United States v. David Nosal

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, Nos. 14-10037
Plaintiff-Appellee, 14-10275
v. D.C. No.
3:08-cr-00237-EMC-1
DAVID NOSAL,
Defendant-Appellant. ORDER AND
AMENDED OPINION
Appeal from the United States District Court
for the Northern District of California
Edward M. Chen, District Judge, Presiding
Argued and Submitted October 20, 2015
San Francisco, California
Filed July 5, 2016
Amended December 8, 2016
Before: Sidney R. Thomas, Chief Judge and Stephen
Reinhardt and M. Margaret McKeown, Circuit Judges.
Order;
Opinion by Judge McKeown;
Dissent by Judge Reinhardt
2 UNITED STATES V. NOSAL
SUMMARY*
Criminal Law
The panel amended its opinion filed July 5, 2016, and
denied on behalf of the court a petition for rehearing en banc,
in a case in which the panel (1) affirmed convictions for
knowingly and with intent to defraud accessing a protected
computer “without authorization,” in violation of the
Computer Fraud and Abuse Act (CFAA), and for trade secret
theft, in violation of the Economic Espionage Act (EEA); and
(2) vacated in part and remanded the restitution order for
reconsideration of the reasonableness of the attorneys’ fees
award.
In the amended opinion, the panel held that the defendant,
a former employee whose computer access credentials were
affirmatively revoked by executive search firm Korn/Ferry
International, acted “without authorization” in violation of the
CFAA when he or his former employee co-conspirators used
the login credentials of a current employee to gain access to
confidential computer data owned by the former employer
and to circumvent Korn/Ferry’s revocation of access. The
panel rejected the defendant’s contentions regarding jury
instructions and sufficiency of the evidence in connection
with the CFAA counts, as well as his sufficiency-of-the-
evidence, instructional, and evidentiary challenges to his EEA
convictions for trade secret theft.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V. NOSAL 3
The panel determined that the restitution order was within
the bounds of the statutory framework set forth in the
Mandatory Victim Restitution Act, rejecting the defendant’s
contention that the award is invalid because it exceeds the
actual loss that the district court determined for purposes of
the Sentencing Guidelines. Reviewing for abuse of discretion
the district court’s decision to award nearly $1 million, the
panel remanded for the district court to reconsider the
reasonableness of the award with respect to the defendant’s
former employer’s attorneys’ fees.
Dissenting, Judge Reinhardt wrote that this case is about
password sharing, and that in his view, the CFAA does not
make the millions of people who engage in this ubiquitous,
useful, and generally harmless conduct into unwitting federal
criminals.
COUNSEL
Dennis P. Riordan (argued) and Donald M. Horgan, Riordan
& Horgan, San Francisco, California; Ted Sampsell-Jones,
William Mitchell College of Law, St. Paul, Minnesota; for
Defendant-Appellant.
Jenny C. Ellickson (argued), Trial Attorney, Criminal
Division, Appellate Section; Sung-Hee Suh, Deputy Assistant
Attorney General; Leslie R. Caldwell, Assistant Attorney
General; United States Department of Justice, Washington,
D.C.; J. Douglas Wilson, Assistant United States Attorney,
Chief, Appellate Division; Kyle F. Waldinger and Matthew
A. Parrella, Assistant United States Attorneys; United States
Attorney’s Office, San Francisco, California; for Plaintiff-
Appellee.
4 UNITED STATES V. NOSAL
Jamie Williams, Cindy Cohn, Andrew Crocker, and
Stephanie Lacambra, Electronic Frontier Foundation, San
Francisco, California; Esha Bhandari and Rachel Goodman,
American Civil Liberties Union Foundation, New York, New
York; Linda Lye, Nicole Ozer, and Matthew T. Cagle,
American Civil Liberties Union Foundation of Northern
California; for Amici Curiae Electronic Frontier Foundation,
American Civil Liberties Union, and American Civil
Liberties Union of Northern California.
Martin Hansen, Covington & Burling, Washington, D.C.;
Simon J. Frankel and Matthew D. Kellogg, Convington
& Burling, San Francisco, California, for Amicus Curiae
BSA | The Software Alliance.
David Nied, Keenan W. Ng and Michael S. Dorsi, Ad Astra
Law Group, San Francisco, California, for Amicus Curiae
NovelPoster.
ORDER
The opinion filed on July 5, 2016, and appearing at
828 F.3d 865, is hereby amended. An amended opinion is
filed concurrently with this order.
With these amendments, Chief Judge Thomas and Judge
McKeown vote to deny the petition for rehearing en banc.
Judge Reinhardt votes to grant the petition for rehearing en
banc.
The full court has been advised of the petition for
rehearing en banc, and no judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
UNITED STATES V. NOSAL 5
The petition for rehearing en banc is denied. No further
petitions for en banc or panel rehearing shall be permitted.
OPINION
McKEOWN, Circuit Judge:
This is the second time we consider the scope of the
Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C.
§ 1030, with respect to David Nosal. The CFAA imposes
criminal penalties on whoever “knowingly and with intent to
defraud, accesses a protected computer without
authorization, or exceeds authorized access, and by means of
such conduct furthers the intended fraud and obtains anything
of value.” Id. § 1030(a)(4) (emphasis added).
Only the first prong of the section is before us in this
appeal: “knowingly and with intent to defraud” accessing a
computer “without authorization.” Embracing our earlier
precedent and joining our sister circuits, we conclude that
“without authorization” is an unambiguous, non-technical
term that, given its plain and ordinary meaning, means
accessing a protected computer without permission. Further,
we have held that authorization is not pegged to website
terms and conditions. This definition has a simple corollary:
once authorization to access a computer has been
affirmatively revoked, the user cannot sidestep the statute by
going through the back door and accessing the computer
through a third party. Unequivocal revocation of computer
access closes both the front door and the back door. This
provision, coupled with the requirement that access be
“knowingly and with intent to defraud,” means that the statute
6 UNITED STATES V. NOSAL
will not sweep in innocent conduct, such as family password
sharing.
Nosal worked at the executive search firm Korn/Ferry
International when he decided to launch a competitor along
with a group of co-workers. Before leaving Korn/Ferry,
Nosal’s colleagues began downloading confidential
information from a Korn/Ferry database to use at their new
enterprise. Although they were authorized to access the
database as current Korn/Ferry employees, their downloads
on behalf of Nosal violated Korn/Ferry’s confidentiality and
computer use policies. In 2012, we addressed whether those
employees “exceed[ed] authorized access” with intent to
defraud under the CFAA. United States v. Nosal (Nosal I),
676 F.3d 854 (9th Cir. 2012) (en banc). Distinguishing
between access restrictions and use restrictions, we concluded
that the “exceeds authorized access” prong of § 1030(a)(4) of
the CFAA “does not extend to violations of [a company’s]
use restrictions.” Id. at 863. We affirmed the district court’s
dismissal of the five CFAA counts related to Nosal’s aiding
and abetting misuse of data accessed by his co-workers with
their own passwords.
The remaining counts relate to statutory provisions that
were not at issue in Nosal I: access to a protected computer
“without authorization” under the CFAA and trade secret
theft under the Economic Espionage Act (“EEA”), 18 U.S.C.
§ 1831 et seq. When Nosal left Korn/Ferry, the company
revoked his computer access credentials, even though he
remained for a time as a contractor. The company took the
same precaution upon the departure of his accomplices,
Becky Christian and Mark Jacobson. Nonetheless, they
continued to access the database using the credentials of
Nosal’s former executive assistant, Jacqueline Froehlich-
UNITED STATES V. NOSAL 7
L’Heureaux (“FH”), who remained at Korn/Ferry at Nosal’s
request. The question we consider is whether the jury
properly convicted Nosal of conspiracy to violate the
“without authorization” provision of the CFAA for
unauthorized access to, and downloads from, his former
employer’s database called Searcher.1 Put simply, we are
asked to decide whether the “without authorization”
prohibition of the CFAA extends to a former employee whose
computer access credentials have been rescinded but who,
disregarding the revocation, accesses the computer by other
means.
We directly answered this question in LVRC Holdings
LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009), and reiterate
our holding here: “[A] person uses a computer ‘without
authorization’ under [the CFAA] . . . when the employer has
rescinded permission to access the computer and the
defendant uses the computer anyway.” Id. at 1135. This
straightforward principle embodies the common sense,
ordinary meaning of the “without authorization” prohibition.
Nosal and various amici spin hypotheticals about the dire
consequences of criminalizing password sharing. But these
warnings miss the mark in this case. This appeal is not about
password sharing. Nor is it about violating a company’s
internal computer-use policies. The conduct at issue is that
of Nosal and his co-conspirators, which is covered by the
1
As in Nosal I, Nosal did not himself access and download information
from Korn/Ferry’s database. Nosal was convicted of three substantive
CFAA counts on either an aiding and abetting or conspiracy theory.
Under either, Nosal is liable for the conduct of Christian and Jacobson.
See Pinkerton v. United States, 328 U.S. 640, 647 (1946) (conspiracy
liability); United States v. Short, 493 F.2d 1170, 1172 (9th Cir. 1974)
(aiding and abetting liability).
8 UNITED STATES V. NOSAL
plain language of the statute. Nosal is charged with
conspiring with former Korn/Ferry employees whose user
accounts had been terminated, but who nonetheless accessed
trade secrets in a proprietary database through the back door
when the front door had been firmly closed. Nosal
knowingly and with intent to defraud Korn/Ferry blatantly
circumvented the affirmative revocation of his computer
system access. This access falls squarely within the CFAA’s
prohibition on “knowingly and with intent to defraud”
accessing a computer “without authorization,” and thus we
affirm Nosal’s conviction for violations of § 1030(a)(4) of the
CFAA.
The dissent mistakenly focuses on FH’s authority,
sidestepping the authorization question for Christian and
Jacobson. To begin, FH had no authority from Korn/Ferry to
provide her password to former employees whose computer
access had been revoked. Also, in collapsing the distinction
between FH’s authorization and that of Christian and
Jacobson, the dissent would render meaningless the concept
of authorization. And, pertinent here, it would remove from
the scope of the CFAA any hacking conspiracy with an inside
person. That surely was not Congress’s intent.
We also affirm Nosal’s convictions under the EEA for
downloading, receiving and possessing trade secrets in the
form of source lists from Searcher. We vacate in part and
remand the restitution order for reconsideration of the
reasonableness of the attorneys’ fees award.
UNITED STATES V. NOSAL 9
BACKGROUND
I. FACTUAL BACKGROUND
Nosal was a high-level regional director at the global
executive search firm Korn/Ferry International. Korn/Ferry’s
bread and butter was identifying and recommending potential
candidates for corporate positions. In 2004, after being
passed over for a promotion, Nosal announced his intention
to leave Korn/Ferry. Negotiations ensued and Nosal agreed
to stay on for an additional year as a contractor to finish a
handful of open searches, subject to a blanket non-
competition agreement. As he put it, Korn/Ferry was giving
him “a lot of money” to “stay out of the market.”
During this interim period, Nosal was very busy, secretly
launching his own search firm along with other Korn/Ferry
employees, including Christian, Jacobson and FH. As of
December 8, 2004, Korn/Ferry revoked Nosal’s access to its
computers, although it permitted him to ask Korn/Ferry
employees for research help on his remaining open
assignments. In January 2005, Christian left Korn/Ferry and,
under instructions from Nosal, set up an executive search
firm—Christian & Associates—from which Nosal retained
80% of fees. Jacobson followed her a few months later. As
Nosal, Christian and Jacobson began work for clients, Nosal
used the name “David Nelson” to mask his identity when
interviewing candidates.
The start-up company was missing Korn/Ferry’s core
asset: “Searcher,” an internal database of information on over
one million executives, including contact information,
employment history, salaries, biographies and resumes, all
compiled since 1995. Searcher was central to Korn/Ferry’s
10 UNITED STATES V. NOSAL
work for clients. When launching a new search to fill an
open executive position, Korn/Ferry teams started by
compiling a “source list” of potential candidates. In
constructing the list, the employees would run queries in
Searcher to generate a list of candidates. To speed up the
process, employees could look at old source lists in Searcher
to see how a search for a similar position was constructed, or
to identify suitable candidates. The resulting source list could
include hundreds of names, but then was narrowed to a short
list of candidates presented to the client. Korn/Ferry
considered these source lists proprietary.
Searcher included data from a number of public and
quasi-public sources like LinkedIn, corporate filings and
Internet searches, and also included internal, non-public
sources, such as personal connections, unsolicited resumes
sent to Korn/Ferry and data inputted directly by candidates
via Korn/Ferry’s website. The data was coded upon entry; as
a result, employees could run targeted searches for candidates
by criteria such as age, industry, experience or other data
points. However, once the information became part of the
Searcher system, it was integrated with other data and there
was no way to identify the source of the data.
Searcher was hosted on the company’s internal computer
network and was considered confidential and for use only in
Korn/Ferry business. Korn/Ferry issued each employee a
unique username and password to its computer system; no
separate password was required to access Searcher. Password
sharing was prohibited by a confidentiality agreement that
Korn/Ferry required each new employee to sign. When a
user requested a custom report in Searcher, Searcher
displayed a message which stated: “This product is intended
UNITED STATES V. NOSAL 11
to be used by Korn/Ferry employees for work on Korn/Ferry
business only.”
