[Congressional Record (Bound Edition), Volume 158 (2012), Part 13]
[House]
[Pages 17302-17304]
[From the U.S. Government Publishing Office, www.gpo.gov]




            THEFT OF TRADE SECRETS CLARIFICATION ACT OF 2012

  Mr. SMITH of Texas. Mr. Speaker, I move to suspend the rules and pass 
the bill (S. 3642) to clarify the scope of the Economic Espionage Act 
of 1996.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                                S. 3642

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Theft of Trade Secrets 
     Clarification Act of 2012''.

     SEC. 2. AMENDMENT.

       Section 1832(a) of title 18, United States Code, is amended 
     in the matter preceding paragraph (1), by striking ``or 
     included in a product that is produced for or placed in'' and 
     inserting ``a product or service used in or intended for use 
     in''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Texas (Mr. Smith) and the gentleman from Michigan (Mr. Conyers) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Texas.


                             General Leave

  Mr. SMITH of Texas. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days in which to revise and extend their 
remarks and include extraneous materials on S. 3642, currently under 
consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.
  Mr. SMITH of Texas. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, S. 3642, the Theft of Trade Secrets Clarification Act of 
2012,

[[Page 17303]]

clarifies the scope of the Economic Espionage Act, EEA, and protects 
American jobs and businesses from the theft of their valuable trade 
secrets. I want to thank Senator Leahy for his hard work on this piece 
of legislation.
  Since 1996, the EEA has served as the primary tool the Federal 
Government uses to protect secret, valuable, commercial information 
from theft. The Second Circuit's Aleynikov decision revealed a 
dangerous loophole that demands our attention. In response, the Senate 
unanimously passed S. 3642 in November. We need to act today to send 
this important measure directly to the President. We must also take 
action in response to the Second Circuit's call and ensure that we have 
appropriately adapted the scope of the EEA to the digital age.
  I again thank Senator Leahy for his leadership on this issue. I urge 
my colleagues to support the bill, and I reserve the balance of my 
time.
  Mr. Speaker, S. 3642, the ``Theft of Trade Secrets Clarification Act 
of 2012,'' clarifies the scope of the Economic Espionage Act (EEA) and 
protects American jobs and businesses from the theft of their valuable 
trade secrets. I thank Senator Leahy for his hard work on this bill.
  Sergey Aleynikov was convicted for stealing and transferring valuable 
proprietary computer source code that belonged to his former employer, 
Goldman Sachs. Earlier this year, he was released from a federal 
penitentiary after serving only one year of an eight-year sentence.
  According to the Second Circuit Court of Appeals, he had accepted an 
offer in 2009, to become a senior executive at a Chicago-based startup 
that intended to compete against Goldman in the provision of high 
frequency trading (HFT) services.
  The Appeals Court explained:

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

  Aleynikov was convicted of violating the EEA and the National Stolen 
Property Act. After reviewing the trial record, the Appeals Court 
issued an order in February 2012, which reversed Aleynikov'convictions 
on both counts.
  The court's decision construed the scope of the two federal criminal 
statutes. It observed that there is a limitation that products be 
``produced for'' or ``placed in'' interstate or foreign commerce.
  The court concluded, ``Goldman's HFT system was neither `produced 
for' nor `placed in' interstate or foreign commerce,'' despite evidence 
that it facilitated millions of proprietary trades and transactions 
each year. It then determined that the theft of source code was not an 
offense under the EEA.
  The court explained that when a statute, particularly a criminal 
statute, is ambiguous, it is appropriate to construe it narrowly and, 
``to require that Congress should have spoken in language that is clear 
and definite'' before choosing a stricter interpretation.
  In his concurring opinion, Judge Calabresi [Cal-abress-E] directly 
called upon Congress to clarify the scope of the EEA as he wrote:

