Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-02066/USCOURTS-ca10-90-02066-0/pdf.json

Parties Involved:
John M. Brown
Appellee
United States of America
Appellant

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEfk!j, F 1 L .B l) 

FOR THE TENTH CIRCUIT ruted S~r~ t:Qu;r @f Appeals - enrh Cir~it 

UNITED STATES OF AMERICA, 

Plaintiff-Appellant, 

v. 

JOHN·M. BROWN, 

Defendant-Appellee. 

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FEB 21 ff19J 

ROBERT L HOECKER 

Clerk 

No. 90-2066 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF NEW MEXICO 

(D. C. NO. CR-89-474-SC) 

David N. Williams, Assistant u. S. Attorney, Albuquerque, 

New Mexico (William L. Lutz, United States Attorney, and Paula G. 

Burnett, Assistant u. s. Attorney, Albuquerque, New Mexico, on the 

brief), for Plaintiff-Appellant. 

Paul J. Kennedy, Albuquerque, New Mexico, for Defendant-Appellee. 

Before HOLLONAY, Chief Judge, 

NOTTINGHAM*, District Judge. 

HOLLOWAY, Chief Judge. 

* 

EBEL, Circuit Judge, and 

Honorable Edward w. Nottingham, United States District Judge for 

the District of Colorado, sitting by designation. 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 1 
The United States appeals from a dismissal by the district 

court of an indictment charging the defendant, John M. Brown, with 

three counts of violations of the National Stolen Property Act, 18 

u.s.c. §§ 2314 and 2315. 1 The indictment was dismissed on the 

ground that the allegedly stolen property, a computer program in 

source code form, did not come within the ambit of 18 u.s.c. 

§§ 2314 and 2315 as goods, wares or merchandise. We affirm. 

I 

At the hearing on the motion to dismiss the indictment, 

government counsel stated that defendant Brown worked as a 

computer programmer for The Software Link, Inc. (hereinafter TSL), 

a computer software company located in Georgia (II R. 31). One 

asset of TSL was a computer program known as PC-MOS/386. 2 Later 

in New Mexico, Brown was the subject of an FBI investigation which 

culminated in the issuance and execution of a search warrant for 

his apartment. During the search of Brown's residence, the FBI 

1 

Section 2314 applies, in part, to whoever "transports, 

transmits, or transfers in interstate or foreign commerce any 

goods, wares, merchandise, securities or money, of the value of 

$5,000 or more, knowing the same to have been stolen, converted or 

taken by fraud." 18 u.s.c. § 2314. 

Section 2315 applies, in part, to whoever "receives, 

possesses, conceals, stores, barters, sells, or disposes of any 

goods, wares, or merchandise, securities, or money of the value of 

$5,000 or more ••• which have crossed a State or United States 

boundary after being stolen, unlawfully converted, or taken, 

knowing the same to have been stolen, unlawfully converted, or 

taken." 18 u.s.c. § 2315. 

2 

PC-MOS/386 allows certain International Business Machines 

(IBM) compatible computers to perform complex activities such as 

multi-tasking and sharing of data among multiple users. II R. at 

45-46. 

2 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 2 
discovered five three-ring notebooks and a hard disk3 which 

contained portions of the source code4 for the PC-MOS/386 program. 

II R. at 47. 

A grand jury returned a three count indictment on November 

16, 1989, charging Brown in one count with violating 18 U.S.C. 

§ 2314 and in two counts with violating 18 U.S.C. § 2315. 5 At a 

pretrial motion hearing, the district judge granted a motion to 

dismiss made by the defendant. 6 The judge based his decision 

3 

A hard disk drive is one of the primary types of media for 

storing and retrieving computer data. They are characterized by a 

fast access time and a fixed storage capacity. 

4 

Programmers often write programs in source code, also called 

assembly language. This type of code contains mnemonic 

abbreviations for each step and can be read by expert programmers. 