Nosal and his compatriots downloaded information and
source lists from Searcher in preparation to launch the new
competitor. Before leaving Korn/Ferry, they used their own
usernames and passwords, compiling proprietary Korn/Ferry
data in violation of Korn/Ferry’s computer use policy. Those
efforts were encompassed in the CFAA accounts appealed in
Nosal I. See 676 F.3d at 856.
After Nosal became a contractor and Christian and
Jacobson left Korn/Ferry, Korn/Ferry revoked each of their
credentials to access Korn/Ferry’s computer system. Not to
be deterred, on three occasions Christian and Jacobson
borrowed access credentials from FH, who stayed on at
Korn/Ferry at Nosal’s request. In April 2005, Nosal
instructed Christian to obtain some source lists from Searcher
to expedite their work for a new client. Thinking it would be
difficult to explain the request to FH, Christian asked to
borrow FH’s access credentials, which Christian then used to
log in to Korn/Ferry’s computer system and run queries in
Searcher. Christian sent the results of her searches to Nosal.
In July 2005, Christian again logged in as FH to generate a
custom report and search for information on three individuals.
Later in July, Jacobson also logged in as FH, to download
information on 2,400 executives. None of these searches
related to any open searches that fell under Nosal’s
independent contractor agreement.
In March 2005, Korn/Ferry received an email from an
unidentified person advising that Nosal was conducting his
own business in violation of his non-compete agreement. The
12 UNITED STATES V. NOSAL
company launched an investigation and, in July 2005,
contacted government authorities.
II. PROCEDURAL BACKGROUND
In the first indictment, Nosal was charged with twenty
criminal counts, including eight counts under the CFAA, two
trade secrets counts under the Economic Espionage Act and
one conspiracy count. Five of the eight CFAA counts were
based on allegations that FH and Christian downloaded
material from Searcher using their own credentials while
employed by Korn/Ferry in violation of company policies.
The district court dismissed these counts, citing our decision
in Brekka, 581 F.3d 1127. That dismissal was affirmed by
the en banc court in Nosal I, and the case was remanded for
trial on the remaining counts. 676 F.3d at 864.
The government filed a second superseding indictment in
February 2013 with three CFAA counts, two trade secrets
counts and one conspiracy count. Nosal’s remaining CFAA
counts were based on the three occasions when Christian and
Jacobson accessed Korn/Ferry’s system for their new clients
using FH’s login credentials. The district court denied
Nosal’s motion to dismiss the three remaining CFAA counts,
rejecting the argument that Nosal I limited the statute’s
applicability “to hacking crimes where the defendant
circumvented technological barriers to access a computer.”
United States v. Nosal, 930 F. Supp. 2d 1051, 1060 (N.D. Cal.
2013). Alternatively, the court held that “the indictment
sufficiently allege[d] such circumvention.” Id. at 1061. A
jury convicted Nosal on all counts. The district court
sentenced Nosal to one year and one day in prison, three
years of supervised release, a $60,000 fine, a $600 special
UNITED STATES V. NOSAL 13
assessment and approximately $828,000 in restitution to
Korn/Ferry.
ANALYSIS
I. CONVICTIONS UNDER THE COMPUTER FRAUD AND
ABUSE ACT
A. Background of the CFAA
The CFAA was originally enacted in 1984 as the
Counterfeit Access Device and Computer Fraud and Abuse
Act, Pub. L. No. 98-473, § 2102(a), 98 Stat. 2190 (1984).
The act was aimed at “hackers who accessed computers to
steal information or to disrupt or destroy computer
functionality.” Brekka, 581 F.3d at 1130–31 (citing H.R.
Rep. No. 98-894, at 8–9 (1984), reprinted in 1984
U.S.C.C.A.N. 3689, 3694). The original legislation protected
government and financial institution computers,2 and made it
a felony to access classified information in a computer
“without authorization.” Counterfeit Access Device and
Computer Fraud and Abuse Act § 2102(a).
2
A computer is defined broadly as “an electronic . . . data processing
device performing logical, arithmetic, or storage functions, and includes
any data storage facility or communications facility directly related to or
operating in conjunction with such device.” 18 U.S.C. § 1030(e)(1). The
CFAA’s restrictions have been applied to computer networks, databases
and cell phones. See, e.g., United States v. Valle, 807 F.3d 508, 513 (2d
Cir. 2015) (restricted police databases); United States v. Barrington, 648
F.3d 1178, 1184 (11th Cir. 2011) (a university’s Internet-based grading
system); United States v. Kramer, 631 F.3d 900, 903 (8th Cir. 2011) (cell
phones); United States v. Shea, 493 F.3d 1110, 1115–16 (9th Cir. 2007)
(computer network).
14 UNITED STATES V. NOSAL
Just two years later in 1986, Congress amended the statute
to “deter[] and punish[] certain ‘high-tech’ crimes,” and “to
penalize thefts of property via computer that occur as part of
a scheme to defraud,” S. Rep. No. 99-432, at 4, 9 (1986),
reprinted in 1986 U.S.C.C.A.N. 2479, 2482, 2486–87. The
amendment expanded the CFAA’s protections to private
computers. Computer Fraud and Abuse Act of 1986, Pub. L.
No. 99-474, § 2(g)(4), 100 Stat. 1213-15.3
The key section of the CFAA at issue is 18 U.S.C.
§ 1030(a)(4), which provides in relevant part:
Whoever . . . knowingly and with intent to
defraud, accesses a protected computer
without authorization, or exceeds authorized
access, and by means of such conduct furthers
the intended fraud and obtains anything of
value . . . shall be punished . . . .
A key element of the statute is the requirement that the access
be “knowingly and with intent to defraud.” Not surprisingly,
this phrase is not defined in the CFAA as it is the bread and
butter of many criminal statutes. Indeed, the district court
borrowed the language from the Ninth Circuit model jury
instructions in defining “knowingly” and “intent to defraud”
for the jury, and Nosal does not renew any challenges to those
instructions on appeal. This mens rea element of the statute
is critical because imposing the “intent to defraud” element
3
The act was later expanded to protect any computer “used in interstate
or foreign commerce or communication.” Economic Espionage Act of
1996, Pub. L. 104-294, § 201(4)(B), 110 Stat. 3488, 3493 (codified as
amended at 18 U.S.C. § 1030(e)(2)(B)).
UNITED STATES V. NOSAL 15
targets knowing and specific conduct and does not embrace
the parade of hypotheticals generated by Nosal and amici.
The CFAA defines “exceeds authorized access” as
“access [to] a computer with authorization and [using] such
access to obtain or alter information in the computer that the
accesser is not entitled so to obtain or alter.” Id. § 1030(e)(6).
The statute does not, however, define “without
authorization.” Both terms are used throughout § 1030.
Subsection 1030(a)(2), which mirrors (a)(4) but requires that
access be intentional, penalizes access without authorization
and exceeding authorization. Subsection 1030(a)(1) also
incorporates both terms in relation to accessing a computer
and obtaining national security information. Subsection
1030(a)(7)(B) criminalizes extortion by threats to obtain
information “without authorization or in excess of
authorization.” The remaining subsections pertain only to
access “without authorization.” Subsection 1030(a)(3)
prohibits access “without authorization” to nonpublic
government computers. Subsections 1030(a)(5) and (6)
employ the term “without authorization” with respect to,
among other things, “transmission of a program, information,
code, or command,” § 1030(a)(5)(A); intentional access that
“causes damage and loss,” § 1030(a)(5)(C); and trafficking in
passwords, § 1030(a)(6). In construing the statute, we are
cognizant of the need for congruence among these
subsections.
B. Meaning of “Authorization” Under the CFAA
The interpretive fireworks under § 1030(a)(4) of the
CFAA have been reserved for its second prong, the meaning
of “exceeds authorized access.” Not surprisingly, there has
been no division among the circuits on the straightforward
16 UNITED STATES V. NOSAL
“without authorization” prong of this section. We begin with
the two Ninth Circuit cases that bind our interpretation of
“without authorization”—Brekka and Nosal I—and then
move on to address the cases from our sister circuits that are
in accord with Brekka, agreeing that “without authorization”
is an unambiguous term that should be given its ordinary
meaning.
Brekka involved a former employee in circumstances
remarkably similar to Nosal: he wanted to compete using
confidential data from his former company. Christopher
Brekka worked as an internet marketer with LVRC Holdings,
LLC (“LVRC”), a residential addiction treatment center.
Brekka, 581 F.3d at 1129. LVRC assigned him a computer
and gave him access credentials to a third-party website that
tracked traffic and other information for LVRC’s website. Id.
at 1129–30. When negotiations to become part owner of
LVRC broke down, Brekka left the company. Id. at 1130.
LVRC sued him, claiming that he violated the CFAA by
emailing certain confidential company documents to his
personal email account while an employee and also by
continuing to access LVRC’s account on the external website
after he left the company. Id.
In Brekka we analyzed both the “without authorization”
and “exceeds authorization” provisions of the statute under
§§ 1030(a)(2) and (4). Id. at 1132–36. Because the CFAA
does not define the term “authorization,” we looked to the
ordinary, contemporaneous meaning of the term:
“‘permission or power granted by an authority.’” Id. at 1133
(quoting Random House Unabridged Dictionary 139 (2001)).
In determining whether an employee has authorization, we
stated that, consistent with “the plain language of the statute
. . . ‘authorization’ [to use an employer’s computer] depends
UNITED STATES V. NOSAL 17
on actions taken by the employer.” Id. at 1135. We
concluded that because Brekka had permission to use his
employer’s computer, “[t]he most straightforward
interpretation of §§ 1030(a)(2) and (4) is that Brekka had
authorization to use the computer” while an employee. Id. at
1133.
Brekka’s access after LVRC terminated his employment
presented a starkly different situation: “There is no dispute
that if Brekka accessed LVRC’s information on the [traffic
monitoring] website after he left the company . . . , Brekka
would have accessed a protected computer ‘without
authorization’ for purposes of the CFAA.” Id. at 1136.4
Stated differently, we held that “a person uses a computer
‘without authorization’ under §§ 1030(a)(2) and (4) . . . when
the employer has rescinded permission to access the computer
and the defendant uses the computer anyway.” Id. at 1135.
In Brekka’s case, there was no genuine issue of material fact
as to whether Brekka actually accessed the website, and thus
we affirmed the district court’s grant of summary judgment.
Id. at 1137.
Not surprisingly, in Nosal I as in this appeal, both the
government and Nosal cited Brekka extensively. The focus
of Nosal’s first appeal was whether the CFAA could be
interpreted “broadly to cover violations of corporate
computer use restrictions or violations of a duty of loyalty.”
4
Brekka’s authorization terminated when his employment terminated,
not because his password expired. Expired passwords do not necessarily
mean that authorization terminates: authorized account-holders often let
their passwords lapse before updating the password or contacting the
company’s technical support team for help, but expiration of a password
doesn’t necessarily mean that account authorization has terminated.
18 UNITED STATES V. NOSAL
Nosal I, 676 F.3d at 862. We unequivocally said “no”: “For
our part, we continue to follow in the path blazed by Brekka
and the growing number of courts that have reached the same
conclusion. These courts recognize that the plain language of
the CFAA ‘target[s] the unauthorized procurement or
alteration of information, not its misuse or
misappropriation.’” Id. at 863 (citations omitted) (alteration
in original). In line with Brekka, we stated that “‘[w]ithout
authorization’ would apply to outside hackers (individuals
who have no authorized access to the computer at all) and
‘exceeds authorization access’ would apply to inside hackers
(individuals whose initial access to a computer is authorized
but who access unauthorized information or files).” Id. at 858
(emphases in original). Because Nosal’s accomplices had
authority to access the company computers, we affirmed the
district court’s dismissal of the CFAA counts related to the
period when the accomplices were still employed at
Korn/Ferry. Id. at 864.
In Nosal I, authorization was not in doubt. The
employees who accessed the Korn/Ferry computers
unquestionably had authorization from the company to access
the system; the question was whether they exceeded it. What
Nosal I did not address was whether Nosal’s access to
Korn/Ferry computers after both Nosal and his co-
conspirators had terminated their employment and Korn/Ferry
revoked their permission to access the computers was
“without authorization.” Brekka is squarely on point on that
issue: Nosal and his co-conspirators acted “without
authorization” when they continued to access Searcher by
other means after Korn/Ferry rescinded permission to access
its computer system. As Nosal I made clear, the CFAA was
not intended to cover unauthorized use of information. Such
use is not at issue here. Rather, under § 1030(a)(4), Nosal is
UNITED STATES V. NOSAL 19
charged with unauthorized access—getting into the computer
after categorically being barred from entry.
The text of the CFAA confirms Brekka’s approach.
