The People, Respondent,v.Sergey Aleynikov, Appellant.BriefN.Y.March 27, 2018APL-2017-00078 To be argued by ELIZABETH ROPER (20 Minutes Requested) COVER Court of Appeals STATE OF NEW YORK THE PEOPLE OF THE STATE OF NEW YORK, Respondent, - against - SERGEY ALEYNIKOV, Defendant-Appellant. B R I E F F O R R E S P O N D E N T CYRUS R. VANCE, JR. District Attorney New York County Attorney for Respondent One Hogan Place New York, New York 10013 Telephone: (212) 335-9000 Facsimile: (212) 335-9288 HILARY HASSLER ELIZABETH ROPER DANIEL HOLMES JEREMY GLICKMAN ASSISTANT DISTRICT ATTORNEYS Of Counsel SEPTEMBER 8, 2017 TABLE OF CONTENTS Page TABLE OF AUTHORITIES .............................................................................................. ii INTRODUCTION................................................................................................................ 1 QUESTIONS PRESENTED .............................................................................................. 2 RELEVANT STATUTE ...................................................................................................... 2 STATEMENT OF THE CASE .......................................................................................... 3 THE EVIDENCE AT TRIAL .......................................................................................... 10 The People’s Case ..................................................................................................... 10 The Defense Case ..................................................................................................... 22 POINT I THE APPELLATE DIVISION CORRECTLY HELD THAT DEFENDANT MADE A “TANGIBLE REPRODUCTION OR REPRESENTATION” OF GOLDMAN SACHS’ SOURCE CODE BY UPLOADING AND SAVING IT ONTO A COMPUTER HARD DRIVE .................................................................... 24 POINT II THE APPELLATE DIVISION CORRECTLY CONCLUDED THAT THE EVIDENCE SHOWED DEFENDANT’S INTENT TO EXERCISE PERMANENT CONTROL OVER THE USE OF GOLDMAN’S SOURCE CODE ............................................................... 42 CONCLUSION ................................................................................................................... 55 -ii- TABLE OF AUTHORITIES FEDERAL CASES Almeida v. Holder, 588 F3d 778 (2d Cir. 2009) .............................................................. 52-53 Am. Online, Inc. v. St. Paul Mercury Ins. Co., 207 FSupp 2d (EDVA 2002)(aff’d, 347 F3d 89 (4th Cir 2003)) ........................................................ 38 Kremen v Cohen, 337 F3d 1024 (9th Cir 2003) .................................................................... 33 Librascope v. Libraphone, Inc., 314 F2d 580 (CCPA 1963) .................................................. 35 Reno v Koray, 515 US 50 (1995) ............................................................................................ 41 Smith v United States, 508 US 223 (1993) ............................................................................. 41 United States v. Aleynikov, 676 F3d 71 (2d Cir 2012) ...................................................... 6, 40 United States v. Bass, 404 US 336 (1971) .............................................................................. 41 United States v. Bottone, 365 F2d 389 (2d Cir 1966) ....................................................... 29-31 United States v. Dowling, 473 US 207 (1985) .......................................................................... 6 United States v Riggs, 739 FSupp 414 (ND Ill 1990) ........................................................... 40 United States v Zhang, 995 FSupp2d 340 (ED Pa 2014)..................................................... 40 STATE CASES In re Reinaldo O., 250 AD2d 502 (1st Dept 1998) ......................................................... 50-51 In re Shawn V, 4 AD3d 369 (2d Dept 2004) ...................................................................... 46 Majewski v. Broadalbin-Perth Cent. School Dist., 91 NY2d 577 (1998)................................. 27 People v. Aleynikov, 148 AD3d 77 (1st Dept 2017) ........................................................passim People v. Aleynikov, 49 Misc 3d 286 (NY Co Crim Ct 2015) (rev’d, 148 AD3d 77 (1st Dept 2017)) ........................................................... 8, 43-44, 48 People v Brigante, 186 AD2d 360 (1st Dept 1992) ............................................................... 45 -iii- People v Byron, 17 NY2d 64 (1966) ....................................................................................... 28 People v Ditta, 52 NY2d 657 (1981) ..................................................................................... 35 People v. Finley, 10 NY3d 647 (2008) ................................................................................... 28 People v. Golo, 26 NY3d 358 (2015) ..................................................................................... 27 People v Green, 68 NY2d 151 (1986) .................................................................................... 41 People v Guzman, 68 AD2d 58 (1st Dept 1979) .................................................................. 46 People v Jennings, 69 NY2d 103 (1986) ..................................................................... 45, 51-52 People v Kent, 19 NY3d 290 (2012) .................................................................... 31-33, 37, 39 People v Matthews, 61 AD2d 1017 (2d Dept 1978) ............................................................. 46 People v Montgomery, 39 AD2d 889 (1st Dept 1972) ........................................................... 46 People v. Ocasio, 28 NY3d 178 (2016)................................................................................... 28 People v Parker, 96 AD2d 1063 (2d Dept 1983) ................................................................. 46 People v Russo, 131 Misc2d 677 (Co Ct Suffolk Co 1986) ................................................. 28 People v. Versaggi, 83 NY2d 123 (1994) ......................................................................... 28, 35 People v. Williams, 19 NY3d 100 (2012) ............................................................................... 27 Thyroff v Nationwide Mut Ins Co, 8 NY3d 283 (2007) ........................................ 33-34, 37-38 FEDERAL: STATUTES, RULES, REGULATIONS, CONSTITUTIONAL PROVISIONS 8 U.S.C. § 1101(a)(43)(G) .................................................................................................... 53 Electronic Espionage Act, 18 USC §1832 ........................................................................... 6 National Stolen Property Act, 18 U.S.C. §2314 ............................................................ 6, 39 STATE: STATUTES, RULES, REGULATIONS, CONSTITUTIONAL PROVISIONS CPL §40.20(2)(f) ..................................................................................................................... 7 Penal Law Article 156 .............................................................................................. 31, 36-37 -iv- Penal Law §5.00 .................................................................................................................... 28 Penal Law §155.00(1) ........................................................................................................... 31 Penal Law §155.00(3) ...................................................................................................... 49-50 Penal Law §155.00(4) .......................................................................... 42-43, 45-46,49-54 54 Penal Law §155.00(6) ........................................................................................................... 34 Penal Law §156.00(2) ........................................................................................................... 31 Penal Law §156.00(3) ........................................................................................................... 31 Penal Law §156.30(1) ............................................................................................................. 7 Penal Law §156.35 ................................................................................................................ 31 Penal Law §165.07 ............................................................................... 1-2, 7-8, 26-29, 42, 45 OTHER AUTHORITIES Black’s Law Dictionary (9th Ed. 2009) ......................................................................... 28-29 Damon Stetson, Electronics Aids Chrysler Testing: Data From Moving Autos Are Stored on Tape, NY Times, Jan. 3, 1960, at 72 ....................................................... 36 Honeywell, Inc. v. Sperry Rand Corp., 180 USPQ 673 (D. Minn. 1973) ...................... 35 IBM To Put Out New “Think” Units, NY Times, Sept. 14, 1956, at 32 ............................ 36 Robert Bendiner, The Brain is Not Outmoded, NY Times, January 23, 1955, at 13 .................................................................................................. 36 Stacy V. Jones, IBM Unit Has a Large Memory, NY Times, Apr. 3, 1965, at 33 ......................................................................................................... 36 Steven McGeady, Policy Commentary: The Digital Reformation: Total Risk, Freedom, and Responsibility, 10 Harv. J. Law & Tec 137, 141 (1996) ........................... 35 COURT OF APPEALS STATE OF NEW YORK THE PEOPLE OF THE STATE OF NEW YORK, Respondent, -against- SERGEY ALEYNIKOV, Defendant-Appellant. BRIEF FOR RESPONDENT INTRODUCTION By permission of the Honorable Eugene M. Fahey, defendant Sergey Aleynikov appeals from an order of the Appellate Division, First Department, entered on January 24, 2017, unanimously reversing an order of the Supreme Court, New York County (Daniel P. Conviser, J.) rendered on July 6, 2015 and amended on July 7, 2015, which granted defendant’s motion for a trial order of dismissal and set aside the jury’s verdict convicting defendant of one count of Unlawful Use of Secret Scientific Material (Penal Law §165.07). The Appellate Division unanimously reversed that order, reinstated the jury’s verdict, and remanded the matter for sentencing. The trial court subsequently granted defendant’s request to adjourn sentencing pending the resolution of this appeal. Defendant has been at liberty throughout these proceedings. -2- QUESTIONS PRESENTED 1. Where the evidence unequivocally proved that defendant created a digital copy of his employer’s computer source code by saving it to a hard drive, where it physically resided, was the jury’s verdict convicting defendant of making a “tangible reproduction or representation” of the code based on legally sufficient evidence? The Appellate Division answered the question “yes.” 2. Was evidence proving that defendant illicitly and surreptitiously copied his employer’s source code, saved it to several computer devices, and later shared some of the code files with his new employer sufficient to prove that defendant intended to “appropriate the use of” the code? The Appellate Division answered the