Once a programmer has access to the source code of a program, he 

is able to determine the construction of the program and write his 

own version. For this reason, source code programs are typically 

compiled (translated) into and sold as object code or machine 

language, which is not discernable to even an expert programmer, 

but which is readily usable by the computer. 

5 

Count I stated that Brown "did knowingly cause to be 

transported in interstate commerce from Norcross, in the State of 

Georgia, to Albuquerque, New Mexico, computer programs, software 

and manuals, to wit: a computer program with source code 

PC-MOS/386 an exclusive product of The Software Link, Inc., (TSL), 

such items having a value of $5,000.00 or more, and the Defendant, 

JOHN M. BROWN, then knew that the computer program and software 

manuals had been stolen, converted and taken by fraud." 

Count II charged that Brown "knowingly possessed, concealed, 

stored, sold and disposed of computer programs, software and 

manuals, to wit: a computer program with source code PC-MOS/386 an 

exclusive product of The Software Link, Inc., (TSL), such items 

having a value of $5,000.00 or more and which had crossed a state 

or United States boundary after being stolen, and JOHN M. BROWN 

then knew the computer programs, software and manuals to have been 

stolen." 

Count III was identical to Count II in all aspects other than 

the date of the offense and the deletion of the "sold and disposed 

of" language. 

6 

(Footnote continued on next page) 

3 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 3 
primarily on Dowling v. United States, 473 U.S. 207, 216, 226 

(1985), which held that§ 2314 does not apply to crimes which 

involve mere copyright infringement and emphasized the fact that 

cases under § 2314 have always involved "physical 'goods, wares 

[or] merchandise'" that have themselves been "stolen, converted or 

taken by fraud. " 

II 

The procedural handling of the case below is questioned. In 

the pretrial stage of the proceedings, Brown filed a motion to 

dismiss. The motion alleged that upon his termination from TSL, 

the company shipped his materials from Georgia to his home in New 

Mexico; that these included his backup tapes, owned by him; that 

when packaged, the source code, PC-MOS/386, was on the tapes; 

that material from the government provided to defendant indicates 

the source code is copyright material belonging to TSL. The 

motion concluded that the source code was "intellectual property" 

and that the infringement the government alleges implicates 

complex copyright interests, and that this intellectual property 

cannot constitute goods, wares or merchandise under the National 

Stolen Property Act. For reasons that might appear at a full 

hearing, defendant asked that his motion to dismiss be granted. 

In ruling on the motion the trial judge did not consider 

solely the face of the indictment in determining its sufficiency, 

but instead conducted an evidentiary hearing. The court suggested 

having a factual predicate established to show what happened 

(Footnote continued): 

During this hearing, 

witnesses, two for the 

addition, one exhibit was 

procedure is discussed in 

the court heard testimony from three 

prosecution and one for the defense. In 

introduced by the government. This 

Part II, infra. 

4 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 4 
physically in this case; neither the government nor the defendant 

7 objected to that procedure. II R. 39-40. Three witnesses were 

allowed to testify at this hearing and one exhibit was introduced 

in evidence by the government. The trial judge concluded the 

motion hearing by dismissing the indictment. 

"An indictment is sufficient if it (1) contains the essential 

elements of the offense intended to be charged, (2) sufficiently 

apprises the accused of what he must be prepared to defend 

against, and (3) enables the accused to plead a judgment under the 

indictment as a bar to any subsequent prosecution for the same 

offense." United States v. Kilpatrick, 821 F.2d 1456, 1461 (lOth 

Cir. 1987), aff 1 d sub nom. Bank of Nova Scotia v. United States, 

487 u.s. 250 (1988). Arguing the facial sufficiency of the 

indictment, the government's Reply Brief on appeal says that the 

indictment here listed items specifically and physically related 

to the source code, which was physically possessed, stolen and 

transported to New Mexico. See note 5, supra. The government 

contends that it "is not for this court or the trial court to 

determine whether the facts support a conviction at this 

juncture." This is for the jury. Appellant's Reply Brief at 1-2. 