Employing classic statutory interpretation, we consider the
plain and ordinary meaning of the words “without
authorization.” See United States v. Stewart, 311 U.S. 60, 63
(1940). Under our analysis in Brekka, “authorization” means
“‘permission or power granted by an authority.’” 581 F.3d at
1133 (quoting Random House Unabridged Dictionary 139
(2001)). Other sources employ similar definitions. Black’s
Law Dictionary defines “authorization” as “[o]fficial
permission to do something; sanction or warrant.” Black’s
Law Dictionary 159 (10th ed. 2014). The Oxford English
Dictionary defines it as “the action of authorizing,” which
means to “give official permission for or approval to.”
Oxford English Dictionary 107 (3d ed. 2014). That common
sense meaning is not foreign to Congress or the courts: the
terms “authorize,” “authorized” or “authorization” are used
without definition over 400 times in Title 18 of the United
States Code.5 We conclude that given its ordinary meaning,
access “without authorization” under the CFAA is not
5
For example, Title 18 covers a number of offenses that stem from
conduct “without authorization.” See, e.g., 18 U.S.C. § 1388(a)(2)(B)
(holding liable any person who “willfully and without proper authorization
imped[es]” access to a funeral of a member of the Armed Forces);
18 U.S.C. § 1831(a) (holding liable for economic espionage “[w]hoever,
intending or knowing that the offense will benefit any foreign government
. . . knowingly . . . without authorization appropriates, takes, carries away,
or conceals” trade secrets); 18 U.S.C. § 2701 (holding liable any person
who “intentionally accesses without authorization a facility through which
an electronic communication service is provided . . . and thereby obtains,
alters, or prevents authorized access to a wire or electronic communication
while it is in electronic storage”).
20 UNITED STATES V. NOSAL
ambiguous. See United States v. James, 810 F.3d 674, 681
(9th Cir. 2016) (concluding that the mere fact that a broad,
but otherwise clear, statutory term is “susceptible to
application to various factual situations that can come before
a jury” does not by itself render a term ambiguous).
That straightforward meaning is also unambiguous as
applied to the facts of this case.6 Nosal and his co-
conspirators did exactly what Brekka prohibits—a conclusion
that is not affected by the co-conspirators’ use of FH’s
legitimate access credentials. Implicit in the definition of
authorization is the notion that someone, including an entity,
can grant or revoke that permission. Here, that entity was
Korn/Ferry, and FH had no mantle or authority to override
Korn/Ferry’s authority to control access to its computers and
confidential information by giving permission to former
employees whose access had been categorically revoked by
the company.7 Korn/Ferry owned and controlled access to its
6
We do not invoke the rule of lenity because “the touchstone of the rule
of lenity is statutory ambiguity,” Bifulco v. United States, 447 U.S. 381,
387 (1980) (internal quotation marks omitted), and “[t]he rule comes into
operation at the end of the process of construing what Congress has
expressed, not at the beginning as an overriding consideration of being
lenient to wrongdoers,” Callanan v. United States, 364 U.S. 587, 596
(1961). Here, because the statute “unambiguously cover[s] the
defendant’s conduct, the rule does not come into play.” United States v.
Litchfield, 986 F.2d 21, 22 (2d Cir. 1993). That the CFAA might support
a narrower interpretation, as the dissent argues, does not change our
analysis. See Moskal v. United States, 498 U.S. 103, 108 (1990) (holding
that the rule of lenity is not triggered because it is “possible to articulate”
a narrower construction of a statute).
7
The dissent rests its argument on the fact that Brekka had “no possible
source of authorization.” The same is true here—Nosal had “no possible
source of authorization” since the company revoked his authorization and,
UNITED STATES V. NOSAL 21
computers, including the Searcher database, and it retained
exclusive discretion to issue or revoke access to the database.
By revoking Nosal’s login credentials on December 8, 2004,
Korn/Ferry unequivocally conveyed to Nosal that he was an
“outsider” who was no longer authorized to access
Korn/Ferry computers and confidential information, including
Searcher.8 Korn/Ferry also rescinded Christian and
Jacobson’s credentials after they left, at which point the three
former employees were no longer “insiders” accessing
company information. Rather, they had become “outsiders”
with no authorization to access Korn/Ferry’s computer
system.9 One can certainly pose hypotheticals in which a less
stark revocation is followed by more sympathetic access
through an authorized third party. But the facts before us—in
which Nosal received particularized notice of his revoked
access following a prolonged negotiation—present no such
difficulties, which can be reserved for another day.
while FH might have been wrangled into giving out her password, she and
the others knew that she had no authority to control system access.
8
Nosal argues that he cannot be held liable because, as a contractor, he
was entitled to access information from Korn/Ferry’s database. Nosal
misconstrues his authorization following his departure from Korn/Ferry:
he was entitled only to information related to his open searches, and being
entitled to receive information does not equate to permission to access the
database. Further, Nosal’s liability as a co-conspirator turns on whether
Christian and Jacobson acted “without authorization.”
9
We note that the terms “insider” and “outsider” in these circumstances
are simply descriptive proxies for the status of the parties here and in
Brekka. There obviously could be an “insider” in a company, such as a
cleaning or maintenance person, who is not authorized to access any
computer or company information but who, nonetheless, accesses the
company computer “without authorization.”
22 UNITED STATES V. NOSAL
Our analysis is consistent with that of our sister circuits,
which have also determined that the term “without
authorization” is unambiguous.10 Although the meaning of
“exceeds authorized access” in the CFAA has been subject to
much debate among the federal courts,11 the definition of
“without authorization” has not engendered dispute. Indeed,
Nosal provides no contrary authority that a former employee
10
Although the Supreme Court recently affirmed a conviction under the
CFAA with facts similar to those here, it did not address interpretation of
“without authorization.” See Musacchio v. United States, 136 S. Ct. 709
(2016). Without elaboration, the Court noted that “[t]he statute thus
provides two ways of committing the crime of improperly accessing a
protected computer: (1) obtaining access without authorization; and
(2) obtaining access with authorization but then using that access
improperly.” Id. at 713.
11
See discussion in Nosal I, 676 F.3d at 862–63. Compare United
States v. Valle, 807 F.3d 508, 526–28 (2d Cir. 2015) (holding that while
there is support for both a narrow and broad reading of “exceeds
authorized access,” the rule of lenity requires the court to adopt a narrower
interpretation in the defendant’s favor), with WEC Carolina Energy
Solutions LLC v. Miller, 687 F.3d 199, 204 (4th Cir. 2012) (concluding
that “an employee ‘exceeds authorized access’ when he has approval to
access a computer, but uses his access to obtain or alter information that
falls outside the bounds of his approved access”), and United States v.
John, 597 F.3d 263, 272 (5th Cir. 2010) (“Access to a computer and data
that can be obtained from that access may be exceeded if the purposes for
which access has been given are exceeded.”), and United States v.
Rodriguez, 628 F.3d 1258, 1263 (11th Cir. 2010) (holding that an
employee who violates employer use restrictions “exceeds authorized
access”), and Int’l Airport Ctrs., L.L.C. v. Citrin, 440 F.3d 418, 420–21
(7th Cir. 2006) (holding that while the “difference between access
‘without authorization’ and ‘exceeding authorized access’ is paper thin,”
an employee who breached a duty of loyalty terminated the agency
relationship and exceeded authorized access in using company laptop),
and EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577, 581–84 (1st
Cir. 2001) (holding that former employees who violated confidentiality
agreements exceeded authorized access).
UNITED STATES V. NOSAL 23
whose computer access has been revoked can access his
former employer’s computer system and be deemed to act
with authorization.
Beginning in 1991, in construing § 1030(a)(5)(A),12 the
Second Circuit recognized that “authorization” is a word “of
common usage, without any technical or ambiguous
meaning.” United States v. Morris, 928 F.2d 504, 511 (2d
Cir. 1991). The court reaffirmed this holding in 2015, citing
Brekka and stating that “common usage of ‘authorization’
suggests that one ‘accesses a computer without authorization’
if he accesses a computer without permission to do so at all.”
United States v. Valle, 807 F.3d 508, 524 (2d Cir. 2015).
The Fourth Circuit’s analysis mirrors the conclusion that
the “without authorization” language is unambiguous based
on its ordinary meaning:
Recognizing that the distinction between
[“exceeds authorized access” and access
“without authorization”] is arguably minute,
we nevertheless conclude based on the
ordinary, contemporary, common meaning of
“authorization,” that an employee is
authorized to access a computer when his
employer approves or sanctions his admission
to that computer. Thus, he accesses a
computer “without authorization” when he
gains admission to a computer without
approval. Similarly, we conclude that an
12
This section of the CFAA criminalizes intentional “transmission of a
program, information, code, or command” to a protected computer
“without authorization” causing damage. 18 U.S.C. § 1030(a)(5)(A).
24 UNITED STATES V. NOSAL
employee “exceeds authorized access” when
he has approval to access a computer, but uses
his access to obtain or alter information that
falls outside the bounds of his approved
access.
WEC Carolina Energy Solutions LLC v. Miller, 687 F.3d 199,
204 (4th Cir. 2012) (internal citations omitted).
Like the other courts, the Sixth Circuit noted that “[t]he
plain meaning of ‘authorization’ is ‘[t]he conferment of
legality; . . . sanction.’ Commonly understood, then, a
defendant who accesses a computer ‘without authorization’
does so without sanction or permission.” Pulte Homes, Inc.
v. Laborers’ Int’l Union of N. Am., 648 F.3d 295, 303–04 (6th
Cir. 2011) (quoting 1 Oxford English Dictionary 798 (2d ed.
1989)). Based on ordinary usage, the Sixth Circuit similarly
reasoned that “‘a person who uses a computer ‘without
authorization’ has no rights, limited or otherwise, to access
the computer in question.’” Id. at 304 (alteration in original)
(quoting Brekka, 581 F.3d at 1133); see also United States v.
Willis, 476 F.3d 1121, 1124–27 (10th Cir. 2007) (upholding
a conviction for aiding and abetting access to a protected
computer “without authorization” where an employee gave
login credentials for a financial information website to an
associate of his drug dealer who in turn used the accessed
information for identity theft).
In the face of multiple circuits that agree with our plain
meaning construction of the statute, the dissent would have us
ignore common sense and turn the statute inside out. Indeed,
the dissent frames the question upside down in assuming that
permission from FH is at issue. Under this approach,
ignoring reality and practice, an employee could undermine
UNITED STATES V. NOSAL 25
the company’s ability to control access to its own computers
by willy nilly giving out passwords to anyone outside the
company—former employees whose access had been
revoked, competitors, industrious hackers or bank robbers
who find it less risky and more convenient to access accounts
via the Internet rather than through armed robbery. See Orin
S. Kerr, Norms of Computer Trespass, 116 Colum. L. Rev.
1143, 1179–80 (2016).
Our conclusion does nothing to expand the scope of
violations under the CFAA beyond Brekka; nor does it rest on
the grace of prosecutorial discretion. We are mindful of the
examples noted in Nosal I—and reiterated by Nosal and
various amici—that ill-defined terms may capture arguably
innocuous conduct, such as password sharing among friends
and family, inadvertently “mak[ing] criminals of large groups
of people who would have little reason to suspect they are
committing a federal crime.” Nosal I, 676 F.3d at 859. But
these concerns are ill-founded because § 1030(a)(4) requires
access be “knowingly and with intent to defraud” and further,
we have held that violating use restrictions, like a website’s
terms of use, is insufficient without more to form the basis for
liability under the CFAA. See Nosal I, 676 F.3d at 862–63.
The circumstance here—former employees whose computer
access was categorically revoked and who surreptitiously
accessed data owned by their former employer—bears little
resemblance to asking a spouse to log in to an email account
to print a boarding pass. The charges at issue in this appeal
do not stem from the ambiguous language of Nosal
I—“exceeds authorized access”—or even an ambiguous
application of the phrase “without authorization,” but instead
relate to the straightforward application of a common,
unambiguous term to the facts and context at issue.
26 UNITED STATES V. NOSAL
The Brekka analysis of the specific phrase “without
authorization”—which is consistent with our sister
circuits—remains controlling and persuasive. We therefore
hold that Nosal, a former employee whose computer access
credentials were affirmatively revoked by Korn/Ferry acted
“without authorization” in violation of the CFAA when he or
his former employee co-conspirators used the login
credentials of a current employee to gain access to
confidential computer data owned by the former employer
and to circumvent Korn/Ferry’s revocation of access.
C. Jury Instruction on “Without Authorization”
With respect to the meaning of “without authorization,”
the district court instructed the jury as follows:
Whether a person is authorized to access the
computers in this case depends on the actions
taken by Korn/Ferry to grant or deny
permission to that person to use the computer.
A person uses a computer “without
authorization” when the person has not
received permission from Korn/Ferry to use
the computer for any purpose (such as when a
hacker accesses the computer without any
permission), or when Korn/Ferry has
rescinded permission to use the computer and
the person uses the computer anyway.
The instruction is derived directly from our decision in
Brekka and is a fair and accurate characterization of the plain
meaning of “without authorization.” Although the term
“without authorization” is unambiguous, it does not mean that
the facts don’t matter; the source and scope of authorization
UNITED STATES V. NOSAL 27
may well be at issue. Here, it was not disputed that
Korn/Ferry was the source of permission to grant
authorization. The jury instruction left to the jury to
determine whether such permission was given.
