BACKDOOR MAN: A RADIOGRAPH OF COMPUTER SOURCE CODE THEFT CASES.

Author:Vasiu, Ioana
 
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CONTENTS I. Introduction II. Computer Source Code III. The Federal Theft of Trade Secret Statute A. Remarks B. Trade Secrets C. Theft of Trade Secrets Under 18 U.S.C. [section] 1832 D. Legal Elements IV. Litigation Aspects A. Vagueness Challenges B. Readily Ascertainable Information C. Economic Value D. Reasonable Security Measures E. Intent to Convert F. Loss Calculation and Sentencing V. Conclusion I. Introduction

Intellectual property (IP) protection encompasses four major types of rights: copyright; trademark; patent; and trade secrets. (1) Trade secrets, "the most ancient type of intellectual property," (2) even though "far more amorphously defined than other IP pillars," (3) represent an important asset of organizations. (4) Trade secrets' role for the competitiveness of companies in the last decades is reflected in the notable efforts aiming to strengthen the legal protection afforded (5) and to identify and monitor countries that deny adequate trade secret protection, (6) as well as in the large number of academic publications focused on various trade secret aspects. (7)

Facilitated by globalization, technological developments, and workers mobility, the opportunities for and the impact of trade secrets misappropriation are on the rise. (8) The theft of trade secrets affects virtually every important economic sector, (9) and imposes severe economic and other harm to the owner of the trade secret and to others. (10) Successful or attempted trade secret theft may result in loss of sales, costs for internal investigation, negotiating settlements, prosecution and litigation, and higher disbursement for security measures. (11) In 2012, for instance, in cases investigated by the FBI's Economic Espionage Unit, the victim companies reported losses amounting to $19 billion. (12) Overall, according to estimates, the theft of trade secrets costs up to $300 billion per year, (13) or 1-3 percent of the U.S. gross domestic product (GDP). (14)

There are multiple trade secret attack vectors. (15) Misappropriation of trade secrets can take the form of economic espionage, which benefits a foreign nation or instrumentality, and theft for pecuniary gain,which benefits an individual or an organization. (16) The threat comefrom numerous sources, such as current or former employees, (17) competitors, clients, suppliers, (18) and hackers. (19) Given the complexity of developing computer programs, (20) the massive financial investments involved, (21) as well as the fundamental role programs play in numerous industries, computer source code (source code) can be considered "one of the most critical assets that companies possess". (22)

Source code often present a particular interest for perpetrators, (23) successful misappropriation resulting in profound consequences for victims. In United States v. Sinovel, for instance, the defendant misappropriated source code from a company called AMSC, then used it in the operation of wind turbines. (24) As a result of the theft, victim's annual revenues fell by 75 percent, its stock price plummeted by 90 percent, and it had to cut its employee workforce by 70 percent. (25)

This article reports and discusses the main cases of theft of source code held as a trade secret brought to courts in violation of the Economic Espionage Act of 1996, Title 18, section 1832 of the U.S. Code. The article is structured into four parts. Part I looks into definitions of source code and outlines forms of theft. Part II contains remarks on trade secret law and an examination of the legal elements of Section 1832. Part III reports and discusses the most relevant arguments, issues, and viewpoints found in cases brought under the Theft of Trade Secrets Section. Finally, the article outlines the main findings and their normative and managerial implications

  1. Computer Source Code

    A "computer program" is "a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result." (26) There are three categories of languages in which computer programs can be written: high level, assembly, and machine language. (27) Computer programs are usually written in a high-level programming language, development which provides the source code version of the computer program. (28) In order to run a computer program on a computing device, the program must be compiled or translated from the language in which it was written, into a machine-form (object or binary code), understood by the processor. (29)

    The term "source code" is a complex one, difficult to define. (30) In a concise definition, source code is described as "one of several ways to obtain structured binary data that when sequenced to a processor in a particular order causes a computer to perform particular functions." (31) Source code includes text written in languages such as 'C,' 'C++,' assembler, VHDL, Verilog, and/or digital signal processor (DSP) programming languages, and files such as "include," "make," link, or other files "used in the generation and/or building of any software that is directly executed on a microprocessor, microcontroller, or DSP; and accompanying documentation." (32) A comprehensive definition of source code can be found in Palmchip Corporation v. Ralink Technology Corporation: (33)