This, however, is not the ordinary case arising on a motion 

to dismiss the indictment, as under Rule 12(b), Fed. R. Crim. P., 

for failure to state an offense. Here the parties both presented 

evidence and raised no objection to the judge 1 s consideration of 

7 

We note that the government did not object below to the 

district court's consideration of the evidence adduced at the 

hearing in ruling on the sufficiency of the indictment. In fact, 

not until the government's appellate Reply Brief was any question 

raised as to the examination of the facts underlying the 

indictment. 

5 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 5 
the facts. These circumstances are similar to those in United 

States v. Risk, 843 F.2d 1059 (7th Cir. 1988). Risk was charged 

with failure to file Currency Transaction Reports for transactions 

involving more than $10,000, in violation of 31 u.s.c. §§ 5313 and 

5322, 31 C.F.R. Part 103 and 18 u.s.c. § 2. Through discovery, 

the government gave Risk access to the documents presented to the 

grand jury that indicted him and Risk appended these documents to 

his motion to dismiss. The government's response to this motion 

conceded that the facts as presented by Risk were "'essentially 

accurate[].'" 8 The facts developed showed that although Risk had 

been involved in transactions which in the aggregate totaled well 

over $10,000, no single transaction involved over $9,800. 

In Risk, the district court held that the indictment was 

facially sufficient but that the facts developed could not 

establish a violation of the statute underlying the indictment. 

Risk, 843 F.2d at 1061. The government argued that the district 

court erred both procedurally and substantively in dismissing the 

case, exceeding its authority under. Rule 12(b) by relying on 

incomplete facts. The Seventh Circuit stated that Rule 12(b) 

allows pretrial determination of any motion which can be resolved 

without trial of the general issue. Additionally, it was noted 

that Rule 12(e) allows the court to consider factual issues in 

determining a pretrial motion. 9 Id.; see United States v. Coia, 

8 

In the instant case, the district court had before it the 

government's version of the facts through the testimony given by 

government witnesses and the statements made by government counsel 

at the evidentiary hearing. 

9 

Rule 12(e) provides: 

(Footnote continued on next page) 

6 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 6 
719 F.2d 1120, 1123 (11th Cir. 1983), cert. denied, 466 U.S. 973 

{1984). 

We find no procedural error here. Ordinarily the sufficiency 

of an indictment should be decided solely by the charges made in 

the indictment, without regard to the strength or weakness of the 

government's case. Risk, 843 F.2d at 1061. However, in 

circumstances like those in Risk or in the instant case, it is 

permissible and may be desirable where the facts are essentially 

undisputed, for the district court to examine the factual 

predicate for an indictment to determine whether the elements of 

the criminal charge can be shown sufficiently for a submissible 

case. In any event, here the government's procedural objection is 

untimely. "Now it is too late." Risk, 843 F.2d at 1061. 

III 

We turn now to the charges of the indictment and to the 

evidentiary hearing on the motion to dismiss, including statements 

by counsel and testimony of witnesses, which developed essentially 

undisputed facts. 

The indictment was stated in three counts. Count I alleged 

that Brown violated 18 u.s.c. § 2314, in February 1989 by 

transporting interstate, from Georgia to New Mexico, "computer 

programs, software and manuals, to wit: a computer program with 

(Footnote continued): 

A motion made before trial shall be determined before 

trial unless the court, for good cause, orders that it 

be deferred for determination at the trial of the 

general issue or until after verdict, but no such 

determination shall be deferred if a party's right to 

appeal is adversely affected. Where factual issues are 

involved in determining a motion, the court shall state 

its essential findings on the record. 

7 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 7 
source code PC-MOS/386 an exclusive product of The Software Link, 

Inc., (TSL), such items having a value of $5,000.00 or more." I R. 

Doc. 1 at 1. Count II alleged that Brown violated 18 U.S.C. § 

2315 on July 28, 1989 because he "knowingly possessed, concealed, 

stored, sold and disposed of computer programs, software and 

manuals, to wit: a computer program with source code PC-MOS/386 

which had crossed a state or United States boundary after 

being stolen." Id. at 1-2. Count III was virtually identical to 

Count II, except that the date was August 2, 1989 and the "sold 

and disposed of" language was deleted. Id. at 2. 