question “yes.” RELEVANT STATUTE Under New York Penal Law Section 165.07, a person is guilty of Unlawful Use of Secret Scientific Material (“Unlawful Use”) when: with intent to appropriate to himself or another the use of secret scientific material, and having no right to do so and no reasonable ground to believe he has such right, he makes a tangible reproduction or representation of such secret scientific material by means of writing, photographing, drawing, mechanically or electronically reproducing or recording such material. -3- STATEMENT OF THE CASE In 2009, defendant, a computer engineer, was a vice president in the stocks group at Goldman Sachs, making about $400,000 a year. He was tasked with writing and maintaining software relating to Goldman’s market-making, or high-frequency trading, business. In high-frequency trading, computers communicate with markets and financial institutions to make extremely fast decisions about trading stocks, options, and futures. It is a highly competitive and profitable business, and firms engaged in this kind of trading invest heavily in developing their software and maintaining its secrecy. That April, defendant accepted a position with a new high-frequency trading firm called Teza Technologies. Defendant was hired to create software for the high- frequency trading system Teza planned to develop. The firm hoped to be actively trading by December 2009, an ambitious goal given its complete lack of trading software. As compensation for creating the software needed to run Teza’s business, defendant would be paid $1.2 million per year, triple the amount he was making at Goldman. Defendant’s last day of work at Goldman was June 5, 2009. That day, shortly before the close of business, he ran a computer program he had written, entitled “backup,” on his work computer twice. Each time, the program selected thousands of designated proprietary files from Goldman’s source code repository and compressed them into files called “tarballs,” which defendant then encrypted. -4- Defendant uploaded the “tarball” files to a hard drive on a “subversion” computer in Germany, another type of source-code repository, where he had previously created an account. The files he chose to copy, transfer, and save included highly valuable programs that Goldman had developed over the course of decades, which would be helpful to a competitor trying to start a new high-frequency trading business. After running the script and making the transfer, defendant attempted to erase any record of it by deleting the program and the “bash history” on his work computer. The bash history houses the recent commands a user has run; there is no legitimate reason a user would delete it. Unfortunately for defendant, Goldman’s system periodically created a separate copy of each user’s bash history, and the commands detailing defendant’s conduct (as well as his attempt to delete those commands) had already been saved as a remote “snapshot” on Goldman’s servers. Approximately three weeks later, a routine internal audit by Goldman alerted the firm to the large data transfer – over 13 megabytes – made by defendant on June 5. As Goldman personnel investigated, they determined that defendant had also transferred files out of the network on June 1, 2009.1 Further investigation by Goldman unearthed the snapshot of defendant’s bash history, and the firm was able 1 Because of a pre-trial suppression ruling, as well as a ruling during trial precluding the People from calling a specific witness, relatively little evidence was introduced at trial regarding the June 1 transfer of data. The jury hung on the count arising from the June 1 transfer, and on appeal to the Appellate Division, the People did not seek reinstatement of that count, which was covered by Justice Conviser’s dismissal order. -5- to see the script that defendant had run on June 5. Re-running that script revealed exactly which files defendant had copied. Goldman’s employees saw that defendant’s unauthorized transfer included several valuable components of the firm’s high-frequency trading platform, which had taken years to develop at great expense to Goldman. All of the files defendant copied were proprietary to Goldman, and significant efforts had been made to safeguard their secrecy. If another firm learned Goldman’s trading strategies or, even worse, began to implement them, Goldman’s competitive edge would be blunted and their significant investment in developing this software would be in jeopardy. By the time Goldman learned of the illicit transfer of its files, defendant had already begun work at Teza. Although defendant had been at Teza for only a few weeks, he had already uploaded to Teza’s servers copies of some programs virtually identical to those he had copied from Goldman. A programmer comparing the files confirmed that the code on Teza’s server had been created using the copied Goldman code as a model. On July 3, 2009, FBI agents arrested defendant. That same day, after waiving his Miranda rights, defendant made a series of statements to FBI agents in which he initially denied copying any proprietary files from Goldman and claimed to have taken only “open source” materials. When confronted with the script he had run on June 5, defendant expressed surprise that agents had recovered his bash history, and eventually conceded that he had copied proprietary files and uploaded them to a -6- computer in Germany. Defendant also admitted having copied the code onto his home computer, his wife’s computer, a laptop, and a thumb drive. That day, agents seized several devices from defendant’s home; subsequent analysis revealed that, in addition to the server in Germany, the transferred files were also present on two of defendant’s desktop computers and a digital music player. In February 2010, a federal grand jury in the United States District Court for the Southern District of New York charged defendant with, inter alia, violations of the National Stolen Property Act, 18 U.S.C. §2314. He proceeded to trial in federal court and, on December 10, 2010, a jury convicted him as charged. On April 11, 2012, the United States Court of Appeals for the Second Circuit reversed defendant’s federal convictions.2 United States v. Aleynikov, 676 F3d 71 (2d Cir 2012). With respect to the National Stolen Property Act, the Second Circuit held that at the time the computer code was transmitted by defendant across state lines, it did not constitute “goods, wares, or merchandise” within the meaning of the federal statute. Because defendant did not transport a physical item, the court concluded, he did not violate the NSPA, which has as its “‘basic element’” the “‘taking of a physical thing.’” Id. at 77 (quoting United States v. Dowling, 473 US 207 (1985)). 2 The Second Circuit also set aside the defendant’s conviction based on a violation of the Electronic Espionage Act, 18 USC §1832. Defendant does not contend that the dismissal of the EEA charge is authoritative with respect to his state court conviction. -7- In September 2012, a New York County grand jury charged defendant with two counts of Unlawful Use of Secret Scientific Material (Penal Law §165.07) and one count of Unlawful Duplication of Computer Related Material in the First Degree (Penal Law §156.30(1)).3 After extensive pretrial motion practice, defendant proceeded to trial before the Honorable Daniel P. Conviser and a jury on April 8, 2015. At the close of the People’s case, defendant moved for a trial order of dismissal with respect to all counts. Defendant argued that the evidence was not sufficient to show (1) that he had made a “tangible reproduction” of Goldman’s computer code within the meaning of the Unlawful Use statute, absent proof that he had printed the code onto paper, and (2) that he had the intent to appropriate the use of the code, absent proof that he intended to deprive Goldman of over half the value of the code. In fact, the evidence plainly met the legal requirements of the Unlawful Use statute: there was abundant evidence that defendant “electronically reproduced” the code onto the German hard drive, making a tangible reproduction of it, and there was likewise ample proof that defendant intended to exercise permanent control over the use of the copied code. Justice Conviser reserved decision on the defense motion and, after a defense case was presented, submitted all three counts to the jury. The jury convicted 3 Defendant’s prosecution in New York County arose from the same conduct that was the basis for his federal indictment but was a permissible second prosecution under CPL §40.20(2)(f), as the trial court properly determined in its May 2, 2013 decision (Defendant’s Appendix: A102). -8- defendant of the count charging Unlawful Use of Secret Scientific Material committed on June 5, 2009, failed to reach a unanimous verdict on the same charge pertaining to defendant’s conduct on June 1, 2009, and acquitted him of Unlawful Duplication of Computer Related Material in the First Degree. On July 6, 2015, Justice Conviser set aside the jury’s verdict. People v. Aleynikov, 49 Misc 3d 286 (NY Co Crim Ct 2015)(rev’d, 148 AD3d 77 (1st Dept 2017)); RA2414.4 Justice Conviser framed the operative questions as (1) “whether [the] evidence was legally sufficient to demonstrate the source code was tangible” (Id. at 316; RA2450), and (2) whether the evidence sufficiently demonstrated that defendant “intend[ed] to obtain a majority of the full value of” Goldman’s high-frequency trading software, to the detriment of Goldman (Id. at 324; RA2460). Justice Conviser held that because the source code was not printed out onto paper, or “any medium outside a computer or thumb drive,” it was not “tangible” within the meaning of Penal Law §165.07 (Id. at 290, 315, 320, 323-24; RA2418, RA2499, RA2454; RA2458- 59). The trial court further held that because there was no evidence that defendant intended to diminish Goldman’s high-frequency trading profits by more than 50%, or obtain a profit for himself equal to that amount, the evidence of intent had been insufficient (Id. at 334-40; RA2471-75). 