Nosal challenges the instruction on the basis that the
CFAA only criminalizes access where the party circumvents
a technological access barrier.13 Not only is such a
requirement missing from the statutory language, but it would
make little sense because some § 1030 offenses do not require
access to a computer at all. For example, § (a)(6) imposes
penalties for trafficking in passwords “through which a
computer can be accessed without authorization . . . .”
18 U.S.C. § 1030(a).
In any event, Nosal’s argument misses the mark on the
technological access point. Even if he were correct, any
instructional error was without consequence in light of the
evidence. The password system adopted by Korn/Ferry is
unquestionably a technological barrier designed to keep out
those “without authorization.” Had a thief stolen an
employee’s password and then used it to rifle through
Searcher, without doubt, access would have been without
authorization.
The same principle holds true here. A password
requirement is designed to be a technological access barrier.
13
Nosal did not object to this instruction at the jury instruction
conference. He did, however, raise the issue and offer a circumvention
instruction earlier in the proceedings and objected to an earlier version of
this instruction. Whether we review the instruction de novo or for plain
error, the result is the same because the instruction was correct.
28 UNITED STATES V. NOSAL
D. Accomplice Liability Under the CFAA
Nosal’s convictions under the CFAA rest on accomplice
liability. Nosal claims the government failed to prove the
requisite mens rea. Two instructions bear on this issue:
aiding and abetting and deliberate ignorance. As to the
former, which is not challenged on appeal, the court
instructed that the government must prove Nosal “knowingly
and intentionally aided, counseled, commanded, induced or
procured [a] person to commit each element of the crime” and
did so “before the crime was completed . . . with the
knowledge and intention of helping that person commit the
crime.” The court also instructed that the defendant acted
“knowingly” if he was “aware of the act and [did] not act or
fail to act through ignorance, mistake, or accident.” The
adjunct deliberate ignorance instruction read: the defendant
acted “knowingly” if he “was aware of a high probability that
[Christian, Jacobson, or FH] had gained unauthorized access
to a computer . . . or misappropriated trade secrets . . . without
authorization . . . and deliberately avoided learning the truth.”
At trial, Nosal objected to the deliberate ignorance
instruction on the ground that the facts alleged did not permit
a deliberate ignorance theory. On appeal, for the first time,
he argues that the instruction is erroneous because it
undermines the requirement that Nosal had advance
UNITED STATES V. NOSAL 29
knowledge of the crime.14 We review this challenge for plain
error. See Jones v. United States, 527 U.S. 373, 388 (1999).
We have repeatedly held that a statutory requirement that
a criminal defendant acted “knowingly” is “not limited to
positive knowledge, but includes the state of mind of one who
does not possess positive knowledge only because he
consciously avoided it.” United States v. Heredia, 483 F.3d
913, 918 (9th Cir. 2007) (internal citation and alterations
omitted); see also United States v. Jewell, 532 F.2d 697, 700
(9th Cir. 1976) (“To act ‘knowingly,’ therefore, is not
necessarily to act only with positive knowledge, but also to
act with an awareness of the high probability of the existence
of the fact in question. When such awareness is present,
‘positive’ knowledge is not required.”). We have equated
positive knowledge and deliberate ignorance in upholding
conspiracy convictions and see no reason to distinguish
aiding and abetting liability. See, e.g., United States v.
Ramos-Atondo, 732 F.3d 1113, 1120 (9th Cir. 2013) (holding
the district court did not abuse its discretion by instructing the
jury on a theory of deliberate ignorance in the context of a
conspiracy to import marijuana as “‘[t]he Jewell standard
eliminates the need to establish such positive knowledge to
obtain a conspiracy conviction’” (alterations in original)
(quoting United States v. Nicholson, 677 F.2d 706, 711 (9th
Cir. 1982))).
14
The district court accommodated Nosal’s many objections to this
instruction. In particular, at his request, the instruction included the names
of the co-conspirators. When the court asked if this included “the three
people,” Nosal’s counsel said, “Right.” The instruction thus incorporated,
with no further objection or comment, FH’s name. Nosal thus waived any
challenge to inclusion of her name, which was not plain error in any event.
30 UNITED STATES V. NOSAL
Nor does the recent case Rosemond v. United States
counsel a different result. 134 S. Ct. 1240 (2014). In
Rosemond, the Supreme Court held that an accomplice must
have “advance knowledge” of the crime the principal is
planning to commit, “knowledge that enables him to make the
relevant legal (and indeed, moral) choice.” Id. at 1249.
Nosal argues that the district court erred in not including
Rosemond’s advance knowledge requirement. But as the
Supreme Court notes, an advance knowledge requirement for
accomplice liability is not new. Id. at 1248–49. Nothing in
Rosemond suggests that the Court foreclosed a deliberate
ignorance instruction, which was not an issue in the case.
Instead, Rosemond focuses on when a defendant must have
advance knowledge, meaning “knowledge at a time the
accomplice can do something with it—most notably, opt to
walk away.” Id. at 1249–50. The instructions here are
perfectly consonant with our line of cases extending back to
Jewell. If the Supreme Court had chosen to overturn decades
of jurisprudence, we would expect clearer direction. See
United States v. Ford, 821 F.3d 63, 74 (1st Cir. 2016)
(holding that “willful blindness,” including ignoring “red
flags,” meets the mens rea element of aiding and abetting
liability, and discussing the impact of Rosemond elsewhere in
the opinion).
Apart from the instruction, Nosal challenges the
sufficiency of the evidence, claiming evidence of intent was
insufficient because he didn’t have advance knowledge that
Christian and Jacobson would use FH’s password. This
attack fails because, “after viewing the evidence in the light
most favorable to the prosecution, any rational trier of fact
could have found the essential elements of the crime beyond
a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319
(1979) (emphasis in original). Extensive testimony revealed
UNITED STATES V. NOSAL 31
that Nosal wanted his team to obtain information from
Searcher all while maintaining his distance from their
activities.
Although the conviction may be upheld solely under
Pinkerton, which “‘renders all co-conspirators criminally
liable for reasonably foreseeable overt acts committed by
others in furtherance of the conspiracy,’” United States v.
Bingham, 653 F.3d 983, 997 (9th Cir. 2011) (quoting United
States v. Hernandez-Orellana, 539 F.3d 994, 1006–07 (9th
Cir. 2008)), sufficient evidence independently supports the
aiding and abetting counts.
Christian’s testimony is illustrative:
Q. Did the defendant know you were using
[FH’s] password, after you left
Korn/Ferry, to get source lists and other
documents from Korn/Ferry?
A. Yes.
Q. Any doubt in your mind that he knew
that?
A. No.
This unequivocal statement, which more than satisfies the
Jackson v. Virginia standard, is bolstered by other evidence,
including extensive testimony that Nosal wanted his team to
obtain information from Searcher while maintaining his
distance from their activities but knew and understood that
none of them had access credentials. A juror also could have
easily surmised that Nosal, having worked with FH for years
32 UNITED STATES V. NOSAL
on a daily basis, would have known that she had herself never
run custom reports, developed source lists or pulled old
source lists. When Nosal specifically directed Christian to
access Korn/Ferry’s computer system to “[g]et what I need,”
Nosal knew that the only way Christian and Jacobson could
access the source lists was “without authorization” because
Korn-Ferry had revoked their access credentials.
We affirm Nosal’s conviction on the CFAA counts.
II. CONVICTIONS UNDER THE ECONOMIC ESPIONAGE ACT
(EEA)
The jury convicted Nosal of two counts of trade secret
theft under the EEA: Count 5 charged “unauthorized
downloading, copying and duplicating of trade secrets” in
violation of 18 U.S.C. §§ 1832(a)(2) & (a)(4); and Count 6
charged unauthorized receipt and possession of stolen trade
secrets in violation of 18 U.S.C. § 1832(a)(3) & (a)(4). Both
counts relate to Christian’s use of FH’s login credentials to
obtain three source lists of CFOs from Searcher. Count 6 also
included a “cut and paste” of a list of executives derived from
Searcher. Christian emailed Nosal the resulting lists, which
contained candidate names, company positions and phone
numbers. Nosal primarily challenges the sufficiency of the
evidence on the trade secret counts.
A. Sufficiency of the Evidence—Counts 5 and 6
Violation of the EEA requires, among other things,
“intent to convert a trade secret” and “intending or knowing
that the offense will[] injure [an] owner of that trade secret
. . . .” 18 U.S.C. § 1832(a). The jury instruction for Count
UNITED STATES V. NOSAL 33
5—downloading, copying and duplicating trade secrets—set
out the following elements:
1. At least one of the three source lists is a
trade secret (requiring agreement on
which one);
2. Nosal knew that the source list was a trade
secret;
3. Nosal knowingly, and without
authorization, downloaded, copied or
duplicated the trade secret;
4. Nosal intended to convert the trade secret
to the economic benefit of someone other
than the owner;
5. Nosal knew or intended that the offense
would injure the trade secret owner; and
6. The trade secret was related to or included
in a product in interstate commerce.
The instruction for Count 6—receiving and possessing trade
secrets—replaced the third element with a requirement of
knowing receipt or possession of a trade secret with the
knowledge that it was “stolen or appropriated, obtained, or
converted without authorization” and added the “cut and
paste” list as one of the possible trade secrets.
Nosal argues that the government failed to prove:
1) secrecy and difficulty of development, because the search
information was derived from public sources and because
34 UNITED STATES V. NOSAL
there was no evidence the source lists had not been circulated
outside Korn/Ferry; 2) knowledge of trade secret status; and
3) knowledge of injury to, or an intent to injure, Korn/Ferry.
The notion of a trade secret often conjures up magic
formulas, like Coca Cola’s proprietary formula, technical
drawings or scientific data. So it is no surprise that such
technically complex cases have been brought under the EEA.
See, e.g., United States v. Chung, 659 F.3d 815, 819 (9th Cir.
2011) (documents related to space shuttles and rockets);
United States v. Yang, 281 F.3d 534, 540 (6th Cir. 2002)
(scientific research in adhesives); United States v. Hsu,
155 F.3d 189, 191–92 (3d Cir. 1998) (processes, methods and
formulas for manufacturing an anti-cancer drug).
But the scope of the EEA is not limited to these categories
and the EEA, by its terms, includes financial and business
information. The EEA defines a trade secret as
all forms and types of financial, business,
scientific, technical, economic, or engineering
information, including . . . compilations . . . if
(A) the owner thereof has taken reasonable
measures to keep such information secret; and
(B) the information derives independent
UNITED STATES V. NOSAL 35
economic value, actual or potential, from not
being generally known to, and not being
readily ascertainable through proper means by
the public . . . .
18 U.S.C. § 1839(3).15
The thrust of Nosal’s argument is that the source lists are
composed largely, if not entirely, of public information and
therefore couldn’t possibly be trade secrets. But he overlooks
the principle that a trade secret may consist of a compilation
of data, public sources or a combination of proprietary and
public sources. It is well recognized that
it is the secrecy of the claimed trade secret as
a whole that is determinative. The fact that
some or all of the components of the trade
secret are well-known does not preclude
protection for a secret combination,
compilation, or integration of the individual
elements. . . . [T]he theoretical possibility of
reconstructing the secret from published
materials containing scattered references to
portions of the information or of extracting it
from public materials unlikely to come to the
attention of the appropriator will not preclude
relief against the wrongful conduct . . . .
15
This was the text of § 1839 at the time the offenses were committed.
Congress recently amended § 1839, replacing “the public” with “another
person who can obtain economic value from the disclosure or use of the
information.” Defend Trade Secrets Act of 2016, Pub. L. No. 114-153,
§ 2(b)(1)(A), 130 Stat. 376, 380.
36 UNITED STATES V. NOSAL
Restatement (Third) of Unfair Competition § 39 cmt. f
(1995); see also Computer Care v. Serv. Sys. Enters., Inc.,
982 F.2d 1063, 1074 (7th Cir. 1992) (“A trade secret can exist
in a combination of characteristics and components, each of
which, by itself, is in the public domain, but the unified
process design and operation of which in unique combination
affords a competitive advantage and is a protectable trade
secret” (internal citation omitted)); Boeing Co. v. Sierracin
Corp., 738 P.2d 665, 675 (Wash. 1987) (holding that “trade
secrets frequently contain elements that by themselves may
be in the public domain but together qualify as trade
secrets”). Expressed differently, a compilation that affords a
competitive advantage and is not readily ascertainable falls
within the definition of a trade secret.
The source lists in question are classic examples of a trade
secret that derives from an amalgam of public and proprietary
source data. To be sure, some of the data came from public
sources and other data came from internal, confidential
sources. But cumulatively, the Searcher database contained
a massive confidential compilation of data, the product of
years of effort and expense. Each source list was the result of
a query run through a propriety algorithm that generates a
custom subset of possible candidates, culled from a database
of over one million executives. The source lists were not
unwashed, public-domain lists of all financial executives in
the United States, nor otherwise related to a search that could
be readily completed using public sources. Had the query
been “who is the CFO of General Motors” or “who are all of
the CFOs in a particular industry,” our analysis might be
different. Instead, the nature of the trade secret and its value
stemmed from the unique integration, compilation,
cultivation, and sorting of, and the aggressive protections
applied to, the Searcher database.
