Theft of Trade Secrets Clarification Act of 2012

Floor Speech

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Mr. SMITH of Texas. Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, S. 3642, the Theft of Trade Secrets Clarification Act of 2012, clarifies the scope of the Economic Espionage Act, EEA, and protects American jobs and businesses from the theft of their valuable trade secrets. I want to thank Senator Leahy for his hard work on this piece of legislation.

Since 1996, the EEA has served as the primary tool the Federal Government uses to protect secret, valuable, commercial information from theft. The Second Circuit's Aleynikov decision revealed a dangerous loophole that demands our attention. In response, the Senate unanimously passed S. 3642 in November. We need to act today to send this important measure directly to the President. We must also take action in response to the Second Circuit's call and ensure that we have appropriately adapted the scope of the EEA to the digital age.

I again thank Senator Leahy for his leadership on this issue. I urge my colleagues to support the bill, and I reserve the balance of my time.

Mr. Speaker, S. 3642, the ``Theft of Trade Secrets Clarification Act of 2012,'' clarifies the scope of the Economic Espionage Act (EEA) and protects American jobs and businesses from the theft of their valuable trade secrets. I thank Senator LEAHY for his hard work on this bill.

Sergey Aleynikov was convicted for stealing and transferring valuable proprietary computer source code that belonged to his former employer, Goldman Sachs. Earlier this year, he was released from a federal penitentiary after serving only one year of an eight-year sentence.

According to the Second Circuit Court of Appeals, he had accepted an offer in 2009, to become a senior executive at a Chicago-based startup that intended to compete against Goldman in the provision of high frequency trading (HFT) services.

The Appeals Court explained:

just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman's HFT system ..... On June 2, 2009, Aleynikov flew ..... to Chicago to attend meetings at Teza. He brought with him a flash drive and a laptop containing portions of the Goldman source code. When Aleynikov flew back the following day, he was arrested by the FBI .....''

Aleynikov was convicted of violating the EEA and the National Stolen Property Act. After reviewing the trial record, the Appeals Court issued an order in February 2012, which reversed Aleynikov'convictions on both counts.

The court's decision construed the scope of the two federal criminal statutes. It observed that there is a limitation that products be ``produced for'' or ``placed in'' interstate or foreign commerce.

The court concluded, ``Goldman's HFT system was neither `produced for' nor `placed in' interstate or foreign commerce,'' despite evidence that it facilitated millions of proprietary trades and transactions each year. It then determined that the theft of source code was not an offense under the EEA.

The court explained that when a statute, particularly a criminal statute, is ambiguous, it is appropriate to construe it narrowly and, ``to require that Congress should have spoken in language that is clear and definite'' before choosing a stricter interpretation.

In his concurring opinion, Judge Calabresi [Cal-abress-E] directly called upon Congress to clarify the scope of the EEA as he wrote:

[I]t is hard for me to conclude that Congress, in [the EEA], actually meant to exempt the kind of behavior in which Aleynikov engaged ..... [n]evertheless, while concurring [in the opinion], I wish to express the hope that Congress will return to the issue and state, in appropriate language, what I believe it meant to make criminal in the EEA.

The FBI estimated earlier this year that U.S. companies had lost $13 billion to trade secret theft in just over six months. Over the past six years, losses to individual U.S. companies have ranged from $20 million to as much as $1 billion.

Since 1996, the EEA has served as the primary tool the federal government uses to protect secret, valuable, commercial information from theft.

The Second Circuit's Aleynikov [Alay-na-kov] decision revealed a dangerous loophole that demands our attention. In response, the Senate unanimously passed S. 3642 in November.

We need to act today to send this important measure directly to the President. We must also take action in response to the Second Circuit's call and to ensure that we have appropriately adapted the scope of the EEA to the digital age.

I again thank Senator LEAHY for his leadership on this issue and I urge my colleagues to support the bill.

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