4 Numerical references preceded by the letters “RA” are to the Respondent’s Supplemental Appendix. -9- On January 24, 2017, the Appellate Division, First Department, unanimously reversed the trial court’s dismissal order (People v. Aleynikov, 148 AD3d 77 (1st Dept 2017); RA2486). The Appellate Division noted that the trial court erroneously framed the relevant questions as (i) whether the source code itself was tangible, rather than whether defendant’s reproduction of it was tangible (Aleynikov, 148 AD3d at 85; RA2499) and (ii) whether defendant intended to deprive Goldman of some portion of the code’s value (Id. at 89; RA2505-06). Observing that the proper inquiry was whether defendant made a tangible reproduction of the code, the Appellate Division held that defendant “unquestionably” did so when he copied the code onto the German server, “where it took up ‘physical space’ and was ‘physically present.’” Id. at 85 (internal citations omitted); RA2499. In making that determination, the Appellate Division noted that the fact that the reproduction was made onto a hard drive, and not a piece of paper, was “of no consequence,” and that the “trial court’s apparent belief that the source code had to have been printed on paper in order to be tangible [was] at odds with the language of the statute.” Id. at 86; RA2500. The Appellate Division further held that the Unlawful Use statute was drafted with “broad generalized language that fits squarely into today’s digital world.” Id. at 85; RA2500. With respect to the mens rea element, the Appellate Division recounted the evidence that defendant “surreptitiously uploaded the source code to the German server, downloaded it onto several personal computing devices, and then shared it with his new employer … [and] took multiple measures to cover up his illicit transfer -10- of data.” Id.; RA2505. Based on that, the Appellate Division concluded that defendant’s intent was to exercise permanent control over the use of Goldman’s source code, “as opposed to a short-term borrowing.” Id. The Appellate Division further concluded that the People did not have to prove “that defendant intended to acquire the major portion of the economic value or benefit of the source code,” or that defendant intended to deprive Goldman of the use of the source code. Id.; RA2505-06. As the court reasoned, “the unlawful use statute only requires the intent to ‘appropriate’ the use of the secret scientific material, and does not require any intent to ‘deprive.’” Id. Accordingly, the Appellate Division reinstated the jury’s sound verdict. THE EVIDENCE AT TRIAL The People’s Case In May 2007, defendant joined Goldman Sachs as one of about 30 computer programmers working on the firm’s high-frequency trading software (Schlessinger: RA233-35; WILLIAM WHALEN: RA656-57).5 High-frequency trading is a process 5 The evidence of defendant’s conduct at Goldman came mainly from his former Goldman colleagues, including ADAM SCHLESSINGER, who supervised the stock group (Schlessinger: RA234), PAUL WALKER, who was responsible for the data and software used in Goldman’s high-frequency trading business (Walker: RA441-42), KONSTANTIN SHAKHOVICH, a managing director in the “strats” group (Shakhovich: RA566), MARK FREEMAN, who was in charge of the source-code repository (Freeman: RA401-04), JOHN YANAGISAWA, who worked in Goldman’s “information security” section (Yanagisawa: RA57-58), and MOAZZAM ALI, who was in charge of overseeing Goldman’s computer system (Ali: RA123-24). -11- in which computers are used to trade stocks, options, and futures (Schlessinger: RA218-19, RA226). It requires computers to make very rapid decisions that generate trades and orders (Walker: RA443). High-frequency trading can be very lucrative. In 2009, Goldman made about $300 million from this business (Walker: RA465; Shakhovich: RA570). High-frequency trading is a “highly competitive environment” (Schlessinger: RA220), since many participants are vying for trades and prices that will allow their firms to profit (Walker: RA448-49). Firms engaged in high-frequency trading keep their software confidential because it contains algorithms that dictate, for example, how each firm prices stocks (Walker: RA455). Speed is particularly important because markets change rapidly and because every competitor is trying to take advantage of the same events and information at the same time (Schlessinger: RA225-26; Walker: RA447-48; Kumar: RA1203). Goldman took several steps to safeguard the secrecy of its high-frequency trading code, which represented “the infrastructure that a decade of experience ha[d] allowed [them] to create through tens or hundreds of developers working on it” (Walker: RA456). The programs copied by defendant gave Goldman a competitive advantage in the field (Walker: RA449-50; NAVIN KUMAR: RA1193), and their dissemination to a competitor could both financially harm Goldman and benefit that competitor (Schlessinger: RA220-21, RA279-80, RA286; Walker: RA460-62; Kumar: RA1219). -12- One key to successful high-frequency trading is the computer system’s “connectivity” (Walker: RA444). The system has to collect huge amounts of data about stock prices very quickly, so that the computer knows the price at “any given second” and can send orders to exchanges all around the world (Schlessinger: RA223, RA227; Walker: RA445). A second requirement is “business logic” – the algorithms the firm uses to make decisions about what to trade and at what price (Schlessinger: RA223, RA227; Walker: RA444-45). A third key component is the “infrastructure” that supports the system and keeps it running “robustly” throughout the trading day (Schlessinger: RA228; Walker: RA445). The high-frequency trading infrastructure that existed at Goldman in 2009 was based on a system the firm purchased in 1999, as part of its acquisition of Hull Trading. The purchase price of Hull Trading was around $450 million (Schlessinger: RA229). In the ten years after that acquisition, Goldman updated portions of its high- frequency trading software on a daily basis (Schlessinger: RA229). In addition, Goldman programmers wrote new pieces of software that were integrated into the system, sometimes over the course of several months or years (Kumar: RA1194). Defendant was assigned to the infrastructure section of Goldman’s stock group (Schlessinger: RA231-32, RA235). Like all Goldman’s programmers, he had access to the source code – computer instructions written in a human-readable format – that ran the firm’s high-frequency trading system (Schlessinger: RA235-36, RA307-09; Freeman: RA405). He did his work, in fact, by copying code from Goldman’s -13- repository, modifying it, testing it to see if his improvements worked, and then merging it with the firm’s production code so that it became part of the system in use (Schlessinger: RA289-90; Walker: RA452-53). However, like every other programmer, defendant was never allowed to copy Goldman’s source code outside of the Goldman network (Schlessinger: RA289-90; Freeman: RA421; Walker: RA454; Shakhovich: RA571). Every employee signed confidentiality and non-disclosure agreements that emphasized how important it was to the firm to protect its source code and keep secret the components of its trading system (Freeman: RA432, RA434-35; Walker: RA456, RA496-500). Employees were reminded of these policies every time they logged in to the system (Yanagisawa: RA67-70). If an employee wanted to work from home, he could use remote log-in access or a Goldman laptop so that all the code stayed within Goldman’s network (Yanagisawa: RA66; Freeman: RA436; Walker: RA453-54). Thus, there was never any reason for an employee to transfer files to himself outside the network (Schlessinger: RA254). Defendant’s initial salary with Goldman was $270,000 (Whalen: RA658). In 2008, after defendant said he was moving to another firm, Goldman convinced him to stay by raising his salary to $400,000 (Schlessinger: RA233, RA331). Only a few months later, in March of 2009, defendant entered employment negotiations with Teza Technologies, a startup high-frequency trading firm headed by Mikhail Malyshev (Schlessinger: RA239; DEMIAN KOSOFSKY: RA523-24, RA532, RA536, RA551). -14- Teza had no infrastructure, connectivity, or equipment at the time (Kosofsky: RA527). They hoped to build their own software “from scratch” and, despite having only five employees, be fully operational by late 2009 (Kosofsky: RA527-29, RA532- 533; Exhibit 39). Defendant was recruited to write software for the high-frequency trading system Teza hoped to create (Kosofsky: RA536; MICHAEL MCSWAIN: RA940, RA1079). Teza agreed to pay defendant $1.2 million annually, approximately three times what he was making at Goldman (Schlessinger: RA239; Walker: RA516). In April 2009, defendant once again announced he was leaving Goldman and would be joining a start-up high-frequency trading venture as “head of infrastructure” (Schlessinger: RA238-39). About a week before he left Goldman, defendant received a copy of an email from Malyshev (Kosofsky: RA531-34; Exhibit 39). In the email, entitled “Let’s move fast” (Exhibit 39), Malyshev told defendant and the other Teza employees: Gentlemen, It is now less than 6 months left to the system launch. Huge body of work ahead of us. We need the fastest and most scalable trading platform that will be our edge on the market. We need an analytics platform that will allow us [to] invent and develop new trading strategies. In combination these two will propel us ahead of [the] competition. I have no doubt that with the team that we are putting together we will become the best in the business. That being said, we have to focus. We are up against experienced and very wealthy competitors that are currently way ahead of us, and using their cash from last year to buy -15- their way out of tougher times ahead. We are better and smarter but we have to be moving full speed ahead to even catch up with them. So, let[’s] triple our focus, let’s execute relentlessly, and strive for excellence in everything we do. The future is ours to own and the game is already on. Let’s move fast. Defendant left Goldman as scheduled on June 5, 2009. Days later, Teza created a source-code repository account at svn.cvsdude.com, a website that allowed firms to share source code internally with registered users (JEREMY KIRKWOOD: RA397- 400; Exhibit 35). By June 25, 2009, defendant had placed some software in Teza’s repository, including code that could be used in high-frequency trading applications and that would be useful in setting up Teza’s new system (Kosofsky: RA539-44, RA562-65). A subsequent review of some of that code revealed that it had been modeled on certain Goldman programs copied by defendant (Kumar: RA1196-97). On June 30, 2009, Goldman’s information security section reviewed information collected by their monitoring systems (Yanagisawa: RA58, RA63). This system included a program designed to detect large amounts of data being transferred out of the network (Yanagisawa: RA63; Schlessinger: RA245). Because the program was new, however, there were not enough people in place to review the reports without delay (Yanagisawa: RA75, RA112-13; Schlessinger: RA245). Thus, it took a few weeks for the staff to review the report regarding two transfers of data that had occurred at 5:23 p.m. on June 5, 2009, defendant’s last day at Goldman (Yanagisawa: RA74-75; Ali: RA354). -16- The report showed that the information had been sent to a subversion server, which is a server designed to allow a user to copy and store computer source code remotely (Yanagisawa: RA76). Goldman security systems blocked access to many subversion services, but had missed this one (Yanagisawa: RA62-63, RA76, RA98), which was based in Germany (MIRKO MANSKE: RA1168-74; Exhibits 43A-43C). The monitoring report showed that the June 5 data transfer had been very large: 13 megabytes of data (Yanagisawa: RA87-88). The monitoring program listed the IP address from which the data had moved out of the firm (Yanagisawa: RA74). Checking the records, they found that it was defendant who had transferred the data (Yanagisawa: RA77). The IP logs also revealed an earlier transfer made by defendant, on June 1, 2009 (Yanagisawa: RA75, RA87). A subsequent search of the German subversion server later confirmed that a user – “saleyn” – had placed information on the server and then retrieved it (CANDACE HUNTER: RA710-12).6 A search of two computers and a digital music player found in defendant’s home revealed that all three contained data from Goldman (EUGENE CASEY: RA679-82, RA696, RA700; Hunter: RA703-06, RA710). 