UNITED STATES V. NOSAL 37
Nosal takes the view that the source lists are merely
customer lists that cannot be protected as trade secrets. This
characterization attempts to sidestep the unique nature of the
source lists, which are the customized product of a massive
database, not a list of well-known customers. Regardless,
courts have deemed customer lists protectable trade secrets.
See, e.g., Hollingsworth Solderless Terminal Co. v. Turley,
622 F.2d 1324, 1332–33 (9th Cir. 1980) (setting out in detail
how to analyze whether a customer list is a trade secret);
Hertz v. Luzenac Grp., 576 F.3d 1103, 1114 (10th Cir. 2009)
(holding that a customer list may be a trade secret where “it
is the end result of a long process of culling the relevant
information from lengthy and diverse sources, even if the
original sources are publicly available”).
Our approach is not novel. This case is remarkably similar
to Conseco Finance Servicing Corp. v. North American
Mortgage Co., 381 F.3d 811 (8th Cir. 2004). Conseco was a
financial services company that issued subprime mortgages.
Id. at 814. It generated potential customer leads through a
database of information on over 40 million individuals. Id. at
815. A computer program compiled lists of potential
customers, which were sent to branch offices as “customer
lead sheets,” coded from most promising (red) to decent
(blue). Id. Several departing staff took copies of the lead
sheets and went to work for a competitor. Id. at 816. Even
though all the information in the lead sheets was public, the
Eighth Circuit held that they were trade secrets: they “are a
product of a specialized—and apparently quite effective—
38 UNITED STATES V. NOSAL
computer program that was uniquely Conseco’s.” Id. at
819.16
Nosal also takes aim at the secrecy of the three source
lists in question, an argument that is intertwined with his
public domain/compilation claim. The jury heard more than
enough evidence to support its verdict. Christian
acknowledged that the only place she could obtain the source
lists she needed was on Korn/Ferry’s computer system.
Notably, some of the downloaded information came from a
source list for an engagement that was opened only twelve
days prior to the April 12 downloads underlying the trade
secret counts.
Although Nosal claims that Korn/Ferry’s sharing of lists
with clients and others undermined this claim of secrecy,
witnesses who worked at Korn/Ferry did not budge in terms
of procedures undertaken to keep the data secret, both in
terms of technology protections built into the computer
system and the limitations on distribution of the search
results. For example, the Vice-President of Information
Services testified that, to her knowledge, the source lists had
never been released by Korn/Ferry to any third parties. As a
matter of practice, Korn/Ferry did not show source lists to
clients. In the occasional instance when a client was given a
source list or shown one at a pitch, it was provided on an
understanding of confidentiality, and disclosing the lists was
16
See also Rivendell Forest Prods., Ltd. v. Ga.-Pac. Corp., 28 F.3d
1042, 1046 (10th Cir. 1994) (defining a trade secret as including “a system
where the elements are in the public domain, but there has been
accomplished an effective, successful and valuable integration of the
public domain elements and the trade secret gave the claimant a
competitive advantage which is protected from misappropriation”).
UNITED STATES V. NOSAL 39
contrary to company policy. It is also well established that
“confidential disclosures to employees, licensees, or others
will not destroy the information’s status as a trade secret.”
Restatement (Third) of Unfair Competition § 39 cmt. f
(1995).
In light of the above, it would be naive to conclude that
Nosal was unaware that the information pirated by Christian
included trade secrets or that the piracy would harm
Korn/Ferry. As a former senior executive at Korn/Ferry,
Nosal was deeply familiar with the competitive advantage
Searcher provided, and was cognizant of the measures the
company took to protect the source lists generated. He signed
a confidentiality agreement stating that “information
databases and company records are extremely valuable assets
of [Korn/Ferry’s] business and are accorded the legal
protection applicable to a company’s trade secrets.” The
source lists were also marked “Korn/Ferry Proprietary &
Confidential.” While a label or proprietary marking alone
does not confer trade secret status, the notice and protective
measures taken by Korn/Ferry significantly undermine
Nosal’s claim he was unaware the source lists were trade
secret information.
Nosal’s argument that he and his colleagues were
unaware their actions would harm Korn/Ferry also holds no
water. They launched a direct competitor to Korn/Ferry and
went to great lengths to access the source lists, fully aware of
the competitive advantage Searcher gave Korn/Ferry as they
attempted to populate their own database. Christian
underscored the value of the lists through her testimony that
she and Nosal used the source lists to complete searches
faster and gain credibility with clients. They recognized that
the required substantial investment of time, money and elbow
40 UNITED STATES V. NOSAL
grease to even try to replicate the source lists would have
destroyed their prime value—immediacy.
At trial, Nosal’s counsel endeavored to attack the secrecy,
knowledge and other elements of the trade secret counts. The
jury heard extensive testimony and argument. Construing the
evidence in the light most favorable to the government, a
rational juror could have concluded that the evidence
supported convictions under §§ 1832(a)(2), (3) and (4) of the
EEA. As the Supreme Court explained just this year, our
“limited review does not intrude on the jury’s role ‘to resolve
conflicts in the testimony, to weigh the evidence, and to draw
reasonable inferences from basic facts to ultimate facts.’”
Musacchio, 136 S. Ct. at 715 (quoting Jackson, 443 U.S. at
319). It was no stretch for the jury to conclude that the source
lists were trade secrets, that Nosal knew they were trade
secrets and that Nosal knew stealing the source lists would
harm Korn/Ferry by helping a competitor—Nosal’s own
company.
B. Conspiracy Jury Instruction
With respect to trade secrets, the conspiracy jury
instruction stated that “the government need not prove the
existence of actual trade secrets and that Defendant knew that
the information in question was a trade secret. However, the
government must prove that Defendant firmly believed that
certain information constituted trade secrets.” Nosal argues
that the court constructively amended the indictment because
the indictment alleges theft of actual trade secrets while the
jury instruction did not require proof of actual trade secrets.
Constructive amendment occurs where “the crime charged is
substantially changed at trial, so that it is impossible to know
whether the grand jury would have indicted for the crime
UNITED STATES V. NOSAL 41
actually proved.” United States v. Howick, 263 F.3d 1056,
1063 (9th Cir. 2001) (citations and alterations omitted). Here,
there was no constructive amendment. In indicting Nosal for
theft of trade secrets under 18 U.S.C. § 1832(a), the grand
jury necessarily considered whether Nosal “knowingly” stole
the source lists; “firmly believed” is a lesser standard. A
grand jury that indicted on this more inclusive “knowing”
standard would necessarily have indicted on this lesser
standard.
In a related vein, Nosal claims that the instruction unfairly
removes the requirement to prove an actual trade secret. The
instruction reflects our circuit’s precedent on conspiracy
charges—a conviction may be upheld even where the object
of the crime was not a legal possibility. See United States v.
Rodriguez, 360 F.3d 949, 957 (9th Cir. 2004) (upholding
convictions for conspiracy to rob cocaine traffickers where
“neither the narcotics nor the narcotics traffickers actually
existed” since “[i]mpossibility is not a defense to [a]
conspiracy charge”). We agree with the other circuits that
have applied this same principle to trade secrets. See Yang,
281 F.3d at 544 (holding that the government did not need to
prove theft of actual trade secrets because the defendants
“intended to commit the crime and took a substantial step
towards commission of the crime”); United States v. Martin,
228 F.3d 1, 13 (1st Cir. 2000) (holding the “key question is
whether [the defendant] intended to steal secrets,” not
whether he actually did); Hsu, 155 F.3d at 204 (“A defendant
can be convicted of attempt or conspiracy pursuant to
18 U.S.C. §§ 1832(a)(4) or (a)(5) even if his intended acts
were legally impossible.”). In any event, the jury found theft
of actual trade secrets, and therefore any error was harmless.
See Neder v. United States, 527 U.S. 1, 19 (1999).
42 UNITED STATES V. NOSAL
C. Evidentiary Challenges
Nosal disputes evidentiary rulings made regarding his
non-competition agreement. Although Nosal was permitted
to testify that he believed the agreement was illegal, the court
struck certain testimony by government witnesses about the
agreement and also precluded evidence about the
enforceability of the agreement under California law. The
jury was instructed that whether “Mr. Nosal breached or did
not breach this covenant is not relevant to the question of
whether he is guilty of the crimes charged in this case.” The
district court did not abuse its discretion.
In closing rebuttal, the government argued that Nosal’s
use of the name “David Nelson” showed his intent to conspire
to steal information from Korn/Ferry. Importantly, the
government did not link Nosal’s charade to the legality of the
non-competition agreement. This passing reference, which
was not objected to at trial, was harmless and certainly does
not rise to the level of plain error.
III. RESTITUTION ORDER
The district court awarded Korn/Ferry $827,983.25 in
restitution. We review de novo the legality of the restitution
order and review for clear error the factual findings that
support the order. United States v. Luis, 765 F.3d 1061, 1065
(9th Cir. 2014), cert. denied, 135 S. Ct. 1572 (2015) (citations
omitted). If the order is “‘within the bounds of the statutory
framework, a restitution order is reviewed for abuse of
discretion.’” Id. (citation omitted).
The restitution order identified three categories of
recoverable losses: 1) Korn/Ferry’s internal investigation
UNITED STATES V. NOSAL 43
costs incurred in attempting to ascertain the nature and scope
of Nosal’s breach, in the amount of $27,400; 2) the value of
Korn/Ferry’s employee time spent participating in and
assisting the government’s investigation and prosecution, in
the amount of $247,695; and 3) the attorneys’ fees incurred
by Korn/Ferry in aid of the investigation or prosecution of the
offense, in the amount of $595,758.25. While the
government asked for a higher amount, the district court
reduced the award, primarily by cutting the request for
attorneys’ fees from $964,929.65 to $595,758.25 for invoices
“not demonstrably reasonably necessary to the government’s
investigation and prosecution,” for “staffing inefficiencies,”
and for “time spent on ‘press’ and file/order reviewing
charges.”
The district court relied on the Mandatory Victim
Restitution Act (MVRA), which “makes restitution
mandatory for particular crimes, including those offenses
which involve fraud or deceit.” United States v. Gordon,
393 F.3d 1044, 1048 (9th Cir. 2004) (citing 18 U.S.C.
§ 3663A(c)(1)(A)(ii)). The MVRA requires that restitution
awards “reimburse the victim for lost income and necessary
child care, transportation, and other expenses incurred during
participation in the investigation or prosecution of the offense
or attendance at proceedings related to the offense.”
18 U.S.C. § 3663A(b)(4). Although the MVRA was passed
as part of the Violence Against Women Act and directed in
part to concerns related to women victims of crime, such as
child care costs, see Pub. L. 103-322, § 40504, 108 Stat.
1796, 1947 (1994), we have joined other circuits in holding
that the language “other expenses incurred during the
participation in the investigation or prosecution” also
authorizes the award of investigation costs and attorneys’ fees
in some circumstances. See, e.g., United States v. Abdelbary,
44 UNITED STATES V. NOSAL
746 F.3d 570, 574–79 (4th Cir. 2014); United States v. Elson,
577 F.3d 713, 728 (6th Cir. 2009); United States v. Waknine,
543 F.3d 546, 558–59 (9th Cir. 2008); United States v.
Amato, 540 F.3d 153, 159–62 (2d Cir. 2008); Gordon,
393 F.3d at 1056–57.
We must initially decide whether, as Nosal urges, the
restitution award is invalid because it exceeds the actual loss
that the district court determined for the purposes of the
Sentencing Guidelines U.S.S.G. § 2B1.1(b)—calculated at
$46,907.88. The answer to that question is found in our
observation that “calculating loss under the guidelines is not
necessarily identical to loss calculation for purposes of
restitution.” United States v. Hunter, 618 F.3d 1062, 1065
(9th Cir. 2010). Rather, restitution loss is governed not by
the criteria of the Sentencing Guidelines, but by the
MVRA’s purpose of “mak[ing] the victim[] whole.”
Gordon, 393 F.3d at 1052 n.6. To this end, the plain
language of 18 U.S.C. § 3663A(a)(1) makes restitution
mandatory “[n]otwithstanding any other provision of law”
and “in addition to . . . any other penalty authorized by law,”
including the Sentencing Guidelines. See also Amato,
540 F.3d at 160–62.
In contrast with the MVRA, which includes expenses
related to investigation and prosecution, such costs are
categorically excluded under the Sentencing Guidelines
applicable here. The guidelines provision for actual loss for
crimes of fraud explicitly excludes “costs incurred by victims
primarily to aid the government in[] the prosecution and
criminal investigation of an offense.” U.S.S.G. § 2.B.1.1 cmt.
3(D)(ii). From that, Nosal appears to assume, without any
support, that “actual loss” is a term-of-art, such that in this
category of offenses a restitution order could never include
UNITED STATES V. NOSAL 45
investigation costs or attorneys’ fees in aid of the
government. That assumption is not warranted under the
plain language of the MVRA, which notably never uses the
terminology of actual loss.
In an effort to overcome the differences between the
MVRA and the guidelines, Nosal points to our decision in
United States v. Stoddard, 150 F.3d 1140, 1147 (9th Cir.