The primary focus of the hearing on the motion to dismiss was 

on the applicability of Dowling to the case. Brown argued that 

Dowling applied because the government was not "complaining that 

Mr. Brown took a physical object from this company in Georgia and 

transported it in interstate commerce" but instead that he took a 

source code and transported it. II R. at 24. 

The government attempted to distinguish this case from 

Dowling, arguing that 

[t]he major distinction in this case ... [is that the] 

source code took 15 years to develop by TSL. It is not 

something that Mr. Brown could have gone to TSL, talked 

to the engineers, talked to the computers, even if he is 

extremely literate and perhaps brilliant in the area of 

computer programming, left that area, not taken anything 

physically that was not his, come to New Mexico and 

recreated it. 

Id. at 27. 

Brown claimed that the government could at most show that a 

copy of the program was made at TSL and was then transported in 

interstate commerce. Id. at 33. The court questioned this 

characterization of the government case since the indictment did 

not state that only a "copy" was involved. Id. In an attempt to 

8 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 8 
clarify the government's position, the court asked the prosecutor 

to describe what its proof would show as to "how the program got 

to New Mexico " or, specifically, what Brown did "physically to 

acquire t he program in Georgia. " Id. 

The government reply was that "TSL has it in their computers. 

He acquired that, and he could either have done it on a floppy 

disk or a tape or a hard disk and brought that with him to New 

Mexico . " Id. at 35. The district judge asked: "Will the 

government prove that it was not [sic) the company's hard disk 

that was brought, physically?" The prosecuting attorney stated 

that she did "not believe the government can prove that TSL owned 

hard disk A and he stole hard disk A. I don't believe we can 

prove that. " Id. at 36. The court then stated that since the 

government could not prove that, "we have to assume that a copy 

was made. " Id. The prosecutor responded "[t]hat's correct," but 

argued that it made no difference because "he still knows that it 

is not s omething that he has a right to take ." Id. 

The government again attempted to distinguish Dowling by 

emphasizing that Dowling involved recordings made "off of 

something that's open to the public", while in the instant case 

the sour c e code was "removed from things that the victim thought 

they had protected ..• " Id. at 37. The court questioned as to 

"whether or not (something is] property de pends on the method in 

which i t's captured?" Id. 10 The court then directed both counsel 

10 

A pertinent excerpt from the transcript follows: 

THE COURT: So whether or not it's property depends on the 

method in which it's captured? For example, this program that 

somebody devised, it's something intellect ual. 

MS . BURNETT: An idea. 

(Footnote continued on next page) 

9 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 9 
to establish "a factual predicate to show . . . what 

happened physically, and what physical objects were acted upon to 

bring the program to New Mexico." Id. at 39. 

The government's first witness was Mr. Klossner, a special 

agent and local information systems administrator for the FBI in 

Albuquerque, who was present at the execution of the search 

warrant at Brown's apartment. rd. at 42. He stated that Mr. 

Roark, co-chairman of TSL and co-developer of PC-MOS/386, 

identified the source code from Brown's hard disk and bound paper 

printouts as being part of PC-MOS/386. Id. at 46. The judge 

attempted to determine the origin of this seized material by 

asking if the witness had "any information whatsoever insofar as 

the material that is contained in the five three-ring binders, 

that this was original material belonging to Software Link?" Id. 

at 51. Klossner replied that "it doesn't make sense to talk about 

original material." Id. Klossner further stated that he did not 

understand that Roark was indicating that the hard disk found in 

Brown's apartment, the physical object itself, was the property of 

(Footnote continued): 

THE COURT: An idea. Are you telling me that it depends 

on how you transfer that idea, or how or where you get--where you 

pick up that idea--I mean, where you steal that from? 

MS. BURNETT: Well--

THE COURT: But is that what Dowling says? 

