Opinion ID: 1036112
Heading Depth: 2
Heading Rank: 1

Heading: Legal Sufficiency of the Charges

Text: Agrawal challenges the legal sufficiency of both counts of the indictment. As to Count One, he argues that, insofar as the trade secret at issue, SocGen’s computer code, was “included in” SocGen’s HFT systems, those internal, confidential systems cannot qualify as “product[s] . . . produced for or placed in interstate or foreign commerce” as required by the EEA. 18 U.S.C. § 1832(a)(2) (emphasis added). As to Count Two, Agrawal asserts that SocGen’s computer code is intangible property and, as such, not “goods, wares, or merchandise” as required by the NSPA. Id. § 2314. Neither argument was ever raised below. We generally review a challenge to the legal sufficiency of an indictment de novo. See United States v. Shellef, 507 F.3d 82, 104 (2d Cir. 2007). Where, as here, however, a defendant failed to raise a sufficiency objection in the district court and presents it for the first time on appeal, we review for plain error. See United States v. Cotton, 535 U.S. 625, 631 (2002) (applying plain-error review to defective indictment claim); United States v. Nkansah, 699 F.3d 743, 752 (2d Cir. 2012); United States v. Doe, 297 F.3d 76, 81 (2d Cir. 2002). Under that standard, an appellate court may, in its discretion, correct an error not raised at trial only where the appellant demonstrates that (1) there is an error; (2) the error is clear or obvious, rather than subject to reasonable dispute; (3) the error affected the appellant’s substantial rights, which in the ordinary case means it affected the outcome of the district court proceedings; and (4) the error seriously affect[s] the fairness, integrity or public reputation of judicial proceedings. 11 United States v. Marcus, 130 S. Ct. 2159, 2164 (2010) (internal quotation marks omitted). In attempting to demonstrate plain error, Agrawal is entitled to the benefit of our recent decision in United States v. Aleynikov, 676 F.3d 71. See United States v. Garcia, 587 F.3d 509, 520 (2d Cir. 2009) (instructing that whether error is “plain” is determined by reference to law at time of appeal); see also Henderson v. United States, 133 S. Ct. 1121, 1126 (2013) (holding that court of appeals is bound by law as it exists at time of appeal); Johnson v. United States, 520 U.S. 461, 468 (1997) (“[I]t is enough that an error be ‘plain’ at the time of appellate consideration.”). In Aleynikov, another dishonest employee, this one employed by Goldman Sachs, also stole proprietary trading code, in that case by uploading more than 500,000 lines of code to a third-party computer server in Germany, downloading the code from that server to his home computer, and then electronically copying some of the files to other computer devices that he owned. See 676 F.3d at 74. This court reversed defendant’s EEA conviction, holding that to the extent such code was “included in” the employer’s confidential trading system, that system was not “a product that is produced for or placed in interstate or foreign commerce,” as required by the EEA, 18 U.S.C. § 1832(a)(2), because the employer never intended to sell or license the system but, rather, went to great lengths to maintain its secrecy, see United States v. Aleynikov, 676 F.3d at 82. The court further reversed defendant’s NSPA conviction, holding that the code, stolen entirely in electronic form, was not tangible property, as necessary to qualify as “goods, wares, [or] merchandise” under 18 U.S.C. § 2314. See id. at 76–79. While Aleynikov’s construction of the EEA and NSPA controls on the matters it decides, Agrawal’s case is distinguishable from Aleynikov in important respects that 12 preclude him from demonstrating plain error in the legal sufficiency of his indictment. We here briefly summarize what we explain further in this opinion.6 As to the EEA charge, in this case, neither the indictment nor the prosecution’s arguments or the court’s charge identified SocGen’s confidential HFT systems as the “product” relied on to satisfy the crime’s jurisdictional element. Rather, the record indicates that the relevant product was the publicly traded securities bought and sold by SocGen using its HFT systems. Because such securities satisfy the EEA’s jurisdictional element without raising the concerns identified in Aleynikov, Agrawal cannot demonstrate that any pleading insufficiency with respect to SocGen’s HFT systems affected his substantial rights, much less the fairness, integrity, or public reputation of judicial proceedings. Insofar as Agrawal invokes Yates v. United States, 354 U.S. 298 (1957), to urge otherwise, faulting the indictment and charge for failing to specify that only securities, and not SocGen’s HFT systems, could satisfy the EEA’s product requirement, we similarly review only for plain error because no such objection was ever raised in the district court. Agrawal cannot demonstrate Yates error because neither the prosecution nor the court ever presented SocGen’s HFT systems to the jury as “products” satisfying the EEA’s jurisdictional element. In any event, any such error would not be “plain,” because the only 6 The overall tenor of the dissenting opinion is that, in affirming Agrawal’s conviction, we fail to respect the precedent set by the reversal in Aleynikov. That suggestion considerably over-reads the precedential force of Aleynikov. That case establishes that the jury instructions in Aleynikov permitted the jury to convict on a legally invalid theory. It does not, and cannot, establish that the kind of conduct in which Aleynikov and Agrawal engaged is intrinsically legal, and it does not address, let alone reject, the theory on which Agrawal was convicted. Neither the jury instructions nor the prosecution’s summation in this case proffered to the jury the theory on which Aleynikov’s conviction was based, and Agrawal did not seek any instruction specifically disavowing that theory. In short, nothing we say or do today is inconsistent with the reversal of Aleynikov’s conviction. 13 possible basis for treating confidential trading systems as products produced for or placed in interstate commerce was that such systems are used to buy and sell securities traded in interstate commerce. In short, no jury could find SocGen’s HFT systems to qualify as EEA products (impermissibly, after Aleynikov), without first finding that the securities traded using those systems were such products. In these circumstances, any Yates error in failing to distinguish between the two possible products could not have affected either Agrawal’s substantial rights or the fairness, integrity, or public reputation of judicial proceedings. As to the NSPA charge, Agrawal’s legal-sufficiency challenge fails at the first step of plain-error analysis. Because Agrawal—unlike Aleynikov—stole the computer code in a tangible rather than intangible form, i.e., printed onto thousands of sheets of paper, he cannot demonstrate any error, let alone plain error, in charging him with the theft of “goods, wares, [or] merchandise.” 18 U.S.C. § 2314.
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