1998), which states that “[r]estitution can only be based on
actual loss.” We acknowledge that Stoddard’s use of the
phrase “actual loss” in discussion of restitution generates
some confusion, but Stoddard does not answer the question
at hand. In Stoddard, the difference between the loss under
the Sentencing Guidelines and the restitution award ($30,000
versus $116,223) related to profits that the defendant received
from a business opportunity linked to the fraud, not for
anything remotely resembling the investigation costs at issue
here. See id. at 1147–48 (Ferguson, J., dissenting).
Nosal is also mistaken that this reading of the statute
creates a circuit split with the Seventh Circuit. See United
States v. Dokich, 614 F.3d 314, 318–20 (7th Cir. 2010).
Dokich addressed whether a $55.9 million restitution award
was calculated using intended loss or actual loss. Based on
an unclear record, the court was forced to conclude that the
restitution award (which was higher than the $20–$50 million
loss used for sentencing under the guidelines) was based on
intended loss, not actual loss, and therefore barred. Id. As in
Stoddard, the case had nothing to do with inclusion of
investigation costs as part of the restitution loss calculation.
Having determined that the restitution award was “within
the bounds of the statutory framework,” we turn to whether
the district court nevertheless abused its discretion in
46 UNITED STATES V. NOSAL
awarding nearly $1 million in restitution. See Waknine,
543 F.3d at 555 (quoting Gordon, 393 F.3d at 1051). With
respect to investigation costs and attorneys’ fees, our rule is
clear: restitution for such losses “‘may be recoverable’”
where the harm was the “‘direct and foreseeable result’ of the
defendant’s wrongful conduct . . . .” Gordon, 393 F.3d at
1057 (quoting United States v. Phillips, 367 F.3d 846, 863
(9th Cir. 2004)). But see Amato, 540 F.3d at 162 (disagreeing
with Gordon’s approach of basing restitution on the
foreseeable results of the criminal conduct). We require the
government to present evidence “demonstrat[ing] that it was
reasonably necessary for [the victim] to incur attorneys’ and
investigator’s fees to participate in the investigation or
prosecution of the offense.” Waknine, 543 F.3d at 559.
Unlike some other circuits, see, e.g., United States v.
Papagno, 639 F.3d 1093, 1099–1100 (D.C. Cir. 2011), we
have “‘adopted a broad view of the restitution authorization
[for investigation costs].’” Gordon, 393 F.3d at 1056–57
(alteration in original) (quoting Phillips, 367 F.3d at 863).
We applaud the district court’s thorough review of the
voluminous time and fee records submitted by the
government and Korn/Ferry. We agree with the award for
internal investigation costs to uncover the extent of the breach
and for the value of employee time spent participating in the
government’s investigation and prosecution. See, e.g., United
States v. De La Fuente, 353 F.3d 766, 773 (9th Cir. 2003)
(upholding an award for a “cleanup and decontamination”
costs in response to an anthrax scare); United States v.
Hosking, 567 F.3d 329, 332 (7th Cir. 2009) (holding that
restitution included the value of “[t]he time and effort spent
by the bank’s employees and outside professionals in
unraveling the twelve-year embezzlement scheme”).
UNITED STATES V. NOSAL 47
However, we part ways with the district court and the
government with respect to Korn/Ferry’s attorneys’ fees.
While the district court’s reduction of the fee award was
a step in the right direction, our review of the record
convinces us that the court should have gone further. Several
principles guide this conclusion. To begin, the fees must be
the direct and foreseeable result of the defendant’s conduct.
Gordon, 393 F.3d at 1057 (quoting Phillips, 367 F.3d at 863).
Next, as in other attorneys’ fee awards, reasonableness is the
touchstone. Reasonableness is benchmarked against the
necessity of the fees under the terms of the statute, thus
excluding duplicate effort, time that is disproportionate to the
task and time that does not fall within the MVRA’s
mandate.17 Finally, fees are only recoverable if incurred
during “participation in the investigation or prosecution of
the offense.” 18 U.S.C. § 3663A(b)(4) (emphasis added).
The company’s attorneys are not a substitute for the work of
the prosecutor, nor do they serve the role of a shadow
prosecutor. To be sure, nothing is wrong with proactive
participation. But participation does not mean substitution or
duplication.
Even after reduction, the total amount of fees awarded is
striking, particularly given that the trial ultimately involved
only three discrete incidents of criminal behavior. Although
resulting in multiple counts, at bottom the events were
temporally circumscribed and limited in scope. We note that
a highly disproportionate percentage of the fees arose from
17
We agree with the district court’s decision to accept the hourly rate of
Korn/Ferry’s attorneys. Recognizing the importance and impact of the
breach, Korn/Ferry cannot be faulted for selecting an “excellent,” or
“premium,” law firm.
48 UNITED STATES V. NOSAL
responding to requests and inquiries related to sentencing,
damages, and restitution. The reasonableness of the fees
needs to be reexamined to consider (i) whether the sizeable
fee related to restitution matters was reasonable; (ii) whether
there was unnecessary duplication of tasks between
Korn/Ferry staff and its attorneys since the court awarded a
substantial sum for the time of Korn/Ferry employees; and
(iii) whether the outside attorneys were substituting for or
duplicating the work of the prosecutors, rather than serving in
a participatory capacity.
We vacate the restitution award with respect to the
attorneys’ fees and remand for reconsideration in light of the
principles and observations set out above.
AFFIRMED, EXCEPT VACATED IN PART AND
R E M A N D E D W I T H R E S PE C T T O T H E
RESTITUTION AWARD.
REINHARDT, Circuit Judge, dissenting:
This case is about password sharing. People frequently
share their passwords, notwithstanding the fact that websites
and employers have policies prohibiting it. In my view, the
Computer Fraud and Abuse Act (“CFAA”) does not make the
millions of people who engage in this ubiquitous, useful, and
generally harmless conduct into unwitting federal criminals.
Whatever other liability, criminal or civil, Nosal may have
incurred in his improper attempt to compete with his former
employer, he has not violated the CFAA.
UNITED STATES V. NOSAL 49
The first time this case came before us we examined
whether Nosal’s former colleagues acted “without
authorization, or exceed[ed] authorized access” when they
downloaded information from Searcher while still employed
at Korn/Ferry and shared it with Nosal in violation of the
firm’s policies. United States v. Nosal (Nosal I), 676 F.3d
854, 864 (9th Cir. 2012) (en banc). We said “no,” rejecting
the approach of a few other circuits which had interpreted the
CFAA looking “only at the culpable behavior of the
defendants before them, and fail[ing] to consider the effect on
millions of ordinary citizens.” Id. at 862. In doing so, we
stated that they turned the CFAA into a “sweeping Internet-
policing mandate,” instead of maintaining its “focus on
hacking.” Id. at 858. We emphatically refused to turn
violations of use restrictions imposed by employers or
websites into crimes under the CFAA, declining to put so
many citizens “at the mercy of [their] local prosecutor.” Id.
at 862. Since then, both circuits to rule on the point have
agreed with our interpretation. See United States v. Valle,
807 F.3d 508, 526–28 (2d Cir. 2015); WEC Carolina Energy
Sols. LLC v. Miller, 687 F.3d 199, 204 (4th Cir. 2012).
Today, addressing only slightly different conduct, the
majority repudiates important parts of Nosal I, jeopardizing
most password sharing. It loses sight of the anti-hacking
purpose of the CFAA, and despite our warning, threatens to
criminalize all sorts of innocuous conduct engaged in daily by
ordinary citizens.
At issue are three incidents of password sharing. On
these occasions while FH was still employed at Korn/Ferry,
she gave her password to Jacobson or Christian, who had left
the company. Her former colleagues then used her password
to download information from Searcher. FH was authorized
50 UNITED STATES V. NOSAL
to access Searcher, but she did not download the information
herself because it was easier to let Jacobson or Christian do
it than to have them explain to her how to find it. It would
not have been a violation of the CFAA if they had simply
given FH step-by-step directions, which she then followed.
Thus the question is whether because Jacobson and Christian
instead used FH’s password with her permission, they are
criminally liable for access “without authorization” under the
Act.1
The majority finds the answer is “yes,” but in doing so
commits the same error as the circuits whose views we
rejected in Nosal I. My colleagues claim that they do not
have to address the effect of their decision on the wider
population because Nosal’s infelicitous conduct “bears little
resemblance” to everyday password sharing. Notably this is
the exact argument the dissent made in Nosal I: “This case
has nothing to do with playing sudoku, checking email, [or]
fibbing on dating sites . . . . The role of the courts is neither
to issue advisory opinions nor to declare rights in
hypothetical cases.” 676 F.3d at 864, 866 (Silverman, J.,
dissenting) (internal quotation and citation omitted).
We, of course, rejected the dissent’s argument in Nosal I.
We did so because we recognized that the government’s
theory made all violations of use restrictions criminal under
the CFAA, whether the violation was innocuous, like
checking your personal email at work, or more objectionable
like that at issue here. Because the statute was susceptible to
a narrower interpretation, we rejected the government’s
1
Nosal was charged as criminally culpable for Jacobson’s and
Christian’s alleged violations under a theory of either aiding and abetting
or conspiracy.
UNITED STATES V. NOSAL 51
broader reading under which “millions of unsuspecting
individuals would find that they are engaging in criminal
conduct.” Id. at 859. The same is true here. The majority
does not provide, nor do I see, a workable line which
separates the consensual password sharing in this case from
the consensual password sharing of millions of legitimate
account holders, which may also be contrary to the policies
of system owners. There simply is no limiting principle in
the majority’s world of lawful and unlawful password
sharing.
Therefore, despite the majority’s attempt to construe
Nosal I as only applicable to “exceeds authorized access,” the
case’s central lesson that the CFAA should not be interpreted
to criminalize the ordinary conduct of millions of citizens
applies equally strongly here. Accordingly, I would hold that
consensual password sharing is not the kind of “hacking”
covered by the CFAA. That is the case whether or not the
voluntary password sharing is with a former employee and
whether or not the former employee’s own password had
expired or been terminated.
I.
“Congress enacted the CFAA in 1984 primarily to address
the growing problem of computer hacking,” Nosal I, 676 F.3d
at 858. United States v. Morris, the first appellate case under
the CFAA, illustrates the core type of conduct criminalized
by the Act. 928 F.2d 504 (2d Cir. 1991). There a student
created a worm which guessed passwords and exploited bugs
in computer programs to access military and university
computers, eventually causing them to crash. The Second
Circuit found that the student had accessed those computers
52 UNITED STATES V. NOSAL
“without authorization” in violation of the Act. Id. at 506,
509–511.
“Without authorization” is used in a number of places
throughout the CFAA, but is not defined in the Act. The
phrase appears in two subsections relevant to this case:
§ 1030(a)(2)(C) and (a)(4). Subsection (a)(2)(C) criminalizes
“intentionally access[ing] a computer without authorization
or exceed[ing] authorized access, and thereby obtain[ing] . . .
information from any protected computer.” This is the
“broadest provision” of the CFAA. Nosal I, 676 F.3d at 859.
Subsection (a)(4) in essence increases the penalty for
violating (a)(2)(C) if the perpetrator also acts “with intent to
defraud,” and “obtains anything of value.”2 Nosal was
charged and convicted under (a)(4).
Our definition of “without authorization” in this case will
apply not only to (a)(4), but also to (a)(2)(C) and the rest of
the Act. In Nosal I, the government contended that “exceeds
authorization” could be interpreted more narrowly in
(a)(2)(C) than in (a)(4), but we concluded: “This is just not
so: Once we define the phrase for the purpose of subsection
1030(a)(4), that definition must apply equally to the rest of
the statute pursuant to the ‘standard principle of statutory
construction . . . that identical words and phrases within the
same statute should normally be given the same meaning.’”
676 F.3d at 859 (quoting Powerex Corp. v. Reliant Energy
Servs., Inc., 551 U.S. 224, 232 (2007)). That holds here.
Indeed, the government so concedes.
2
The penalty for violating § 1030(a)(2)(C) may also be increased if the
government proves an additional element under (c)(2)(B).
UNITED STATES V. NOSAL 53
It is thus necessary to consider the potential breadth of
subsection (a)(2)(C) if we construe “without authorization”
with less than the utmost care. Subsection (a)(2)(C)
criminalizes nearly all intentional access of a “protected
computer” without authorization.3 A “‘protected computer’
is defined as a computer affected by or involved in interstate
commerce—effectively all computers with Internet access.”
See Nosal I, 676 F.3d at 859. This means that nearly all
desktops, laptops, servers, smart-phones, as well as any
“iPad, Kindle, Nook, X-box, Blu-Ray player or any other
Internet-enabled device,” including even some thermostats
qualify as “protected.” Id. at 861. Thus § 1030(a)(2)(C)
covers untold millions of Americans’ interactions with these
objects every day. Crucially, violating (a)(2)(C) does not
require “any culpable intent.” Id. Therefore if we interpret
“without authorization” in a way that includes common
practices like password sharing, millions of our citizens
would become potential federal criminals overnight.