6 Defendant has used this particular username, consisting of his first initial and five letters of his surname, elsewhere. For example, defendant listed saleyn@gmail.com as his personal email address when he joined Goldman in 2007 and in his exit interview in 2009 (Whalen: RA657, RA671). -17- Examination of defendant’s computer at Goldman showed that he had written a program, or “script,” containing computer commands designed to compress and copy data from Goldman’s source-code repository (Yanagisawa: RA78; Schlessinger: RA249-50; Ali: RA342-47, RA357-65; Exhibit 13). His script, entitled “backup,” was a two-page program that listed more than 30 directories in the source-code repository containing thousands of files that would be compressed into two large files, or “tarballs,” when he ran the script (Schlessinger: RA247, RA254-58, RA269, RA272- 78, RA283-86; Freeman: RA418-19; Exhibit 13). Defendant ran the backup program two separate times, and then encrypted the resulting tarballs of source code and sent them out of Goldman’s network to the subversion computer in Germany (Yanagisawa: RA78; Schlessinger: RA249-50; Ali: RA342-47, RA357-65; Exhibit 13). The script had also been back-dated to make it seem two years older than it really was, which is not something that could happen accidentally (Schlessinger: RA252-53). The Goldman team investigating the source-code transfers looked at the bash history on defendant’s work computer, which normally keeps track of the last 1,000 commands typed into the computer (Ali: RA125-26). At first glance, it seemed that there was nothing in defendant’s bash history relating to the script or the data that was copied (Ali: RA131). However, when they looked at a back-up “snapshot” version of his computer saved on the Goldman network, they saw different commands that did tie directly to the June 5 source code transfers (Yanagisawa: RA79; Ali: RA131, RA340-42; Exhibits 2, 11). In fact, the snapshot revealed that defendant -18- had also entered a command to remove from the bash history on his computer all trace of the copying, which is why the commands were not discovered earlier (Ali: RA346-48). Although he was successful in removing the evidence of his copying from his computer, the information was nevertheless saved in the network’s back-up snapshot (Ali: RA349-50). When defendant was questioned by the FBI, he admitted that he had uploaded material from Goldman onto the German subversion server and then downloaded it to his home computer (McSwain: RA931-32, RA935, RA939, RA944). Defendant also admitted that he had found the German server and used it because it was not blocked by Goldman (McSwain: RA940). At first, defendant claimed that all he had taken from Goldman were two files, “AtomicInt” and “AsyncLogger” (McSwain: RA939, RA944). He said he had copied the code to inspect it, “much like a person in college would go back and read a paper” (McSwain: RA944-45). Later, when he learned his computers would be examined, defendant changed his story. He told the FBI that he had copied more Goldman files than he intended, and that those two files and “about five megabytes” of other data had ended up on his home computer (McSwain: RA943). Pressed further, he said he might have some files from the Goldman high-frequency trading library (McSwain: RA941, RA944). He also admitted that he had tried to erase his bash history because “what he uploaded out was in violation of Goldman’s security policy” (McSwain: RA945). -19- In a written statement, defendant once again claimed that he had intended his script to collect only “open source work” on which he had “previously worked” (McSwain: RA950; Exhibit 18). He said he did not realize he had taken more than he intended until he opened the files at home (McSwain: RA951-52). He also admitted, however, that he had deliberately erased his bash history and the encryption software he used to make the tarballs. He said he had copied the source-code files because he “wanted to inspect the work later in a more usable environment,” and claimed that he had not “shared” Goldman’s source code “with any person or corporation” (McSwain: RA951-52). In fact, analysis of defendant’s script showed that his claim that he had copied only open source files was not true. His script not only copied proprietary materials on which he had been working before his departure, but also several components created by other programmers (Schlessinger: RA258, RA270, RA273, RA283-85). Defendant’s script was designed specifically to copy code made for infrastructure and connectivity components, some of which took other programmers months, if not years, to create (Schlessinger: RA270, RA273, RA279, RA283-85; Walker: RA458; Shakhovich: RA573). This source code would have been very useful to anyone trying to replicate what Goldman had done to create a robust system. For a start-up company, it would have meant they “would have the answer in the back of the book from hundreds of people” who had worked on developing the system at Goldman (Walker: RA460-61). -20- Defendant’s script also targeted large parts of the valuation algorithms at the core of Goldman’s high-frequency trading system (Walker: RA457-58). Among the valuation algorithms it targeted and copied was the “theoretical value library” used to price options in Goldman’s high-frequency trading business (Walker: RA458). This code … contains the accumulated knowledge and experience of tens of man-years of development … [and] encapsulates a lot of [Goldman’s] experience and things that we have learned while developing this library and that could be quite useful to a competitor. … the code itself could serve as a blueprint for somebody [seeking] to build a similar operation. It also contains information about what our trading strategy is. It contains information about the assumptions we make about the relationships between the prices of different options and the competitor might choose to exploit that by tuning their strategy to kind of optimally [interact] or avoid interacting with ours (Shakhovich: RA573-74). Defendant’s script also copied a program called the “order book builder” or “OBB,” which read market data from stock exchanges and organized orders for the “trading applications” so the system could understand the state of the market (Schlessinger: RA277-78). Navin Kumar had written this program “from scratch” for Goldman in 2007 or 2008 (Schlessinger: RA279; Kumar: RA1188). He spent three months solving a single “subproblem” on this project, and it took him 18 to 24 months to finish the “overall project” (Kumar: RA1194). Kumar’s program was a “very high performance component” because of its speed (Kumar: RA1189-90). -21- Because it relied on very few other programs, OBB could easily be integrated into systems outside Goldman’s (Kumar: RA1190-91). A commercial equivalent capable of just some of OBB’s functions would have cost Goldman $4 million. Defendant had no role in the program’s development (Schlessinger: RA281-82). Densemap 1-D and Densemap 2-D were part of the OBB program. These programs kept track of pricing data (Kumar: RA1191, RA1196) and would have helped a new firm start trading more quickly (Schlessinger: RA280-81). Having an existing order book program available to use as reference would make it easier for someone to create a new high-frequency trading system (Kumar: RA1219). Anyone who got a copy of it would have “access to that technology without the same amount of investment” (Kumar: RA1192). A comparison of the code defendant had copied to Teza’s code repository with some of the material he copied from Goldman showed defendant had been lying when he said he had not “shared” Goldman’s source code (Chen: RA1162-63). In fact, in the first weeks after he left Goldman, defendant copied several Goldman files to Teza’s repository (Exhibits 52-56). Although he had made some minor modifications to the files, they involved matters like changing the email address of the “author” from defendant’s Goldman email address to his personal email address (Chen: RA1165-66). Kumar compared the source code he had written for Densemap 1-D and Densemap 2-D with source code defendant had copied to Teza’s repository (Kumar: -22- RA1196; Exhibits 36, 57-59). Although the code Teza obtained was not a “strict copy” of Kumar’s work for Goldman, it used the same design, which could not have happened had it been developed independently (Kumar: RA1196-97). In fact, there were roughly a dozen “design decisions” Kumar had made during the many months he spent on this work, and every single one was mirrored in code in Teza’s repository (Kumar: RA1198). Defendant thus not only intentionally copied proprietary materials, but also shared some of them with his new employer (Kirkwood: RA398- 400; Kosofsky: RA539-44, RA562-63; Chen: RA1162-67). The Defense Case Defendant called two witnesses: PETER FRIEDMAN, whose firm had recruited defendant to work at Teza (Friedman: RA1392), and MIKHAIL MALYSHEV, who owned Teza and hired defendant (Malyshev: RA1401). Teza had no trading infrastructure and did not have any high-frequency trading software (Malyshev: RA1405-07). Malyshev admitted that he had sent defendant and other employees the email expressing his desire that they get Teza up and running by December 2009 (Malyshev: RA1416; Exhibit 39). He claimed that this email was simply “a motivational talk” (Malyshev: RA1416). Malyshev wanted programmers to write Teza’s computer source code from scratch, so he looked for programmers who were “the best of the breed” (Malyshev: RA1401-02, RA1406-07). According to Teza’s recruiter, however, defendant’s $400,000 salary at Goldman put defendant at the “low end” of the pay scale for -23- programmers (Friedman: RA1396). Malyshev also said he had never wanted any Goldman code, that he did not think much of Goldman’s work in this field, and that he thought computer systems at Goldman and other banks “tend to be stale” (Malyshev: RA1407-08).7 Friedman and Malyshev said they never told defendant to copy Goldman’s high-frequency trading source code and bring it to Teza with him (Friedman: RA1394; Malyshev: RA1409). However, Malyshev admitted that he had agreed to pay defendant three times as much as he was making at Goldman, almost double the highest salary Malyshev offered any other programmer (Malyshev: RA1404, RA1420-21). Malyshev even agreed to defendant’s demand that Teza’s New York office be located close to his home, rather than more centrally to accommodate other employees. Teza fired defendant shortly after he was arrested (Malyshev: RA1422-23, RA1428). 