MS. BURNETT: I think that what Dowling says is there is a 

difference between an intellectual property, which is this idea 

floating around and it's kind of intangible, and if you shrink it 

down and put it on paper. If it's on paper and what's on paper or 

some media is stolen, then that is 2314. 

THE COURT: That's not what happened here. 

MS. BURNETT: Well, it was put onto a disk. And there's no 

difference between a disk and a piece of paper. It was taken 

directly -- this idea had been shrunk down and made into a 

program. Now it is in the banks of the computer of TSL. And it 

is there to be used for the benefit of TSL, and it lives there. 

And Mr. Brown then physically takes a copy of that out and " 

II R. at 37-38. . 

10 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 10 
TSL. Id. at 57. Klossner understood that Roark was saying that 

"the source code, the electronic signals on the hard disk, were 

the property of TSL, and the material, the source code as printed 

out in the binder were the property of TSL." Id. at 58. 

The next government witness was FBI agent Gariay. He 

testified briefly about a tape recording, a transcript of which 

was offered into evidence. The recording was of a telephone 

conversation between Brown and Ben Brady. Brady was a cooperating 

witness for the government, who was to receive copies of the 

stolen source code. 11 Gariay testified that to his knowledge, 

Brown was discussing his appropriation of the source code itself. 

Id. at 65. When asked if these printouts could have been 

generated by Brown's own computer in Albuquerque, the witness 

stated that he had "no idea." .19.. at 65. 

The final witness was a defense witness, Peter Ives, who is 

an attorney specializing in intellectual property and computer 

law. Ives testified that "[t]he source code itself, under the 

copyright law, exists separate and apart from the tangible 

11 

A pertinent portion of the conversation follows: 

Brown: 

Brady: 

Brown: 

Brady: 

Brown: 

Brady: 

Brown: 

I've got five, three ring binders that's full of 

printouts. 

Right that include PC MOS 3.0. 

3.1 

3.1? 

Yes. 

When did you get that? 

When I was out there. 

Addendum to Appellant's Brief at 2. 

11 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 11 
embodiment of that work." Id. at 68. Ives continued that "[t]he 

source code itself • . • is essentially an intangible which then, 

for purposes of distribution and the like, would be put into some 

sort of tangible form as was discussed, disks, et cetera. " Id. a·t 

70. Ives concluded by agreeing with defense counsel's suggestion 

that the source code on a floppy disk was analogous to a song on a 

phono record. Id. at 72. 

At this point the trial judge made his ruling "based upon the 

rationale in pawling." Id. at 72. The court found that the 

source code contained in the printouts in the binders, and which 

was contained in the hard disk, "is not the type of property which 

is contemplated within the language of the statute, goods, 

wares or merchandise." Id. at 73. Furthermore, the court noted 

that it took "into consideration that which Dowling discusses, and 

that is[,] that a criminal statute must be construed strictly." 

Id. at 73. A brief written order followed this ruling, giving no 

further reasons, but stating that the indictment was "dismissed in 

its entirety." I R. Doc. 21. 

IV 

In Dowling, the defendant was convicted under § 2314 of the 

National Stolen Property Act following his distribution of 

"bootleg" phonograph recordings of Elvis Presley vocalizations, 

the copyrights for which were owned by other persons. 12 The Court 

reasoned that crimes involving copyright violations could be dealt 

with through a variety of means, chiefly civil, and that it was 

12 

"A 'bootleg' phonorecord is one which 

unauthorized copy of a commercially unreleased 

Dowling, at 209 n.2. 

12 

contains an 

perfonnance. " 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 12 
not Congress' intention that the National Stolen Property Act 

function as a criminalization of copyright infringement. Id. at 

216-18. The Court noted that the courts have never required that 

the items stolen and transported remain in entirely unaltered 

form. The Court emphasized, however, that: 

[T]hese cases and others prosecuted under § 2314 have 

always involved physical "goods, wares, [or] 

merchandise" that have themselves been "stolen, 

converted or taken bv fraud." This basic element 

comports with the common-sense meaning of the statutory 

language: by requiring that the "goods, wares, [or] 

merchandise" be "the same" as those "stolen, converted 

or taken by fraud," the provision seems clearly to 

contemplate a physical identity between the items 

unlawfully obtained and those eventually transported, 

and hence some prior physical taking of the subject 

goods. 