3
Computer is defined under the Act as “an electronic, magnetic, optical,
electrochemical, or other high speed data processing device performing
logical, arithmetic, or storage functions, and includes any data storage
facility or communications facility directly related to or operating in
conjunction with such device.” 18 U.S.C. § 1030(e)(1). See also United
States v. Mitra, 405 F.3d 492 (7th Cir. 2005) (finding a radio system is a
computer); United States v. Kramer, 631 F.3d 900, 902 (8th Cir. 2011)
(noting the Act’s definition of a computer “is exceedingly broad,” and
concluding an ordinary cell phone is a computer).
To violate § 1030(a)(2)(C) a person must also “obtain information,”
but it is nearly impossible to access a computer without also obtaining
information. As we noted in Nosal I, obtaining information includes
looking up a weather report, reading the sports section online, etc. See also
Sen. Rep. No. 104-357, at 7 (1996) (“‘[O]btaining information’ includes
merely reading it.”).
54 UNITED STATES V. NOSAL
II.
The majority is wrong to conclude that a person
necessarily accesses a computer account “without
authorization” if he does so without the permission of the
system owner.4 Take the case of an office worker asking a
friend to log onto his email in order to print a boarding pass,
in violation of the system owner’s access policy; or the case
of one spouse asking the other to log into a bank website to
pay a bill, in violation of the bank’s password sharing
prohibition. There are other examples that readily come to
mind, such as logging onto a computer on behalf of a
colleague who is out of the office, in violation of a corporate
computer access policy, to send him a document he needs
right away. “Facebook makes it a violation of the terms of
service to let anyone log into your account,” we noted in
Nosal I, but “it’s very common for people to let close friends
and relatives check their email or access their online
accounts.” 676 F.3d at 861 (citing Facebook Statement of
Rights and Responsibilities § 4.8).5
Was access in these examples authorized? Most people
would say “yes.” Although the system owners’ policies
4
The term “system owner” refers to the central authority governing user
accounts, whether the owner of a single computer with one or several user
accounts, a workplace network with dozens, or a social networking site,
bank website, or the like, with millions of user accounts.
5
For example, a recent survey showed that 46% of parents have the
password to their children’s social networking site, despite the fact that the
largest site, Facebook, forbids password sharing. See USC Annenberg
School Center for the Digital Future, 2013 Digital Future Report 135
(2013), http://www.digitalcenter.org/wp-content/uploads/2013/06/2013-
Report.pdf.
UNITED STATES V. NOSAL 55
prohibit password sharing, a legitimate account holder
“authorized” the access. Thus, the best reading of “without
authorization” in the CFAA is a narrow one: a person
accesses an account “without authorization” if he does so
without having the permission of either the system owner or
a legitimate account holder.
This narrower reading is more consistent with the purpose
of the CFAA. The CFAA is essentially an anti-hacking
statute, and Congress intended it as such. Nosal I, 676 F.3d
at 858. Under the preferable construction, the statute would
cover only those whom we would colloquially think of as
hackers: individuals who steal or guess passwords or
otherwise force their way into computers without the consent
of an authorized user, not persons who are given the right of
access by those who themselves possess that right. There is
no doubt that a typical hacker accesses an account “without
authorization”: the hacker gains access without permission –
either from the system owner or a legitimate account holder.
As the 1984 House Report on the CFAA explained, “it is
noteworthy that Section 1030 deals with an unauthorized
access concept of computer fraud rather than the mere use of
a computer. Thus, the conduct prohibited is analogous to that
of ‘breaking and entering.’” H.R. Rep. 98-894, 20, 1984
U.S.C.C.A.N. 3689, 3706. We would not convict a man for
breaking and entering if he had been invited in by a
houseguest, even if the homeowner objected. Neither should
we convict a man under the CFAA for accessing a computer
account with a shared password with the consent of the
password holder.
Nosal’s conduct was, of course, unscrupulous.
Nevertheless, as the Second Circuit found in interpreting the
CFAA, “whatever the apparent merits of imposing criminal
56 UNITED STATES V. NOSAL
liability may seem to be in this case, we must construe the
statute knowing that our interpretation of [authorization] will
govern many other situations.” Valle, 807 F.3d at 528. The
construction that we adopt in Nosal’s case will apply with
equal force to all others, and the reading of “without
authorization” we adopt for subsection (a)(4) will apply with
equal force to subsection (a)(2)C). I would, therefore, hold
that however reprehensible Nosal’s conduct may have been,
he did not violate the CFAA.
III.
The majority insists that the text of the statute requires its
broad construction, but that is simply not so. Citing our
decision in Brekka, the majority defines “authorization” as
“permission or power granted by an authority.” After
appealing to “ordinary meaning,” “common sense meaning,”
and multiple dictionaries to corroborate this definition, the
majority asserts that the term is “not ambiguous.”
The majority is wrong. The majority’s (somewhat
circular) dictionary definition of “authorization” –
“permission conferred by an authority” – hardly clarifies the
meaning of the text. While the majority reads the statute to
criminalize access by those without “permission conferred
by” the system owner, it is also proper (and in fact preferable)
to read the text to criminalize access only by those without
“permission conferred by” either a legitimate account holder
or the system owner. The question that matters is not what
authorization is but who is entitled to give it. As one scholar
noted, “there are two parties that have plausible claims to
[give] authorization: the owner/operator of the computer, and
the legitimate computer account holder.” Orin S. Kerr,
UNITED STATES V. NOSAL 57
Computer Crime Law 48 (3d ed. 2013). Under a proper
construction of the statute, either one can give authorization.
The cases the majority cites to support its contention that
the statute’s text requires a broad construction merely repeat
dictionary definitions of “without authorization.” Those
cases do nothing to support the majority’s position that
authorization can be given only by the system owner. The
Fourth Circuit, quoting the Oxford English Dictionary, found
that “based on the ordinary, contemporary, common meaning
of ‘authorization,” an employee “accesses a computer
‘without authorization’ when he gains admission to a
computer without approval.” WEC Carolina Energy
Solutions LLC v. Miller, 687 F.3d 199, 204 (4th Cir. 2012).
The Sixth Circuit, also quoting the Oxford English
Dictionary, explained that “[t]he plain meaning of
‘authorization’ is ‘[t]he conferment of legality’” and
concluded that “a defendant who accesses a computer
‘without authorization’ does so without sanction or
permission.” Pulte Homes, Inc. V. Laborers’ Int’l Union of
N. Am., 648 F.3d 295, 303–04 (6th Cir 2011). In both of
these cases, the important question in Nosal’s case –
authorization from whom – went unanswered. The Second
Circuit consulted the Random House Dictionary instead and
concluded that the “common usage of ‘authorization’
suggests that one ‘accesses a computer without authorization’
if he accesses a computer without permission to do so at all.”
Valle, 807 F.3d 508, 524 (2nd Cir. 2015) (emphasis added).
With that, I agree. Contrary to the majority’s suggestion,
none of the cases on which it relies holds that the requisite
58 UNITED STATES V. NOSAL
permission must come from the system owner and not a
legitimate account holder.6
At worst, the text of the statute is ambiguous as to who
may give authorization. The First Circuit concluded that the
meaning of the term “without authorization” in the CFAA
“has proven to be elusive,” EF Cultural Travel BV v.
Explorica, Inc., 274 F.3d 577, 582 n.10 (1st Cir. 2001), and
an unambiguous definition eludes the majority even now. In
that circumstance, the rule of lenity requires us to adopt the
narrower construction – exactly the construction that is
appropriate in light of the CFAA’s anti-hacking purpose and
concern for the statute’s effect on the innocent behavior of
millions of citizens. The text provides no refuge for the
majority.
As the Supreme Court has repeatedly held, “where there
is ambiguity in a criminal statute, doubts are resolved in favor
of the defendant.” United States v. Bass, 404 U.S. 336, 348
(1971); see also United States v. Santos, 553 U.S. 507, 514
(2008) (“The rule of lenity requires ambiguous criminal laws
to be interpreted in favor of the defendants subjected to
them.”). If a “choice has to be made between two readings of
what conduct Congress has made a crime, it is appropriate,
before we choose the harsher alternative, to require that
Congress should have spoken in language that is clear and
definite.” Jones v. United States, 529 U.S. 848, 858 (2000)
(quoting United States v. Universal C.I.T. Credit Corp.,
6
The Tenth Circuit case the majority cites, United States v. Willis,
476 F.3d 1121 (10th Cir. 2007), has nothing to do with the meaning of
“without authorization.” In fact, Willis did “not contest that he provided
. . . unauthorized access” to the website at issue. “He merely argue[d] that
he had no intent to defraud in so doing. . .” Id. at 1126.
 UNITED STATES V. NOSAL 59
344 U.S. 218, 221–22 (1952)) (internal quotation marks
omitted). We are therefore bound to adopt the construction
of CFAA that criminalizes access only by those without
permission from either an account holder or the system
owner. See also, e.g., Nosal I, 676 F.3d at 863 (applying the
rule of lenity to the CFAA); Valle, 807 F.3d at 527 (same);
Miller, 687 F.3d at 204 (same).
The “venerable” rule of lenity ensures that individuals are
on notice when they act. Santos, 553 U.S. at 514. It
“vindicates the fundamental principle that no citizen should
be held accountable for a violation of a statute whose
commands are uncertain. . . .” Id. We must, therefore, read
the CFAA not just in the harsh light of the courtroom but also
from the perspective of its potential violators.7 In the
everyday situation that should concern us all, a friend or
colleague accessing an account with a shared password would
most certainly believe – and with good reason – that his
access had been “authorized” by the account holder who
shared his password with him. Such a person, accessing an
account with the express authorization of its holder, would
7
Moskal v. United States, 498 U.S. 103 (1990), relied on by the majority
for the claim that “the rule of lenity is not triggered [simply] because it is
‘possible to articulate’ a narrower construction of the statute,” is fully
consistent with my reading. Here, the narrower reading rises above the
possible and even the plausible: it is the natural reading from the
perspective of a number of the law’s potential violators. Moreover,
because the narrower interpretation better harmonizes with the anti-
hacking purpose of the CFAA, the ambiguity here is exactly the kind
Moskal said does trigger the rule of lenity: “reasonable doubt persists
about [the] statute’s intended scope even after resort to ‘the language and
structure, legislative history, and motivating policies’ of the statute.”
Moskal v. United States, 498 U.S. 103, 108 (1990) (citing Bifulco v.
United States, 447 U.S. 381, 387 (1980)).
60 UNITED STATES V. NOSAL
believe that he was acting not just lawfully but ethically.8
“It's very common for people to let close friends and relatives
check their email or access their online accounts,” we said in
Nosal I. “Some may be aware that, if discovered, they may
suffer a rebuke from the ISP or a loss of access, but few
imagine they might be marched off to federal prison for doing
so.” 676 F.3d at 861. The majority’s construction thus
conflicts with the natural interpretation its freshly minted
CFAA violators would have given to “without authorization.”
That alone should defeat the majority’s conclusion.
Worse, however, the majority’s construction would base
criminal liability on system owners’ access policies. That is
exactly what we rejected in Nosal I. See 676 F.3d at 860.
Precisely because it is unacceptable in our legal system to
impose criminal liability on actions that are not proscribed
“plainly and unmistakably,” Bass, 404 U.S. at 348–49, it is
also unacceptable to base “criminal liability on violations of
private computer use policies.” Nosal I, 676 F.3d at 860. Not
only are those policies “lengthy, opaque, subject to change
and seldom read,” id. at 860, they are also private – by
definition not addressed and perhaps not even accessible to
shared password recipients who are not official users
themselves. Just as the rule of lenity ensures that Congress,
not the judiciary, creates federal crimes, Bass, 404 U.S. at
348, the rule also ensures that the clear (and public) words of
8
It is evident that Nosal is not such a person. This case, however,
differs from Bush v. Gore, 531 U.S. 98 (2000). It is not “a ticket for one
train only.” Linda Greenhouse, Thinking About The Supreme Court After
Bush v. Gore, 35 Ind. L. Rev. 435, 436 (2002). The majority’s opinion
criminalizes the conduct of all the friends and colleagues mentioned
above.
UNITED STATES V. NOSAL 61
Congress – not the obscure policies of system owners –
delimit their scope.
If this were a civil statute, it might be possible to agree
with the majority, but it is not. The plain fact is that the Act
unquestionably supports a narrower interpretation than the
majority would afford it. Moreover, the CFAA is not the
only criminal law that governs computer crime. All fifty
states have enacted laws prohibiting computer trespassing. A
conclusion that Nosal’s actions do not run afoul of the CFAA
need not mean that Nosal is free from criminal liability, and
adopting the proper construction of the statute need not
thwart society’s ability to deter computer crime and punish
computer criminals – even the “industrious hackers” and
“bank robbers” that so alarm the majority.9
IV.
In construing any statute, we must be wary of the risks of
“selective or arbitrary enforcement.” United States v.
Kozminski, 487 U.S. 931, 952 (1988). The majority’s
construction of the CFAA threatens exactly that. It
9
In fact, the ubiquity of state regulation targeting computer trespassing
counsels in favor of the narrower interpretation of the federal statute.
