Opinion ID: 1036112
Heading Depth: 3
Heading Rank: 2

Heading: Count One (EEA)

Text: a. The Alleged Securities Publicly Traded Using SocGen’s Confidential Computer Code Were Legally Sufficient To Satisfy the Product and Nexus Requirements of the EEA’s Jurisdictional Element The Electronic Espionage Act, as in effect at the time of Agrawal’s indictment and conviction, stated in relevant part as follows: Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will injure any owner of that trade secret, knowingly— (1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information; 14 (2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates or conveys such information; [or] (3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization; ... [is guilty of a crime]. 18 U.S.C. § 1832 (emphasis added). The highlighted statutory language—the jurisdictional element of the statute—is the focus of Agrawal’s sufficiency challenge. In United States v. Aleynikov, this court construed the phrase “a product that is produced for or placed in interstate or foreign commerce” as a “limitation” on the scope of the EEA, 676 F.3d at 79, signaling that Congress did not intend to invoke its full Commerce Clause power to criminalize the theft of trade secrets, see id. at 81–82 (citing Supreme Court cases distinguishing between legislation invoking Congress’s full power over activity substantially “affecting commerce” and legislation using more limiting language).7 7 Aleynikov’s identification of a congressional intent to limit the reach of the EEA has since been disavowed by Congress itself, which quickly amended the EEA to remove the purportedly limiting language and to clarify its intent to reach broadly in protecting against the theft of trade secrets. See Theft of Trade Secrets Clarification Act of 2012, Pub. L. No. 112-236, 126 Stat. 1627 (providing for EEA to be amended to strike phrase “or included in a product that is produced for or placed in” and to insert phrase “a product or service used in or intended for use in,” so that relevant language now reads: “Whoever, with intent to convert a trade secret, that is related to a product or service used in or intended for use in interstate or foreign commerce . . . .”); 158 Cong. Rec. S6978-03 (daily ed. Nov. 27, 2012) (statement of Sen. Leahy) (observing that Aleynikov decision “cast doubt on the reach” of EEA, and that “clarifying legislation that the Senate will pass today corrects the court’s narrow reading to ensure that our federal criminal laws adequately address the theft of trade secrets” (emphasis added)). On this appeal, we have no occasion to construe the revised EEA. Rather, we are obliged to apply the EEA as it existed at the time of Agrawal’s conviction and as construed 15 Aleynikov explained that for a product to be “placed in” commerce, it must have “already been introduced into the stream of commerce and have reached the marketplace.” Id. at 80. Products “being developed or readied for the marketplace” qualified “as being ‘produced for,’ if not yet actually ‘placed in,’ commerce.” Id. But a “product” could not be deemed “produced for” commerce simply because its “purpose is to facilitate or engage in such commerce”; such a construction of the EEA’s product requirement would deprive the statutory language of any limiting effect. Id. at 80–81 & n.5 (noting that government had been “unable to identify a single product that affects interstate commerce but that would nonetheless be excluded by virtue of the statute’s limiting language”). Aleynikov’s construction of the phrase “a product that is produced for or placed in interstate commerce” controls on this appeal. We note, however, that the reversal of Aleynikov’s EEA conviction was based on the application of that phrase to the particular “product” that was the basis of the jurisdictional allegation in his case. As we explain below, the present case was submitted to the jury on a very different product theory than that relied on in Aleynikov. Thus, the same construction that prompted reversal in Aleynikov leads to affirmance here. In Aleynikov, the EEA charge was submitted to the jury on the theory that the trade secret converted by the defendant, i.e., the proprietary computer code, was “included in” a single product: Goldman Sachs’s confidential trading system. The jury instructions in in Aleynikov. See Collins v. Youngblood, 497 U.S. 37, 41 (1990). 