7 Notably, Malyshev admitted that his former firm, Citadel, had sued him for violating his non-compete agreements. Although Citadel ultimately lost the case, Malyshev admitted that, during the suit, he violated a court order requiring him to preserve computer evidence related to the case by running “scrubbing software” on his computers and deleting certain active files. Malyshev also admitted that he lied under oath to the court twice about what he had done to his computers (Malyshev: RA1429-31). -24- POINT I THE APPELLATE DIVISION CORRECTLY HELD THAT DEFENDANT MADE A “TANGIBLE REPRODUCTION OR REPRESENTATION” OF GOLDMAN SACHS’ SOURCE CODE BY UPLOADING AND SAVING IT ONTO A COMPUTER HARD DRIVE (Answering Defendant’s Brief, Point I). To prove defendant’s guilt of Unlawful Use of Secret Scientific Material, the People were required to prove, among other things, that defendant made a tangible reproduction or representation of Goldman’s source code. The People’s proof readily established that element of the Unlawful Use statute. More specifically, the evidence showed that defendant twice ran a program on his last day of work at Goldman designed to copy thousands of proprietary Goldman files and compress them into files known as tarballs, which he then encrypted and transferred out of the Goldman network. Defendant did not just send these files into the ether; he created a copy of them on a subversion repository computer located in Germany, from which he would later access and download them to several of his own computer devices. The copies of the files that were saved on the German server were physically located on that server’s hard drive, which was eventually seized and analyzed. The analysis revealed evidence of defendant’s placement of Goldman’s computer code onto that hard drive – in other words, his creation of a physical, electronic copy of secret scientific material. On this appeal, defendant contends that his electronic reproduction of the source code on the computer in Germany was not a tangible copy. According to defendant, -25- the Unlawful Use statute may be used to prosecute only “the kinds of copies that were possible fifty years ago,” and is thus limited to reproductions made on paper (Def. Brief: 30). One can make an “electronic reproduction” within the meaning of the statute, defendant proclaims, only by using certain “publishing innovations” in existence in 1967, specifically the photocopier and the electric typewriter (Id. at 40). Defendant is demonstrably incorrect. As the Appellate Division properly determined, “there is no merit to defendant’s argument that the unlawful use statute could not have been intended to criminalize his conduct because it was enacted in 1967, long before the advent of the technology used by defendant to copy Goldman’s proprietary information.” Aleynikov, 148 AD3d at 86; RA2499-500. Indeed, the statute uses “broad generalized language that fits squarely into today’s digital world.” Id. Accordingly, noting that the “People and defendant are in essential agreement that the term ‘tangible’ means something having ‘physical form and characteristics,” (Aleynikov, 148 AD3d at 84-85; RA2497-98), the court quite reasonably concluded that the “physically present” copy of data made by the defendant on the German hard drive was a tangible reproduction within the meaning of the statute. Id. A. The evidence at trial demonstrated that the data copied by defendant to a hard drive had physical presence on that hard drive, and was a “tangible reproduction or representation” of information. For example, data that is sent and saved outside of a -26- network can be recovered or removed from the physical space where it was copied (Yanigasawa: RA101-03). Source code stored on a subversion company’s servers is physically located on those servers (Kirkwood: RA397). When source code is stored on a hard drive, it is “physical” and “it takes up space” (McSwain: RA1011). Source code can be “transferred,” “received,” and “stored on multiple different devices” (McSwain: RA1049). When computer files are stored on a hard drive or a CD, they are “physically present on that hard drive or CD” (Kumar: RA1199). In the case of a CD, data can even be visually perceptible “in the aggregate” (Kumar: RA1199). These types of “representations” of source code are concrete, even though the abstract code itself is intangible intellectual property (Kumar: RA1217). That evidence established that defendant copied and saved the source code in a way that gave it physical presence on the German server; in so doing, he “unquestionably made a tangible reproduction of it,” in plain violation of Penal Law Section 165.07. Aleynikov, 148 AD3d at 87; RA2499. Under Penal Law Section 165.07, a person is guilty of Unlawful Use of Secret Scientific Material when: with intent to appropriate to himself or another the use of secret scientific material, and having no right to do so and no reasonable ground to believe he has such a right, he makes a tangible reproduction or representation of such material by means of writing, photographing, drawing, mechanically or electronically reproducing or recording such secret scientific material. -27- (emphasis added).8 The statute criminalizes the reproduction or representation of material, as opposed to the physical taking of it, as is required by New York’s larceny statutes. See Donnino, Practice Commentary to Penal Law §165.07, McKinney’s Cons Laws of New York, p. 413 (1999)(in the absence of this statute, copying or otherwise reproducing proprietary information would not be a crime because it does not constitute a traditional “taking.”). Of course, the statute specifically requires that the reproduction of the protected material made by defendant be “tangible,” a word that is not defined in the Penal Law. But the application of settled principles of statutory construction guides the analysis. As an initial matter, courts are “obligated to interpret a statute to effectuate the intent of the Legislature.” Aleynikov, 148 AD3d at 84, quoting People v. Williams, 19 NY3d 100, 103 (2012); RA2496. In determining legislative intent, it is well-recognized that the clearest indicator is the text of the statute itself; courts are therefore obliged to “giv[e] effect to the plain meaning” of that text. Aleynikov, 148 AD3d at 84, citing People v. Golo, 26 NY3d 358, 361 (2015)(quoting Majewski v. Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 583 (1998)); RA2496. “We must ‘presume that lawmakers have used words as they are commonly or ordinarily employed, unless there is something in the 8 In his motion for a trial order of dismissal, defendant did not challenge the proof that he electronically reproduced Goldman’s source code, nor did he dispute that the code was “secret scientific material.” Those elements are not at issue on this appeal. -28- context or purpose of the [statute] which shows a contrary intention.’” Aleynikov, 148 AD3d 77 at 84 (quoting People v. Finley, 10 NY3d 647, 654 (2008)); RA2496-97. Complementing these principles, Penal Law Section 5.00 dictates that “the provisions herein must be construed according to the fair import of their terms to promote justice and effect the objects of the law.” Words contained in a statute should be given their “ordinary and usual meaning present in common usage and understanding.” People v Russo, 131 Misc2d 677, 679-80 (Co Ct Suffolk Co 1986)(applying this approach to Section 165.07); see also People v. Versaggi, 83 NY2d 123, 131 (1994)(“conduct that falls within the plain, natural meaning of the language of a Penal Law provision may be punished as criminal”); People v Byron, 17 NY2d 64, 67 (1966)(statutes may define crimes through the use of “ordinary terms to express ideas which find adequate interpretation in common usage and understanding”). Finally, when a word is not defined in the law, “dictionary definitions serve as ‘useful guideposts’ in determining the word’s meaning. Aleynikov, 148 AD3d at 84, quoting People v. Ocasio, 28 NY3d 178 (2016); RA2497. Black’s Law Dictionary defines “tangible” principally in a way that connotes physical form or characteristics (see Black’s Law Dictionary [9th Ed. 2009]): 1. Having or possessing physical form; CORPOREAL. 2. Capable of being touched and seen; perceptible to the touch; capable of being possessed or realized. -29- Black’s Law Dictionary [9th Ed 2009].9 Indeed, the requirement that the information assume a physical form is borne out by the enumerated means set forth in the Unlawful Use statute of making a “tangible reproduction or representation” – writing, photographing, drawing, and mechanically or electronically reproducing the material. Of course, the statute does not require that the copy be made onto paper; rather, it “proscribes making tangible reproductions or representations of secret scientific material not only by means of ‘writing, photographing, [and] drawing,’ but also by ‘mechanically or electronically reproducing or recording [the] material.’” Aleynikov, 148 AD3d at 86, quoting Penal Law §165.07; RA2500. Thus, rather than arbitrarily requiring that a defendant copy material onto paper (as the trial court found and as defendant continues to insist), the statute criminalizes tangible reproductions or representations regardless of the medium onto which they are memorialized, transposed, or stored. Although the plain meaning of the Unlawful Use statute is readily apparent from its plain language, the legislative history of the statute also supports the view that defendant’s conduct falls within the reach of the statute. The Legislative Annual proposing Penal Law Section 165.07 cites the 1966 decision in United States v. Bottone, 365 F2d 389 (2d Cir 1966) as illustrative of the need for the enactment of the 9 A third definition encompasses a more abstract meaning: “3. Capable of being understood by the mind.” Black’s Law Dictionary [9th Ed 2009]. But as the Appellate Division noted, the “People and defendant are in essential agreement that the term ‘tangible’ means something ‘having physical form and characteristics.’” Aleynikov, 148 AD3d at 84-85; RA2497-98. -30- Unlawful Use statute. N.Y.S. Legislative Annual, 1967, p. 20-21 (c. 791). The reference to Bottone bolsters the conclusion that the Legislature sought to criminalize misappropriations of intellectual property that were not traditional takings, but resulted in tangible reproductions of the protected material (regardless of the medium used to create the reproductions). In Bottone, the defendants stole microorganisms as well as photocopies of blueprints from Lederle Laboratories, with the intent to sell those materials abroad. United States v. Bottone, 365 F2d 389. Appealing from their convictions under the federal NSPA, the defendants argued, inter alia, that the photocopies they removed from the lab were not “stolen, converted, or taken by fraud,” because they (unlike the original blueprints) never belonged to Lederle. Id. at 393. Although the Second Circuit agreed that the original materials had not been stolen (“only the copies and notes moved in interstate commerce”), the court found that “it would offend common sense” to allow the defendants to escape liability “simply because the intangible information that was the purpose of the theft was transformed and embodied in a different physical object” which was then transported. Id. at 393-94. The convictions were thus upheld. Id. The court did, however, note a possible shortcoming of the law as it applied to intellectual property theft: “the statute would presumably not extend to the case where a carefully guarded secret formula was memorized, carried away in the recesses of a thievish mind and placed in writing only after a boundary had been crossed.” Id. at 393. New York’s Unlawful Use statute -31- filled this gap, making it a crime to create a tangible reproduction or representation of misappropriated intellectual property. As codified by the Legislature and in accordance with Bottone, liability does not depend on what type of “physical object” is used to create the reproduction. Other sections of the Penal Law support the conclusion that computer data can be tangibly reproduced in electronic format. Under Penal Law Section 10.00(8), to “possess” is defined as “to have physical possession or otherwise to exercise dominion or control over tangible property.” Penal Law Section 155.00(1) includes “computer data” or a “computer program” in the definition of “property.” The Penal Law section dealing with computer crimes makes clear that computer data and programs may be “possessed,” underscoring the fact that such data can assume “tangible” form. Penal Law §156.35. And, as the Appellate Division noted, Article 156 provides that computer data and computer programs can exist in a variety of forms “including magnetic storage media, punched cards, or stored internally in the memory of the computer.” Aleynikov, 148 AD3d at 85; RA2499; Penal Law §156.00(2),(3). New York state precedent also reflects the distinction between intangible intellectual property (the code itself) and tangible reproductions of such property (the reproduction of the code onto a hard drive). In People v Kent, 19 NY3d 290 (2012), the defendant was charged with possession of images and videos depicting the sexual abuse of children. The defendant had saved some of the files to his computer’s hard drive, whereas others were merely present in his internet cache, an area of the -32- computer where internet files are automatically stored (often unbeknownst to the user). There was no evidence that the defendant had knowingly saved the cached files, but they provided circumstantial evidence that he had previously viewed those images on the internet. Id. at 298-99. Thus, it was incumbent on the Court to resolve whether the defendant had possessed, i.e., exercised dominion and control over, all of the images, or merely those he knowingly downloaded and saved. With respect to the files that the defendant downloaded, this Court upheld the convictions for various counts of Promoting a Sexual Performance by a Child (Penal Law §263.15) and Possessing a Sexual Performance by a Child (Penal Law §263.16), because the defendant “downloaded and/or saved [the files], thereby committing them to the allocated space of his computer.” Id. at 304. The Court held that these acts of creating digital copies of the pornographic images were sufficient to show that the defendant exercised dominion and control over the property. Id. But, the Court reversed the convictions pertaining to the files that were merely present in the internet cache: those images were not “knowingly” possessed, in the absence of proof that the defendant “print[ed], download[ed], or sav[ed] them.” Id. at 301.10 The holding in Kent underscores the point that “intangible” information may become “tangible” when it is “downloaded and/or saved” by a user. Id. at 304. After 10 The Legislature subsequently amended Penal Law Section 263.16, and it now criminalizes both possessing and “knowingly access[ing] with intent to view” a sexual performance by a child. -33- all, in upholding the defendant’s conviction for possessing the digitalized pornographic images that were downloaded, the Court referenced the “tangibility of [the downloaded] image (i.e., its permanent placement on the defendant’s hard drive and his ability to access it later).” Id. The logic of Kent applies with equal force to the facts of this case. Notably, at defendant’s trial, People’s witness Navin Kumar drew a distinction similar to the one made by the Kent court: he distinguished files that exist in a computer’s volatile memory (and are not present on the hard drive) from saved files that are present in persistent storage (which exist physically on the hard drive) (Kumar: RA1219). Thus, when secret scientific material is only viewed or committed to memory, even with the intent to misappropriate it, there is no violation of the Unlawful Use statute. But when a defendant, with the requisite intent, copies the material in a way that gives it physical presence on a computer or other electronic device, he makes a “tangible reproduction or representation” of the material within the meaning of the statute. Espousing the sensible view that digital copies of material should be treated the same as paper copies, this Court upheld a conversion action involving electronic data. Thyroff v Nationwide Mut Ins Co, 8 NY3d 283 (2007). In doing so, the Court observed that “[i]t would be a curious jurisprudence that turned on the existence of a paper document rather than an electronic one.” Id. at 292, quoting Kremen v Cohen, 337 F3d 1024 (9th Cir 2003). With respect to saving files onto a computer’s hard drive, the Court noted that “we cannot conceive of any reason in law or logic why [the] process -34- of virtual creation should be treated any differently from production by pen on paper or quill on parchment.” Id. at 291. B. There is no question that by uploading and copying Goldman’s source code to the German server, defendant created a tangible electronic reproduction of it, as proscribed by the Unlawful Use statute.11 Unable to counter the plain language of the Unlawful Use statute or the relevant New York state authority on the subject – all of which support the Appellate Division’s reinstatement of the jury’s verdict – defendant resorts to misdirection, and advances the nonsensical notion that the Legislature intended to limit the phrase “tangible reproduction or representation” to copies made onto paper. But, as noted above, the Unlawful Use statute was enacted to address the unauthorized reproduction of certain specific types of data and information – what the Legislature defined as “secret scientific material.” Penal Law §155.00(6). The Legislature was concerned that the misappropriation of intellectual property would often not fall within the ambit of the larceny statutes, which require the taking or asportation of an item, not the illicit reproduction of information. See N.Y.S. Legislative 11 Defendant characterizes computer data as “invisible and unperceivable” (Def. Brief: 29, 30). This is at odds with the evidence at trial as well as common sense. The proof was clear that the data existed on the hard drive in a physical, perceptible, and readable format – indeed, witnesses defined source code as “human readable commands” (Freeman: RA405; McSwain: RA1011). And, of course, for software to work, it must be read by a computer. -35- Annual, 1967, p.21 (c. 791). Contrary to defendant’s position, there is nothing to indicate that the Legislature sought to narrow the scope of the Unlawful Use statute specifically to reproductions made onto paper – in fact, it is hard to imagine how logic would support such a limitation. This is exactly the sort of “strained interpretation[]” of a penal statute that New York eschews. People v Versaggi, 83 NY2d 123, 131 (1994), quoting People v Ditta, 52 NY2d 657, 660 (1981). Instead, the Legislature used “broad generalized language” (Aleynikov, 148 AD3d at 86; RA2500) to catalog the ways in which a defendant could make a tangible reproduction or representation under the statute, and included “electronically reproducing or recording” among them. The Appellate Division correctly dismissed defendant’s “originalist” argument as pure sophistry: the court noted that the year the statute was passed was “not dispositive of this appeal” and went on to hold that the language of the statute was deliberately broad and encompassed the electronic reproduction created by defendant. Aleynikov, 148 AD3d at 86; RA2499-2500. Moreover, defendant’s contention that the only types of electronic reproductions possible in 1967 were Xerox copies and typewritten copies is simply untrue; it is well-established that the digital storage of information began well before 1967.12 Indeed, the Legislature accounted for it by 12 Digital computers were in use as early as the 1940s. See, e.g., Honeywell, Inc. v. Sperry Rand Corp., 180 USPQ 673 (D. Minn. 1973)(resolving a dispute over a 1947 patent for electronic data processing equipment); Librascope v. Libraphone, Inc., 314 F2d 580 (CCPA 1963)(resolving trademark claim by manufacturer of computers and data recording equipment); Steven McGeady, Policy Commentary: The Digital Reformation: Total Risk, Freedom, (Continued…) -36- specifically including electronic reproductions and representations in the Unlawful Use statute. Next, defendant suggests that the statute was somehow abrogated by the passage of Penal Law Article 156: Offenses Involving Computers (Def. Brief: 12-13). To be sure, Article 156 criminalizes a range of offenses involving computers including, for example, unauthorized access to computer networks and related conduct. In defendant’s view, by the time Article 156 was enacted in 1986, the Legislature had finally realized that information could be reproduced on something other than a piece of paper, and thus “dispensed with any tangibility requirement,” a sure sign that the Unlawful Use statute was never meant to criminalize the duplication of computer data (Def. Brief: 13; 40-42). This argument is easily dispatched because it ignores the fact that Article 156 criminalizes entirely different conduct than the Unlawful Use statute. The Unlawful ______________________ (…Continued) and Responsibility, 10 Harv. J. Law & Tec 137, 141 (1996)(referring to 1996 as the 50th anniversary of the digital electronic computer). Electronic storage of data was likewise possible well before 1967. See, e.g., Robert Bendiner, The Brain is Not Outmoded, NY Times, January 23, 1955, at 13 (describing the proliferation of electronic computers, noting a computer’s ability to store a vocabulary of Russian and English words in its “memory”); IBM To Put Out New “Think” Units, NY Times, Sept. 14, 1956, at 32 (announcing IBM’s release of the Random Access Memory Accounting Machine, which stored information “in a stack of electromagnetic disks”); Damon Stetson, Electronics Aids Chrysler Testing: Data From Moving Autos Are Stored on Tape, NY Times, Jan. 3, 1960, at 72 (describing the storage of data on magnetic tape, and the