473 u.s. at 216 (emphasis added). This essential ingredient of 

the statute the involvement of physical "goods, wares, [or] 

merchandise" that were themselves "stolen, converted or taken by 

fraud" -- was missing in Dowling and is likewise missing here. 

The government argues that the case before us is 

distinguishable from Dowling primarily because the recordings in 

Dowling were taken off of the radio. Members of the public are 

allowed to listen to these recordings when broadcast and to make a 

copy for their· own personal use, but not to make numerous copies 

and sell them commercially, as Dowling did. See Sony Corp. v. 

Universal City Studios, Inc., 464 U.S. 417 (1984). Dowling 

involves a bare copyright violation, since Dowling merely used 

recordings which he possessed legally, in a manner which went 

beyond what was permissible. In the instant case, however, the 

government says that an actual taking occurred because the "source 

code" which was found in Brown's apartment was never released to 

13 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 13 
anyone outside TSL . The program, therefore, had to have been 

originally physically taken from TSL through illicit means.

13 

As noted, Dowling holds that § 2314 applies only to physical 

"goods, wares or merchandise." Purely intellectual property is 

not within this category. It can be represented physically, such 

as through writing on a page , but the underlying, intellectual 

property itself, remains intangible. 14 It is true that the 

intellectual property involved in the instant case was more nearly 

"stolen, converted or taken by fraud" in the sense that it was at 

no time freely presented to the public as had been the recordings 

13 

§ee II R. at 37-38. 

14 

Dowling cites with approval cases which involved the 

application of § 2314 for theft of intellectual property, in 

conjunction with theft of tangible media. United States v. 

Seagraves, 265 F.2d 876 (3d Cir. 1959) (conspiracy to violate 

§ 2314); United States v. Greenwald, 479 F.2d 320 (6th Cir.), 

cert. denied, 414 u.s. 854 (1973). The Court noted that these 

cases "have always involved physical 'goods, wares, or 

merchandise' that have themselves been 'stolen, converted or taken 

by fraud' .... [T]he provision seems clearly to contemplate a 

physical identity between the items unlawfully obtained and those 

eventually transported, and hence some prior physical taking of 

the subject goods." Id., 473 u.s. at 216. 

Cases such as Seagraves and Greenwald, do not apply § 2314 to 

a bare intangible, but merely allow an intangible component of a 

tangible item, such as a chemical formula written on a stolen 

piece of paper, to contribute to the value of the item in order to 

satisfy the $5,000 statutory minimum for § 2314. Nevertheless, 

for § 2314 to apply there must be some tangible item taken, 

however insignificant or valueless it may be, absent the 

intangible component. See also United States v. Ste gora, 849 F.2d 

291, 292 (8th Cir. 1988) {where sample of a synthetic casting 

material was stolen, using research, development, and 

manufacturing costs along with value of item "in the thieves 

market" in order to meet the $5000 valuation). 

In the instant case, the testimony presented by the 

prosecution, as well as statements made by the prosecutor, 

indicated that there was no evidence which would tend to prove 

that defendant Brown was involved in the physical theft or 

transportation of physical property belonging to TSL. II R. at 

34-36, 50-52, 64-65. 

14 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 14 
. D 1' 15 J.n ow 1.ng. In fact, the government says here that Brown 

himself, although a programmer at TSL, did not have authorized 

access to the PC-MOS/386 source code file. II R. at 58. This 

point, however, is not dispositive of the critical issue under 

Dowling. Here we agree that the property, PC-MOS/386, does not 

meet the requirement of §§ 2314 and 2315 respecting "goods, wares, 

or merchandise." We hold that the computer program itself is an 

intangible intellectual property, and as such, it alone cannot 

constitute goods, wares, merchandise, securities or moneys which 

have been stolen, converted or taken within the meaning of §§ 2314 

or 2315. 