“Congress has traditionally been reluctant to define as a federal crime
conduct readily denounced as criminal by the States.” Bond v. United
States, 134 S. Ct. 2077, 2093 (2014) (quoting Bass, 404 U.S. at 349). As
such, “we will not be quick to assume that Congress has meant to effect
a significant change in the sensitive relation between federal and state
criminal jurisdiction.” Id. at 2089. Because the states are already
regulating such conduct, we deemed it appropriate in Nosal I to presume
that “Congress act[ed] interstitially” in passing the CFAA. We therefore
refused to adopt a broader interpretation of the Act in the absence of a
clear indication from Congress that such a reading was warranted.
676 F.3d at 857. The same is as true of Nosal II as of Nosal I.
62 UNITED STATES V. NOSAL
criminalizes a broad category of common actions that nobody
would expect to be federal crimes. Looking at the fallout
from the majority opinion, it is clear that the decision will
have “far-reaching effects unintended by Congress.” See
Miller, 687 F.3d at 206 (rejecting a broad interpretation of the
CFAA producing such unintended effects).
Simply put, the majority opinion contains no limiting
principle.10 Although the majority disavows the effects of its
decision aside from dealing with former employees, it may
not by fiat order that the reasoning of its decision stop, like
politics used to, “at the water’s edge.” The statute says
nothing about employment. Similarly, Nosal I discussed use
restrictions, whether imposed by an employer or a third-party
website, all in the same way. It did not even hint that
employment was somehow special.11 676 F.3d at 860–61.
10
The government has not offered a workable standard for
distinguishing Nosal’s case from innocuous password sharing either in the
context of employment or outside of it. With respect to things like
Facebook password sharing, for example, the government gamely states
that in other “categories of computer users,” aside from employees,
defendants might be able to claim password sharing gave them
authorization even if it was against the policy of the website, but does not
offer any line of its own or even a hint as to what in the statute permits
such a distinction.
11
The majority tries to dismiss Nosal I as irrelevant because in the end
it only interprets “exceeds authorized access.” This is wrong for two
reasons. First, while Nosal I’s holding applies directly only to “exceeds
authorized access,” its discussion of password sharing affects the meaning
of “without authorization” as well. This is because the “close friends [or]
relatives” have no right to access Facebook’s or the email provider’s
servers, unless the account holder’s password sharing confers such
authorization. Although in Nosal I we rejected the Seventh Circuit’s
holding in Int'l Airport Centers, L.L.C. v. Citrin, that court correctly
observed that the distinction between “exceeds authorized access” and
UNITED STATES V. NOSAL 63
It is impossible to discern from the majority opinion what
principle distinguishes authorization in Nosal’s case from one
in which a bank has clearly told customers that no one but the
customer may access the customer’s account, but a husband
nevertheless shares his password with his wife to allow her to
pay a bill. So long as the wife knows that the bank does not
give her permission to access its servers in any manner, she
is in the same position as Nosal and his associates.12 It is not
“advisory” to ask why the majority’s opinion does not
criminalize this under § 1030(a)(2)(C); yet, the majority
suggests no answer to why it does not.
Even if the majority opinion could be limited solely to
employment, the consequences would be equally untoward.
Very often password sharing between a current and past
employee serves the interest of the employer, even if the
current employee is technically forbidden by a corporate
policy from sharing his password. For example, if a current
Korn/Ferry employee were looking for a source list for a
pitch meeting which his former colleague had created before
retirement, he might contact him to ask where the file had
been saved. The former employee might say “it’s too
complicated to explain where it is; send me your password
and I’ll find it for you.” When the current employee
“without authorization” is often “paper thin.” 440 F.3d 418, 420 (7th Cir.
2006); see also Miller, 687 F.3d at 204 (recognizing the “distinction
between these terms is arguably minute”). Second, and more important,
Nosal I’s central message that we must consider the effect of our decision
on millions of ordinary citizens applies with equal force to “without
authorization” and “exceeds authorized access.”
12
To make the analogy exact, assume the wife had recently closed her
account with the bank or withdrawn as a member of a joint-account with
her husband and thus had her credentials rescinded.
64 UNITED STATES V. NOSAL
complied and the former employee located the file, both
would become federal criminals under the majority’s opinion.
I am confident that such innocuous password sharing among
current and former employees is more frequent than the
improper password sharing at issue here. Both employees
and Congress would be quite surprised to find that the
innocent password sharing constitutes criminal conduct under
the CFAA.13
Brekka, cited repeatedly in the majority opinion, did not
threaten to criminalize the everyday conduct of millions of
citizens. Nor does that case foreclose the preferable
construction of the statute. Brekka primarily addressed the
question of whether an employee’s violation of the duty of
loyalty could itself render his access unauthorized. 581 F.3d
at 1134–35. Although we found that authorization in that
case depended “on actions taken by the employer,” that was
to distinguish it from plaintiff’s claim that authorization
“turns on whether the defendant breached a state law duty of
loyalty to an employer.” Id. Brekka’s alleged use of an
expired log-in presented a very different situation. Brekka
had no possible source of authorization, and acted without
having permission from either an authorized user or the
system owner. We therefore had no cause to consider
whether authorization from a current employee for the use of
his password (i.e. password sharing) would constitute
“authorization” under the Act. Moreover, it is far less
common for people to use an expired or rescinded log-in
13
This example also demonstrates the problem with the majority’s
reliance on the fact that¯like all former Korn/Ferry employees¯
Christian and Jacobson’s credentials had expired. The expiration of
someone’s credentials is not a reliable indicator of criminal culpability in
a password sharing case.
UNITED STATES V. NOSAL 65
innocuously than to share passwords contrary to the rules
promulgated by employers or website operators. Thus, unlike
this case, Brekka did not place ordinary citizens in jeopardy
for their everyday conduct. That difference alone is
dispositive in light of Nosal I.
In sum, § 1030(a)(2)(C) covers so large a swath of our
daily lives that the majority’s construction will “criminalize
a broad range of day-to-day activity.” Kozminski, 487 U.S. at
949. Such “[u]biquitous, seldom-prosecuted crimes invite
arbitrary and discriminatory enforcement.” Nosal I, 676 F.3d
at 861.
V.
Nosal’s case illustrates some of the special dangers
inherent in criminal laws which are frequently violated in the
commercial world, yet seldom enforced. To quote a recent
comment by a justice of the Supreme Court with regard to a
statute that similarly could be used to punish
indiscriminately: “It puts at risk behavior that is common.
That is a recipe for giving the Justice Department and
prosecutors enormous power over [individuals].” Transcript
of Oral Argument at 38, McDonnell v. United States, 136 S.
Ct. 891 (2016) (No. 15-474) (Breyer, J.). Indeed, as this
opinion is being filed, the Supreme Court has issued its
decision in McDonnell and reiterated that “we cannot
construe a criminal statute on the assumption that the
Government will use it responsibly.” McDonnell v. United
States, 579 U.S. __ (June 27, 2016) (citation omitted). Here
it is far worse. Broadly interpreted, the CFAA is a recipe for
giving large corporations undue power over their rivals, their
employees, and ordinary citizens, as well as affording such
66 UNITED STATES V. NOSAL
indiscriminate power to the Justice Department, should we
have a president or attorney general who desires to do so.
Nosal was a senior member of Korn/Ferry and intended
to start a competing business. He was also due a million
dollars from Korn/Ferry if he abided by his departure
agreement. When Korn/Ferry began its investigation of
Nosal’s possible malfeasance, it brought on ex-FBI agents to
search through Christian’s garbage and follow Jacobson
around. It also hired a leading international corporate law
firm consisting of over 600 lawyers, O’Melveny and Myers,
which charged up to $1,100 per hour for the time of some its
partners.14 One of O’Melveny’s lead attorneys had recently
left the office of the United States Attorney who would
prosecute any case against Nosal. She referred the case to her
former colleagues personally. O’Melveny also told the
prosecutor that the case was “time-sensitive” because
Korn/Ferry would have to file its civil case shortly, but that
it would provide the prosecutor with the facts necessary to
“demonstrate the criminal culpability of those involved.” The
law firm also provided the government with the liability
theories it believed necessary to convict Nosal under the
CFAA. Less than a month after O’Melveny approached the
government, the FBI searched the residences of Jacobson,
Christian, and the offices of Nosal’s new business. That same
day Korn/Ferry filed its civil complaint. In total, Korn/Ferry
sought almost a million dollars in attorneys’ fees from Nosal
14
It was recently reported that more than a few corporate firms,
including O’Melveny’s rival Gibson, Dunn and Crutcher, charge as
much as $2,000 per hour for some partners’ time. Natalie Rodriguez,
Meet the $2,000 An Hour Attorney, Law360, June 11, 2016,
http://www.law360.com/articles/804421/meet-the-2-000-an-hour-attorney.
UNITED STATES V. NOSAL 67
to compensate it for the work O’Melveny did to “assist” with
the criminal prosecution.
To be clear, I am not implying that there is any
misconduct on the part of the prosecution in this case.
Nevertheless, private assistance of such magnitude blurs the
line between criminal and civil law. Courts have long held
that “a private citizen lacks a judicially cognizable interest in
the prosecution or nonprosecution of another.” Linda R.S. v.
Richard D., 410 U.S. 614, 619 (1973). Korn/Ferry and its
counsel’s employment of their overwhelming resources to
persuade prosecutors to bring charges against an economic
competitor has unhealthy ramifications for the legal system.
Civil suits ordinarily govern economic controversies. There,
private parties may initiate any good-faith action at their own
expense. In criminal cases, however, the prosecutor who
“seeks truth and not victims, [and] who serves the law and not
factional purposes” must decide which cases go forward and
which do not. Robert H. Jackson, The Federal Prosecutor,
Address Before Conference of U.S. Attorneys (April 1,
1940), in 24 J. Am. Judicature Soc’y 18, 20 (1940). These
decisions are inevitably affected by a variety of factors
including the severity of the crime and the amount of
available resources that must be dedicated to a prosecution.
Prosecutors cannot help but be influenced by knowing
that they can count on an interested private party to perform
and finance much of the work required to convict a business
rival. As the Supreme Court found recently: “Prosecutorial
discretion involves carefully weighing the benefits of a
prosecution against the evidence needed to convict, [and] the
resources of the public fisc.” Bond v. United States, 134 S.
68 UNITED STATES V. NOSAL
Ct. 2077, 2093 (2014).15 The balance weighs differently
when a major international corporate firm will bear much of
the cost which would otherwise have to be borne by the
prosecutor’s office. Prosecutors will also be able to use the
work product of the country’s finest and most highly paid
corporate litigators, rather than investing its meager human
resources in developing a complex commercial case different
in kind from the cases it is ordinarily used to preparing.16
Undertaking such third-party financed cases which a United
States attorney might not have prosecuted otherwise gives the
appearance of well-financed business interests obtaining the
services of the prosecutorial branch of government to
accomplish their own private purposes, influencing the vast
discretion vested in our prosecutors, and causing the
enforcement of broad and ill-defined criminal laws seldom
enforced except at the behest of those who can afford it.
Moreover, to the extent that decisions to pursue such cases
are influenced by such extraneous concerns, and prosecutorial
discretion is tilted toward their enforcement, other criminal
cases that might otherwise be chosen for prosecution may
well be neglected and the criminal justice system itself
become distorted.
15
Indeed, the Court has recognized that limited government funds
sometimes play an important part in restraining potential executive
overreach. See Illinois v. Lidster, 540 U.S. 419, 426 (2004) (finding that
limited police resources would be a practical impediment to the
“proliferation” of sobriety checkpoints); see also United States v. Jones,
132 S. Ct. 945, 956 (2012) (Sotomayor, J., concurring) (arguing that
technologies like GPS which loosen the check of limited enforcement
budgets may necessitate greater judicial oversight).
16
The fact that the interested party may be able to recover its attorneys’
fees if the prosecution is successful does not affect this analysis.
UNITED STATES V. NOSAL 69
VI.
“There is no doubt that this case is distasteful; it may be
far worse than that.” McDonnell v. United States, 579 U.S.
__ (June 27, 2016). As the Supreme Court said in
McDonnell, “our concern is not with tawdry tales of Ferraris,
Rolexes, and ball gowns. It is instead with the broader legal
implications of the Government’s boundless interpretation”
of a federal statute. Here, our concern is not with tawdry
tales of corporate thievery and executive searches gone
wrong. “It is instead with the broader legal implications of
the Government’s boundless interpretation” of the CFAA.
Nosal may have incurred substantial civil liability, and may
even be subject to criminal prosecution, but I do not believe
he has violated the CFAA, properly construed.17 I
respectfully dissent.
17
Nosal argues that because the jury was instructed under Pinkerton, if
the conspiracy count and substantive CFAA counts are vacated or
reversed, so too must both the trade secrets counts. The government does
not contest this assertion in its answering brief. I would therefore vacate
the trade secrets counts. See United States v. Gamboa-Cardenas, 508 F.3d
491, 502 (9th Cir. 2007) (“Appellees . . . did not raise the . . . argument in
their briefs and thus they have waived it.”). For that reason I express no
independent view on the trade secrets counts, although I have substantial
concerns about the legality of the convictions on those counts as well.