recovery of the data by electronic computers); Stacy V. Jones, IBM Unit Has a Large Memory, NY Times, Apr. 3, 1965, at 33 (announcing IBM’s patent for its “data cell drive,” an external storage device on which “[b]illions of letters and numbers can be stored on magnetic strips and automatically read off when they are needed”). -37- Use statute deals with the misappropriation of trade secrets. As noted, it specifically applies by its plain language to the electronic reproduction or representation of “secret scientific material.” In contrast, Article 156 is designed to prohibit “the unethical and illegal use of computers.” N.Y.S. Legislative Annual, 1986, p.233 (c.514). Of course, in some circumstances, a defendant might be guilty of both Unlawful Use and an Article 156 crime, an unremarkable circumstance in criminal prosecutions. This does not mean, however, that the passage of the newer statute voided the older one. Defendant’s analysis of other legal precedent is similarly flawed. Asserting that the Appellate Division’s decision “intru[des] upon the Legislature’s province” and “disregards prior decisions of this Court” (Def. Brief: 25), defendant mischaracterizes Thyroff and Kent and cites primarily federal and out-of-state authorities (which happen to be consistent with the Appellate Division’s holding) to bolster his misguided argument. As discussed above, this Court in Thyroff recognized that the law should treat digitally-stored information the same as information stored on paper. As such, the Court held that the theft of digitally-stored information could be the subject of a civil action for conversion. Thyroff v. Nationwide Mut. Ins., 8 NY3d 283, 291-292 (2007). Defendant mistakenly asserts that, because the Court used the word “intangible” to describe the data at issue in Thyroff, the holding was that “computer data ‘stored on [a] computer hard drive[]’ is ‘intangible property’” (Def. Brief: 26). But that argument -38- reveals a persistent flaw in defendant’s logic which has been on display throughout these proceedings: defendant conflates the concept of intangible information with tangible reproductions or representations of information. As the Appellate Division stated, “Defendant’s reliance on [Thyroff] is misplaced … it does not appear that the parties in Thyroff litigated the question of whether electronic data is tangible or not. In any event, the fact that the Court described electronic data as ‘intangible’ does not undermine our conclusion here. Regardless of whether the source code itself is intangible, defendant unquestionably made a tangible reproduction of it, within the meaning of the unlawful use statute.” Aleynikov, 148 AD3d at 87; RA2502. Ignoring the distinction between intangible information and tangible representations of such information, defendant also relies on a series of decisions in federal insurance cases, including Am. Online, Inc. v. St. Paul Mercury Ins. Co. (207 FSupp 2d 459 (EDVA 2002)(aff’d, 347 F3d 89 (4th Cir 2003)) for the proposition that computer data is intangible (Def. Brief: 26, 28). Seizing on the fact that the court in Am. Online used the word “intangible” to describe computer data, defendant ignores the court’s observation that there was little to distinguish a paper representation from a digital one: “Similar to the information written on a notepad, or the ideas recorded on a tape, or the design memorialized in a blueprint, computer data, software, and systems are intangible items stored on a tangible vessel.” Am. Online, Inc. v. St. Paul Mercury Ins. Co., 207 FSupp 2d at 468. Of course, defendant’s argument is premised on the notion that writing information onto a notepad would -39- result in a tangible reproduction, while copying the same information in digital form onto a computer would not. But as this decision and others make clear, defendant is relying on a distinction without a difference: abstract information can be reduced to physical form in any number of ways, including writing it on a notepad or electronically copying it onto a computer. Defendant also strains to distinguish this Court’s decision in Kent by asserting that the Court’s holding – that certain images digitally stored by the defendant were knowingly possessed by him – was premised on the “view that while [a] hard drive itself is tangible, the digital images saved to it are not” (Def. Brief: 32). In fact, the Court specifically recognized the “tangibility” of an image as “its permanent placement on the defendant’s hard drive and his ability to access it later,” supporting the common-sense conclusion that a digitally-stored file has physical presence and is tangible. People v. Kent, 19 NY3d at 302. As the Appellate Division correctly observed, “Kent supports our conclusion that a ‘tangible reproduction or representation’ of source code is made when it is saved to a physical medium, such as a hard drive.’” Aleynikov, 148 AD3d at 87; RA2502. Unable to shore up his arguments based on New York state precedent, defendant attempts to equate this proceeding with his federal prosecution. Defendant remarkably claims that, in reinstating the verdict convicting him of Unlawful Use, the Appellate Division “parted ways with” the federal court (Def. Brief: 27-28). But defendant was charged in federal court with a violation of the National Stolen -40- Property Act, 18 USC §2314, a statute with different elements than New York’s Unlawful Use statute. The NSPA applies to the transportation, transmittal, or transfer of stolen property across state lines and has no application to the creation of tangible reproductions or representations of intellectual property. The Second Circuit’s holding was based on its determination that the code defendant misappropriated from Goldman was not in tangible form at the time of its transfer across state lines (United States v. Aleynikov, 676 F3d 71 (2d Cir. 2012). The Second Circuit did not have any occasion to address the question of whether the reproduction of the code defendant ultimately uploaded to the German server was tangible.13 As the Appellate Division observed, “the Second Circuit’s interpretation of the federal statute, which has different elements from the unlawful use statute here, has no bearing on whether the trial evidence was sufficient to sustain the jury’s verdict.” Aleynikov, 148 AD3d at 87-88; RA2503. Finally, defendant seizes upon the 2013 report of the New York State White Collar Crime Task Force (“the Report”), and insists it absolves him of criminal liability. More specifically, defendant claims that his conduct must not have been proscribed by the Penal Law, because the Report “recommended that the Legislature revise the Penal Law to eliminate the requirement of a tangible reproduction or 13 It bears note that some federal courts have, in fact, held that electronic reproductions of data on hard drives or other devices are tangible under the NSPA. See United States v Riggs, 739 FSupp 414 (ND Ill 1990), United States v Zhang, 995 FSupp2d 340 (ED Pa 2014). -41- representation” (Def. Brief: 30-31; Def. Compendium: 256). This is a complete non- sequitur and, more importantly, is untrue. The Report did not address the Unlawful Use statute and did not recommend the elimination of the “tangible reproduction or representation” element of that statute. Instead, the Report advocated that the larceny statute be updated so that defendant’s conduct could be prosecuted as a higher-level felony. *** In sum, the evidence conclusively established that defendant made a tangible reproduction of Goldman’s code that existed in physical form on the German server. His argument that this was not a “tangible” reproduction is misguided and without merit.14 14 Defendant also contends that the mere fact that the trial court granted his motion to dismiss means that the trial court’s interpretation of the statute is “plausible,” and that defendant is entitled to a reversal under the “rule of lenity” (Defendant’s Brief, Point III). Defendant is mistaken. The “rule of lenity,” a common law doctrine known as “strict construction,” directs courts to construe statutory ambiguities in favor of the accused. But as the rule itself provides, it applies only when, “after ‘seiz[ing] everything from which aid can be derived,’” a court is “left with an ambiguous statute,” Smith v United States, 508 US 223, 239 (1993)(citing United States v. Bass, 404 US 336, 347 (1971)); see also People v Green, 68 NY2d 151 (1986); Reno v Koray, 515 US 50, 64-65 (1995)(“statute not ambiguous for purposes of lenity merely because there is a division of judicial authority over its proper construction”)(internal quotations and citation omitted); Smith v United States, 508 US 223, 239 (1993)(“mere possibility of articulating a narrower construction … does not by itself make the rule of lenity applicable”). There is nothing ambiguous about the Unlawful Use statute, nor does defendant point to any ambiguity in it. Thus, the “rule of lenity” has no bearing on this appeal; the Appellate Division was correct to dismiss this argument as “unavailing.” Id. at 89; RA2506. -42- POINT II THE APPELLATE DIVISION CORRECTLY CONCLUDED THAT THE EVIDENCE SHOWED DEFENDANT’S INTENT TO EXERCISE PERMANENT CONTROL OVER THE USE OF GOLDMAN’S SOURCE CODE (Answering Defendant’s Brief, Point II). Under Penal Law Section 165.07, the People were required to prove that the defendant intended to appropriate the use of the Goldman source code, which he uploaded to a server in Germany and later downloaded to several personal devices. Penal Law Section 155.00(4) defines “appropriate,” and states that: To appropriate property of another to oneself or a third person means (a) to exercise control over it, or to aid a third person to exercise control over it, permanently or for so long a period or under such circumstances as to acquire the major portion of its economic value or benefit, or (b) to dispose of the property for the benefit of oneself or a third person. The evidence at trial plainly showed that defendant intended to exercise control permanently over the use of the Goldman source code. On June 5, 2009, minutes before his employment at Goldman was due to end, defendant twice ran the script he had created on his work computer. The script was carefully designed to select and copy thousands of files including valuable parts of Goldman’s proprietary high-frequency trading infrastructure. Defendant then encrypted the files and sent them to one of the few subversion servers that Goldman’s security had inadvertently failed to block. Defendant deleted temporary directories created when the -43- program ran and also erased his bash history, believing this would conceal what he had done. Later, defendant downloaded Goldman’s proprietary code from the subversion server onto his home computer, his wife’s home computer, and a digital music player. Moreover, after securing the code on his personal devices, defendant uploaded nearly identical copies of certain Goldman programs to his new employer’s servers, claiming them as his own work. When questioned later about his conduct, defendant