The recent case of United States v. Riggs, 739 F.Supp. 414 

(N.D. Ill. 1990), was cited by the government as supplemental 

authority for the proposition that source codes can be described 

as goods, wares, or merchandise. Mr. Riggs was convicted under 18 

u.s.c. § 2314 for the theft of an electronic text file owned by 

Bell South. A text file is very similar to a source code file in 

15 

The situation before us is similar to a hypothetical 

presented in Dowling. The Court describes a case in which "The 

Nation, a weekly magazine of political commentary, had infringed 

former President Ford's copyright in the unpublished manuscript of 

his memoirs by verbatim excerpting of some 300 words from the 

work." Dowling, at 226. The Court went on to say that 11We would 

pause, in the absence of any explicit indication of congressional 

intention, to bring such conduct within the purview of a criminal 

statute, making available serious penalties for the interstate 

transportation of goods 'stolen, converted or taken by fraud.'" 

Id. 

In this hypothetical, as in the case before us, the 

intellectual property had not been released to the public and much 

of the value of the property was due to the unrevealed nature of 

such property. The release of select portions of either the book 

or the computer code could severely impact the market for either 

item. Nevertheless, we feel that in this case, as in the Court's 

hypothetical, the conduct complained of is not within the purview 

of § 2314. 

15 

Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 15 
most respects. Riggs stole the text file by accessing the Bell 

South computer and transferring the text file over phone lines to 

his own computer. No physical item was taken from Bell South. 

The district court reasoned that 11 if the information in Bell 

South's E911 text file had been affixed to a floppy disk, or 

printed out on a computer printer, then [defendant's] transfer of 

that information across state lines would clearly constitute the 

transfer of 'goods, wares, or merchandise' within the meaning of S 

2314." Id. The district court found "no reason to hold 

differently simply because [defendant] stored the information 

inside computers instead of printing it out on paper. In either 

case, the information is in 

salable form. " The court 

a transferrable, 

further reasoned 

accessible, even 

that "reading a 

tangibility requirement into the definition of "goods, wares, or 

merchandise" might unduly restrict the scope of § 2314, especially 

in this modern technological age." The court found that "[t]he 

accessability of the information in readable form from a 

particular storage place also makes the information tangible, 

transferable, salable and, in [the district] court's opinion, 

brings it within the definition of 'goods, wares, or merchandise' 

under§ 2314." Id. at 422. 

We disagree. We feel that the Riggs interpretation of the 

statute is in error in light of the Supreme Court's focus on 

"physical 'goods, wares [or] merchandise' that have themselves 

been 'stolen, converted or taken by fraud,'" 473 U.S. at 216. The 

element of physical "goods, wares, or merchandise" in §§ 2314 and 

2315 is critical. The limitation which this places on the reach 

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Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 16 
of the National Stolen Property Act is imposed by the statute 

itself, and must be observed. See Dowling at 218, 226. 

"Federal crimes, of course, 'are solely creatures of statute 

.,'" Dowling, 473 U.S. at 213 (citations omitted). The 

language of the statutes involved here does not support the 

government's broad-ranging interpretation of §§ 2314 and 2315, and 

even if this were less apparent, the ambiguity concerning the 

ambit of the criminal statutes should be resolved in favor of 

lenity. See Rewis v. United States, 401 u.s. 808, 812 (1971). 

Since the government could not establish that the defendant had 

tranported, transmitted or transferred in interstate commerce 

(§ 2314), or received, possessed, concealed, stored, bartered, 

sold or disposed of (§ 2315) any physical "goods, wares or 

merchandise • • . ,"the indictment was properly dismissed. 

AFFIRMED. 

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Appellate Case: 90-2066 Document: 01019728942 Date Filed: 02/21/1991 Page: 17