Saturday, April 30, 2011

Ninth Circuit Extends Application of Computer Fraud and Abuse Act (U.S. v. Nosal)

The Computer Fraud and Abuse Act's role in competition cases has decreased over the past few years. This is due in large part to the interpretation of the "damage" or "loss" element that an employer must show as part of a claim. It also is due, however, to courts' restrictive interpretation of an employee' improper access of a protected computer.

The Ninth Circuit was on the leading edge of the statutory interpretation issues, taking a fairly pro-employee stance in LVRC Holdings, LLC v. Brekka. In a recent decision, the court of appeals softened its stance a bit and issued a pro-employer ruling on the CFAA's scope and application.

The criminal case of United States v. Nosal puts front and center an employer's access or use restrictions. In particular, an employer's policies, most often expressed in a non-disclosure agreement, which place a restriction on the ability of an employee to use or access sensitive company data will determine the CFAA's applicability. For instance, if an employer requires all employees to agree that a CRM database can only be accessed or used for any internal client or business purposes, the use of that database for improper competitive purposes could result now in an employee "exceeding his authorized access" of the system. This would be shown, for instance, by converting a report to Excel and e-mailing it to a personal account or a co-conspirator.

An employer who does not put an employee on notice that such conduct is prohibited most likely will not be able to state a CFAA claim. Keep in mind that a CFAA claim is both civil and criminal, and it still requires an employer to demonstrate a minimum loss in the amount of $5,000. It is not an easy claim to prove. The Ninth Circuit has opened a slight window for employers in that circuit to use carefully worded policies and agreements as a basis for an "exceeds authorized access."


Court: United States Court of Appeals for the Ninth Circuit
Opinion Date: 4/28/2011
Cite: United States v. Nosal, 2011 U.S. App. LEXIS 8660 (9th Cir. Apr. 28, 2011)
Favors: Employer
Law: Federal

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