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

  The FBI estimated earlier this year that U.S. companies had lost $13 
billion to trade secret theft in just over six months. Over the past 
six years, losses to individual U.S. companies have ranged from $20 
million to as much as $1 billion.
  Since 1996, the EEA has served as the primary tool the federal 
government uses to protect secret, valuable, commercial information 
from theft.
  The Second Circuit's Aleynikov [Alay-na-kov] decision revealed a 
dangerous loophole that demands our attention. In response, the Senate 
unanimously passed S. 3642 in November.
  We need to act today to send this important measure directly to the 
President. We must also take action in response to the Second Circuit's 
call and to ensure that we have appropriately adapted the scope of the 
EEA to the digital age.
  I again thank Senator Leahy for his leadership on this issue and I 
urge my colleagues to support the bill.
  The SPEAKER pro tempore. Without objection, the gentleman from 
Virginia controls the time.
  There was no objection.
  Mr. SCOTT of Virginia. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, S. 3642, the Theft of Trade Secrets Clarification Act, 
will help ensure that American businesses can effectively protect their 
trade secrets. This legislation passed the Senate by unanimous consent 
last month, and we are proud to be passing it today.
  S. 3642 responds to a recent Federal court decision that exposed a 
gap in Federal law. In April of this year, the Second Circuit Court of 
Appeals held that the Federal statute prohibiting the theft of trade 
secrets does not apply to computer source code in some circumstances.
  In the Aleynikov case, the defendant, a computer programmer who 
worked for Goldman Sachs, electronically copied and remotely stored 
thousands of lines of source code from the company's internal, high-
frequency trading system and then downloaded that code to his new 
employer's server after leaving Goldman Sachs.
  The transfer of the source code would potentially save up to $10 
million and 2 years of programmers' time for the new employer and would 
eliminate some of the competitive advantage Goldman Sachs achieved by 
developing their own trading program.
  Federal law prohibits the conversion of any trade secret that is 
related to or included in a product that is produced or placed in 
interstate or foreign commerce. Because the code that was stolen is a 
component of an internal computer system, the court found that it is 
not covered by the statute because it was not produced for, or placed 
in, a product in interstate or foreign commerce.
  This bill will close the gap exposed in that case by clarifying that 
the statute applies to both products and services which are used in or 
intended for use in interstate or foreign commerce.
  Congress needs to act quickly to enhance the ability of American 
businesses to safeguard the proprietary information they develop to 
gain a competitive advantage. This is particularly important as our 
country's economy is increasingly knowledge- and service-based.
  We must ensure that our statutes designed to prohibit the theft of 
trade secrets appropriately cover the range of intellectual property 
generated and used by our businesses.
  This bill is an important step to accomplish this goal, and I commend 
the senior Senator from Vermont, the chair of the Judiciary Committee 
in the Senate, Mr. Leahy, for his leadership on the bill; and I urge my 
colleagues to support this legislation so it can be sent directly to 
the President's desk to be signed into law.
  I yield back the balance of my time.
  Mr. Speaker, S. 3642, the ``Theft of Trade Secrets Clarification Act, 
will help ensure that American businesses can effectively protect their 
trade secrets. This legislation passed the Senate by unanimous consent 
last month and I am proud to support it today.
  S. 3642 responds to a recent federal court decision that exposed a 
gap in federal law.
  In April of this year, the Second Circuit Court of Appeals held that 
the federal statute prohibiting the theft of trade secrets does not 
apply to computer source code in some circumstances.
  In the Aleynikov case, the defendant, a computer programmer who 
worked for Goldman Sachs, electronically copied and remotely stored 
thousands of lines of source code for the company's internal, high-
frequency trading system and then downloaded that code to his new 
employer's server after leaving Goldman Sachs.
  The transfer of the source code would potentially save $10 million 
and two years of programmers' time for the new employer and would 
eliminate some of the competitive advantage Goldman achieved by 
developing their own trading program.
  Federal law prohibits the conversion of any trade secret that is 
related to or included in a product that is produced or placed in 
interstate or foreign commerce. Because the code that Mr. Aleynikov 
stole is a component of an internal computer system, the court found 
that it is not covered by the statute because it is not

[[Page 17304]]

produced for, or placed in, a product in interstate or foreign 
commerce.
  S. 3642 would close the gap exposed in the Aleynikov case by 
clarifying that the statute applies to both products and services which 
are used in or intended for use in interstate or foreign commerce.
  Congress needs to act quickly to enhance the ability of American 
businesses to safeguard the proprietary information they develop to 
gain competitive advantage. This is particularly important as our 
country's economy is increasingly knowledge and service-based.
  We must ensure that our statutes designed to prohibit the theft of 
trade secrets appropriately cover the range of intellectual property 
generated and used by our businesses.
  This bill is an important step to accomplish this goal, and I commend 
the gentleman from Vermont, Senator Leahy. I urge my colleagues to 
support this legislation today so that it can be sent to the 
President's desk to be signed into law.
  Mr. SMITH of Texas. Mr. Speaker, I yield back the balance of my time 
as well.
  Ms. JACKSON LEE of Texas. Mr. Speaker, I rise today in support of S. 
3642, the ``Theft of Trade Secrets Clarification Act of 2012,'' a bill 
that simply clarifies a provision of the Economic Espionage Act for the 
purpose of protecting American business and jobs.
  More specifically, S. 3642 would broaden language in the Economic 
Espionage Act so that it protects businesses from trade secret theft to 
the extent that it was originally intended to rather than the narrow 
scope applied by a recent Second Circuit court opinion.
  In United States v. Aleynikov (April 2012 decision), the Second 
Circuit overturned the conviction of a defendant who was found guilty 
of stealing computer code from his employer. The reason for this 
reversal was that the court determined that the theft of the trade 
secret did not meet the interstate commerce threshold delineated in the 
Economic Espionage Act.
  Even though the Defendant copied stolen code from his New York office 
to a computer server in Germany, downloaded the code in New Jersey, and 
then took the code with him to his new job in Illinois, the Second 
Circuit found that the stolen trade secret was not part of a product 
that was produced for or placed in interstate commerce and, therefore, 
was not the subject of this criminal provision of the Economic 
Espionage Act.
  Effective protection of intellectual property rights, including trade 
secrets, is essential for fostering innovation. Innovation typically 
requires substantial investment in education, research and development, 
and labor to bring a new idea to the marketplace.
  The fact that the stolen computer code, which was proprietary, was 
not produced to be placed in interstate commerce should not preclude a 
guilty verdict from being rendered.
  Businesses often spent time and money to develop their own 
proprietary software to be used internally; if others can steal their 
idea, it undermines the creator's ability to recoup the cost of his or 
her innovative investment, and the incentive to innovate is reduced.
  These innovations add value to the overall business, even if they are 
not commercial end-products themselves. The language contained in this 
bill will fix the problem so that trade secret thieves cannot take 
advantage of the loophole in the Economic Espionage Act.
  For that reason, I urge my colleagues to support S. 3642, the ``Theft 
of Trade Secrets Clarification Act of 2012.''
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Texas (Mr. Smith) that the House suspend the rules and 
pass the bill, S. 3642.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Mr. SCOTT of Virginia. Mr. Speaker, on that I demand the yeas and 
nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this question will be postponed.

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