The 9th Circuit Court of Appeals has affirmed convictions for knowingly and with intent to defraud accessing a protected computer without authorization, in violation of the Computer Fraud and Abuse Act, and for trade secret theft, in violation of the Economic Espionage Act (“EEA”).
David Nosal was employed by Korn/Ferry International, an executive search firm, and subsequently resigned in order to start a competing firm. Nosal was convicted of violating the EEA by using login credentials of current Korn/Ferry employees to access the company’s database in order to obtain trade secrets and then delivering information related to potential executive candidates back to Nosal. Nosal was sentenced to one year and one day in prison, three years of supervised release, a $60,000 fine, and $600 special assessment, and was ordered to pay approximately $828,000 in restitution to his former employer.
Nosal appealed his conviction on the ground that the government failed to prove that the information obtained constituted a trade secret as the search information was derived from public sources. The court rejected Nosal’s argument, noting that data containing information from public sources does not necessarily preclude trade secrets. Further, the scope of the EEA is not limited to proprietary formulas, technical drawings, or scientific data and the EEA includes financial and business information. The court recognized that while some or all of the components of a trade secret are public information this does not preclude protection for a secret compilation or integration of the individual elements.
This decision follows the judicial development of finding financial and business lists, that are the customized product of a massive database and not merely a record of public information, are protectable trade secrets.