16 Aleynikov unambiguously stated that “[t]he indictment [in that case] charges that the Goldman Sachs high-frequency trading platform is a product,” and that the jury’s responsibility was to “determin[e] whether the trading platform was produced for or placed in interstate or foreign commerce.” United States v. Aleynikov, No. 10-cr-96 (DLC), Tr. 1546–47 (emphasis added). This had been the court’s and the parties’ understanding of the Aleynikov indictment from the start. In its opinion denying the defendant’s motion to dismiss the indictment, the court noted the parties’ agreement “that the trade secret at issue in [the EEA Count] is the source code, and that the relevant ‘product’ is the Trading System.” United States v. Aleynikov, 737 F. Supp. 2d 173, 178 (S.D.N.Y. 2010). It was on this understanding that this court held the Aleynikov indictment legally insufficient. As Aleynikov construed the phrase “a product that is produced for or placed in interstate or foreign commerce,” Goldman Sachs’s trading system could not constitute such a product because Goldman Sachs “had no intention of selling its HFT system or licensing it to anyone.” United States v. Aleynikov, 676 F.3d at 82. To the contrary, the value of the system depended entirely on preserving its secrecy. See id. Agrawal submits that Aleynikov mandates the same conclusion here because the computer code at issue, like the code in Aleynikov, was included in a confidential HFT system. But this case differs from Aleynikov in an important respect. Here, neither the prosecution nor the district court presented the case to the jury on the theory that SocGen’s trading system was the “product” placed in interstate commerce. Nor did they suggest that 17 the EEA’s jurisdictional nexus was satisfied by computer code (the stolen trade secret) being “included in” that “product.” Rather, the record reveals that EEA jurisdiction was here put to the jury on a more obvious, convincing—and legally sufficient—theory that was not pursued and, therefore, not addressed in Aleynikov: that the securities traded by SocGen using its HFT systems, rather than the systems themselves, were the “product[s] . . . placed in” interstate commerce. Under that theory, the jurisdictional nexus was satisfied because SocGen’s stolen computer code “related to” the securities (the product) it identified for purchase and sale. While Agrawal’s indictment did not state this theory in so many words, it did allege that SocGen engaged in “high-frequency trading in securities” on national markets “such as the New York Stock Exchange and NASDAQ Stock Market.” Indictment ¶¶ 1, 4. This effectively identified securities as products traded in interstate commerce.8 At trial, the 8 Agrawal does not contend that securities are not “products.” See Webster’s 3d New Int’l Dictionary 1810 (1986) (defining “product” as “something produced by physical labor or intellectual effort: the result of work or thought”); Dow Jones Co. v. Int’l Sec. Exch., 451 F.3d 295, 304 n.10 (2d Cir. 2006) (discussing “intellectual-property rights in the securities designed according to the plaintiff’s proprietary formulas”). Indeed, securities are routinely discussed as products by the Securities and Exchange Commission, the administrative agency principally charged with enforcing federal securities laws, see Asset-Backed Securities, SEC Release Nos. 33-9117, 34-61858, 2010 WL 1389116 (Apr. 7, 2010) (“Throughout this release, we refer to the securities sold through such vehicles as asset-based securities, ABS, or structured finance products.” (emphasis added)); by Congress, see 15 U.S.C. § 78c(a)(56) (defining “securities futures product” as “security future or any put, call, straddle, option, or privilege on any security future”); and by this and other courts, see Burns v. N.Y. Life Ins. Co., 202 F.3d 616, 618 (2d Cir. 2000) (referring to entity as “registered broker-dealer of securities products”); see also United States v. Laurienti, 611 F.3d 530, 542 (9th Cir. 2010) (discussing broker’s disclosure obligations “on client purchases of particular securities products”); Gurfel v. SEC, 205 F.3d 400, 400 (D.C. Cir. 2000) (observing that petitioner 18 prosecution offered evidence proving the allegation. Moreover, in summation, it argued that although little had been said about the requirement that the stolen computer code “relate[] to a product that was produced for or placed in interstate or foreign commerce,” the element was satisfied by evidence that SocGen’s trading system was designed to buy and sell “stocks and futures” on national exchanges. Tr. 1258. To be sure, in Aleynikov, the prosecution made a virtually identical argument, see United States v. Aleynikov, No. 10-cr-96 (DLC), Tr. 1485–86, but in that case, as we have already observed, the government and the court elsewhere specifically identified the trading system as the relevant product. Where, as here, no pleading, argument, or charge ever labeled SocGen’s trading system a product—much less the product produced for or placed in interstate commerce on which the government relied to satisfy the EEA’s jurisdictional element—the quoted government argument is more reasonably understood to identify the stocks and futures bought and sold on national exchanges as the products placed in interstate commerce. Indeed, the district court “sold securities products to investors”). Nor is there any question that securities publicly traded on national exchanges—their marketplace—have been “placed in” interstate commerce. See United States v. Aleynikov, 676 F.3d at 80 (stating that product is “placed in interstate or foreign commerce” where it has “been introduced into the stream of