    Human-readable programming language text that defines software, firmware, or electronic hardware descriptions and/or instructions. Source Code includes, without limitation, computer code, scripts, assembly, object code, source code listings and descriptions of source code, object code listings and descriptions of object code, formulas, engineering specifications, or schematics that define or otherwise describe in detail the algorithms or structure of software. Source Code further includes, but is not limited to: (1) printed documents that contain or refer to selected Source Code components; (2) electronic communications and descriptive documents, such as emails, design documents and programming examples, which contain or refer to selected Source Code components, the disclosure of which would create a substantial risk of serious harm that could not be avoided by less restrictive means; (3) electronic Source Code documents that reside in a Source Code repository from which software and related data files may be compiled, assembled, linked, executed, debugged and/or tested; and (4) transcripts, reports, video, audio, or other media that include, quote, cite, describe, or otherwise refer to Source Code, Source Code files, and/or the development thereof. Source Code may further include, but are not limited to, documents containing Source Code in "C", "C++", Java, Java scripting languages, assembler languages, command languages and shell languages. Source Code may further include "header files," "make" files, project files, link files, and other human-readable text files used in the generation, compilation, translation, and/or building of executable software, including software intended for execution by an interpreter. Computer programs play a fundamental role in advanced fields, such as radio frequency identification; (34) protection against computer contaminants; (35) computer networking; (36) audio teleconferencing; (37) fleet management; (38) video games; (39) or financial services. (40) The "hybrid nature" of computer programs, allows for multiple IP categorization. (41) The principal modes of legal protection for source code are copyright law, (42) patent law, (43) and trade secret law. (44) Given the actual or potential value of source code, it is no surprise that there are numerous cases involving disputes over misappropriation or ownership of source code. (45)

    The theft of source code, depending on the circumstances of each case, can be prosecuted as violation of several statutes, such as 18 U.S.C. [section] 1343 (Fraud by Wire, Radio, or Television); (46) 18 U.S.C. s 1831 (Economic Espionage); (47) 18 U.S.C. [section] 1030(a)(2)(C) (Computer Fraud and Abuse Act); (48) 18 U.S.C. [section] 2314 (National Stolen Property Act); (49) 22 U.S.C. [section][section] 2778(b)(2), 2778(c) (Arms Export Control Act); (50) and 18 U.S.C. [section] 1832 (Theft of Trade Secrets). (51)

  2. The Federal Theft of Trade Secret Statute

    1. Remarks

      IP provides a major contribution to the U.S. GDP and plays a major role in the economic growth and technological progress. (52) In figures, IP-intensive industries furnish over $5 trillion in output, and 74 percent of the U.S. exports. (53) The effective protection of intellectual property rights fulfills a major role in the advancement of innovation, facilitates the creation of new jobs, and stimulates higher research and development (R&D) investments. (54)

      Trade secret protection broadly encompasses the following categories: (1) technical data; (2) confidential business information; and (3) know-how. (55) Trade secret law is generally regarded as "based on relational obligations (for example, contract, employment status, or fiduciary duty); property rights; fairness and equity; or unfair competition law tort or delict," however, some legal commentators regard it as a "collection of approaches and norms regarding the protection of business information." (56)

      Trade secrets law "serves as a partial substitute for excessive investments in physical security" and "facilitates disclosure in contract negotiations over the use or sale of know-how that otherwise would not occur in the absence of such protection." (57) Another major aim of trade secret law consists in maintaining "standards of commercial ethics and the encouragement of invention are the broadly stated policies behind trade secret law." (58) Synthetically, trade secret law can be regarded as a form of "private intellectual property law under which creators establish contractual limitations or build legal 'fences' that afford protection from misappropriation." (59)

      The legal protection of trade secrets is different from that...

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