where we don't have tangible rights or tangible property interests or we can bring this kind of a case and skilling is taking us back home to what congress enacted in saying this is it big now it was broad sweeping it cut like a machete and congress came back and only gave us these two options i think that the failure to discuss carpenter could easily be construed as simply an oversight or not necessary because the opinion is very broad i don't want to i have to move off of the subject i do want to again emphasize that i think it's tradition see question here is your concerns judge dennis about overruling the supreme court you can find that this is not property without having to make the ultimate conclusion that carpenter has been invalidated by skilling because we have no test to go off of other than the subjective opinion of the employer that's the government's proposed solution is that courts decide what was the subjective opinion of the employer what irrespective of whether that's reasonable and reasonable they decide when employers are making the law employers are deciding how the government might prosecute someone i think that creates a problem we need some test  i've submitted the monsanto test the boeing airplanes test under texas law as possible considerations i think that those fit i'm not suggesting the court adopt those but i do think the government solution is not appropriate and then i'll reserve my on the question of severance i would strongly encourage the court to also look deeply into this question mr hager had it clear unequivocal defense to the tax counts that was denied an opportunity to be h because he could not risk being placed up on the stand to encounter all of the issues about dishonesty the relate to the wire fraud and mail fraud prosecutions severances are rare and i acknowledge this but are seldom do you have a record where such clear concrete reasons for why severance is necessary are proffered both before trial and during  morning your honor may it please the court elizabeth berenger from the western district of texas on behalf of the united states i just want to start out by pointing out that confidential business information for many many decades has been held to be a protectable property interest under not only carpenter but a long line of cases that go back to the eighteen hundreds in this country and that confidential business information is not an unbounded definition that is subject to an employer's w according to carpenter confidential business information is information acquired or compiled by a business in the course and conduct of its business in which it has an exclusive right and that definition has been further bounded by supreme court precedent we have mcnally which says that it must be a thing of value we have and past twenty no in cleveland which sort of dubbed tell into this concept that it must be property in the hands of the victim so this is not just something that an employer can arbitrarily decided he must become like some sort of value to the company and in this case taking the evidence in the life most favorable to the government this was very valuable information to velocity it was not just price information as the defendant proposed to the jury and which the jury rejected this is the the defendant knew what parts dealt needed this is thirty seven thousand parts on that list and he knew the specific parts that they needed and how much they would pay for it but on in addition to that information which is given to velocity subject to a non disclosure agreement which they agreed to give diplomacy under the terms of their contract under the terms expect loss and he would keep it private but they also and he had information about those v i p s fail points which is and it would have the him the maximum amount that the last day he was willing to pay and this was overwhelming testimony of a lot of stored data that was in this computer program that set forth an even how to function to determine the price that velocity and would it pay more to the supplier for this amount of money and so the defendant through act used this confidential business information to sell parts to blossom at prices that earned considerable profits for act without triggering those spell points longer to get away with the scheme for years two thousand and eight to two thousand and twelve went undetected in the system because he was able to keep that price right below the final point as the testimony is the court's aware any time it went over that twenty percent margin it was required managerial override and there was testimony from  the defendants supervisor that especially with dell they would have really been tracking that twenty percent and what they were doing in the margin because it was their most important customer so he was able to stay right below the twenty and went undetected and the reason that we know that this information is so valuable right is because the defendant profited so greatly from it here one point one million dollars from this scheme to go right under that failed point and keep process team that was one point one million dollars that was intended for the exclusive use of his employer it was not intended to be enrich himself into the scheme to deprive includes the concept of an embezzlement and the employee using the resources of the company to enrich himself of course flossie had an interest in maintaining the confidentiality provided testimony that it would definitely certainly make them not want to use a company that had  misplaced their information and gave information about what type of and prices they would pay for those parts because it would probably cause them to have to pay more in the market what's there are people learn that and that's very similar to the seventh circuit sisters  sharif that when you and i know part of its benefit is that it's providing the service to its customers of keeping that information private so that's another aspect of the confidential business information and i one of the most important pieces of information and knowing that this was confidential information is that the defendant admitted that it was in his deposition testimony in that when he was sued by velocity he admitted that he was using confidential business information that belonged to the loss of he and senate in his home e mail and act was using that to benefit so his own testimony admitted that it was confidential business information and just like to reiterate that no court has held that carpenter has been overruled or that skilling extends to intangible property rights carpenter has continued to be applied uniformly by the courts of appeal in the supreme court even after skilling we have several court of appeals decisions that have and as not even made it an issue in applied carpentering construed carpenter and in the case of science in the government's brief in addition last term the supreme court reaffirmed its holding there's no evidence that skilling which was interpreting intangible rights that are non property interest should be extended to the property around the carpenter makes that clear that there's a distinction between intangible property interests and intangible r one being within the scope of the wire and mail fraud statute and one falling outside and having to phone her thirteen forty six and just seeing him briefly fee and severance issue i would just urge the court this is an exceedingly deferential standard and evaluating the court's decision under rule fourteen a this is not a question where this was a missed joinder of issues this was a clearly under rule  issues were properly joined the fraud and then failing to report that fraud same fragile an income on the tax return or filing a false tax return and the defendant below failed to articulate sufficient reasons why he said he wanted to testify in his tax case and gave a good reason for that but he never articulated good reasons about why he couldn't also testify in his fraud case other than he didn't want to look bad and that's not enough to show manifest prejudice and the government has done an exhaustive search of the case they've never found a case and if the circuits where as a district court has been overruled on similar charges this is where it's actually the intertwined fraud and the failure to report the income and some sort of compelling circumstances that have not been shown here so if the court doesn't have any further questions i would see the rest of my time mr hunter have three three minutes on the government points out that it has been a long standing tradition in the united states to prosecute cases where we're dealing with intangible rights that is very true but it's important to remember that many of those cases deeply consider questions like on the services in their decision procter and gamble for example a case from the forty's discusses many of the same questions we're talking about here whether or not it's property the nature of it being an intangible right the employer's exclusivity to it but also explicitly stated this is a crime because a diplomat deprive the employer of his right to on his services the reason that this case is being brought against is because of the dishonesty the dishonesty in deceiving his employer the general notion that we should insert ourselves into the middle in order to make a profit and those things are unethical there's no question but they're not criminal the that component of that that notion throughout the history of the united states that the honesty the honest day's wage was a piece of this intangible rights puzzle is gone that point can't be debated the question then becomes are we just trying to call these prosecutions by another name because we feel that there's some social need for it i don't believe that that's a valid premise the case is in fact a question of first impression because none of the cases the government can cite directly address this issue which has been raised i believe for the first shaw for example was a bank fraud prosecution the question about the mail and wire fraud statues honest services fraud not at issue always cited by the government completely fails to consider skilling was written before skilling came out i believe they came out within shouldn't be characterized as something where it's routinely done this is commonplace carpenter as been well established that and i think to look for guidance there one need only look to the struggle that the court had at the t judge had to rely on carpenter because there was nothing else when asked for more authority the government at trial could produce only three district court cases this is something that hasn't been discussed in great detail and i needs to be but again to finally emphasize the court does not need to make a broad sweeping action as just in a judge has pointed out we do not need to be overruling the supreme court the evidence is likely insufficient