repeatedly changed his story with respect to what he had taken, and what he intended to take, further attempting to conceal what he had done: intentionally copied proprietary material, saved it onto multiple devices, and shared it with his new employer. Based on that evidence, the jury property concluded that defendant reproduced Goldman’s secret scientific material with the intent to exercise control over its use, and to do so permanently. Nonetheless, the trial court set aside the jury’s verdict, focusing entirely on the part of the definition of “appropriate” that refers to the intent to acquire property “for so extended a period or under such circumstances as to acquire the major portion of its economic value or benefit.” Penal Law §155.00(4). According to the trial court, proof that the defendant intended to acquire the use of the code permanently was not enough; the People were required to prove that defendant also intended to acquire “the major portion of [the source code’s] economic value or benefit.” People v. Aleynikov, 49 Misc 3d 286, 326 (NY Co Sup Ct 2015), rev’d, 148 AD3d 77 (1st Dept 2017); RA 2471, 2473. In the trial court’s view, “‘[w]hether the appropriator got the major portion of the -44- economic value or benefit of property can only be determined by measuring what he got against the whole … and determining if it was more than he left behind.’” Id., quoting Defendant’s Motion to Dismiss (Apr. 27, 2015); RA2464. The Appellate Division unanimously reversed the trial court’s order, holding that the evidence readily supported a finding “that defendant intended to exercise permanent control over the use of Goldman’s source code, as opposed to a short-term borrowing.” Aleynikov, 148 AD3d at 89; RA2505. In doing so, the Appellate Division observed that the People were not required also “to prove the second prong of the definition of ‘appropriate,’ i.e., that defendant intended to acquire the major portion of the economic value or benefit of the source code.” Aleynikov, 148 AD3d at 89; RA2505-06. The Appellate Division also correctly noted that there was no requirement under the statute that the defendant intend to deprive Goldman of anything: “The unlawful use statute only requires the intent to ‘appropriate’ the use of the secret scientific material and does not require any intent to ‘deprive.’” Id.; RA2506. On this appeal, defendant seeks to revive the trial court’s misguided interpretation of the mens rea element. Overlooking the fact that the Unlawful Use statute refers to the intent to appropriate the use of copied material by reproducing it, defendant argues that because his “digital duplication was not intended to and did not deprive Goldman of a single line of source code or a single dollar of profit” (Def. Brief: 45), he did not have the requisite intent. Although defendant concedes that he “intended to permanently retain” the electronic reproduction he made of Goldman’s code, he nevertheless asserts -45- that he should escape liability because Goldman “continued to earn all the money it would otherwise have earned with its HFT system.” (Def. Brief: 53). Defendant’s reading of the intent element is entirely inconsistent with the plain language of both the Unlawful Use statute and the Penal Law definition of “appropriate.” The Appellate Division correctly noted that the evidence demonstrated defendant’s intent to exercise permanent control over the code’s use, and the People “were not required to prove … that defendant intended to acquire the major portion of the economic value or benefit of the source code.” Aleynikov, 148 AD3d at 89; RA2505-06. And, contrary to defendant’s position, the Unlawful Use statute refers exclusively to the intent to appropriate, and “does not require any intent to ‘deprive.’” Id.; RA2506. Based on the ample evidence that defendant intended to acquire permanent use of the source code, the Appellate Division properly reversed the trial court’s order of dismissal. A. A review of the relevant statutes demonstrates that the Appellate Division was correct in its interpretation of the mens rea element of Unlawful Use. Taken together with Penal Law Section 155.00(4), which defines “appropriate,” the intent element of Penal Law Section 165.07 requires a purpose to exert “permanent or virtually permanent” control over the use of the property that the defendant reproduces. People v Jennings, 69 NY2d 103, 118 (1986); Donnino, Practice Commentary to Penal Law §165.07, McKinney’s Cons Laws of New York, p. 166 (1999); see also People v Brigante, -46- 186 AD2d 360 (1st Dept 1992) (for larceny, the act “must contemplate a substantially permanent appropriation of the property”); People v Guzman, 68 AD2d 58, 62 (1st Dept 1979)(for larcenous intent, the goal must have been “a permanent appropriation,” not a “temporary taking”). The clause of Penal Law Section 155.00(4) that refers to exercise of control over property “for so extended a period or under such circumstances as to acquire the major portion of its economic value or benefit” is, in other words, meant to distinguish theft “from a ‘borrowing’ type of intent to obtain temporary use or cause temporary loss.” People v Parker, 96 AD2d 1063, 1065 (2d Dept 1983); see also In re Shawn V, 4 AD3d 369, 370 (2d Dept 2004)(“The mens rea element of larceny is simply not satisfied by an intent to temporarily take property without the owner’s permission”); People v Matthews, 61 AD2d 1017 (2d Dept 1978) (defendant drove off in one his former boss’s cars, but drove it to the police station the next day); People v Montgomery, 39 AD2d 889 (1st Dept 1972)(defendant drove off in a cab to escape the scene of a crime but abandoned cab after only a short drive). Defendant’s conduct here plainly did not fall into the “narrow set of circumstances” at play in the “joy-riding” line of cases. Indeed, the evidence presented at defendant’s trial left no room for doubt that defendant’s goal was a permanent appropriation of the use of Goldman’s source code and not simply a short-term borrowing of its use. First, defendant ran his script two separate times, making his copies of Goldman’s secret scientific material late in the afternoon on his very last day of work there (Yanagisawa: RA74-75; Ali: RA354). At -47- that point, he plainly knew that he would be surrendering his access to Goldman and its computer network in short order and that he, therefore, would be unable to “return” the material without revealing that he had copied it in the first place. And, he clearly never intended his copying of the code to come to light. After all, he not only made unauthorized copies of thousands of Goldman files, but he also took every step imaginable to hide his misconduct and keep it permanently secret. Defendant encrypted the tarball files so they could not be read by Goldman’s system (Yanagisawa: RA78). He back-dated his script to make it seem two years older than it was (Schlessinger: RA252-53), deleted the temporary directory created by the program, deleted his encryption software and script and wrote in commands to remove all traces of his code-copying from the bash history on his computer (Ali: RA346-48; McSwain: RA941, RA944, RA951, RA1068). Plainly, defendant was not planning to return the copies he made and intended that his reproduction of the code would go forever undetected. Second, defendant’s conduct in the wake of uploading the code onto the German server further confirmed that his intent was to appropriate the use of Goldman’s secret scientific material permanently. After all, when he downloaded the copied files from the German server, he did not simply place them on a single device to “study” them for a brief time before returning them. Instead, as he later admitted, he saved the copied code to his home desktop computer, his laptop computer, a thumb drive, his wife’s computer, and a digital music player (McSwain: RA939, -48- RA941-44, RA951; Hunter: RA705-06, RA710). Moreover, defendant also copied several Goldman files to Teza’s code repository server after making minor modifications intended to obscure the fact that the source code belonged to Goldman and not to him (Chen: RA1165-66; Exhibits 52-56). The sole inference to be drawn from that proof is that defendant intended to control the use of Goldman’s source code permanently. Third, although defendant tried to whitewash his conduct with false exculpatory statements when he was caught, he never suggested that he planned to return the secret scientific material or control its use for only a brief period. To the contrary, he acknowledged that his intent had been to “study” Goldman’s source code and “to inspect the work later in a more usable environment” (McSwain: RA951-52). At trial, the defense “acknowledged that [defendant] made copies of the sections of Goldman Sachs’ source code he thought could be helpful to him in building Teza’s high-frequency trading platform.” People v. Aleynikov, 49 Misc 3d at 389; RA2418. And defendant concedes that he “intended to permanently retain” the thousands of copied files (Def. Brief: 53). As the Appellate Division held, this evidence was sufficient to prove the defendant’s intent to exercise permanent control over the use of the code, rather than to borrow it for a short period of time. B. Defendant does not seek to refute any of this evidence, but nevertheless attacks the Appellate Division’s findings as “wrong on their face.” The Appellate Division’s -49- holding, according to defendant, conflicts with what he calls “the settled fact that every ‘appropriation’ entails a ‘deprivation’” (Def. Brief: 45). But this “settled fact” is contradicted by the Penal Law itself, which defines “appropriate” and “deprive” separately (Penal Law §§155.00[3] and [4]). The Unlawful Use statute refers exclusively to the intent to appropriate, with no mention of the intent to deprive. Defendant claims that he did not intend to appropriate the code’s use because he did not “remove the use of that code from Goldman’s control” (Def. Brief: 52). Defendant is mistaken; his intent to exercise permanent control over the use of Goldman’s code establishes his guilt of the mens rea element of the Unlawful Use statute without anything more. Defendant’s argument is premised, in part, on his apparent belief that he was convicted of a larceny (Def. Brief: 2-3, 5-6, 15, 46, 53). He asserts that “[i]n the typical larceny case, the property at issue is indivisible,” but where the property is “divisible,” the People acquire an additional burden – to prove that defendant intended to cause financial loss. Id. at 53. Therefore, defendant claims, the People were required to prove not just that he intended to exercise permanent control over the use of the code, but also that he intended to cause a financial loss to Goldman.15 15 It is worth noting that defendant’s complaint that the People “never established the value of the source code [he] transferred” (Def. Brief: 18) is untrue. The People’s evidence showed that the HFT infrastructure, of which the copied code was a part, was purchased as part of a $450 million acquisition (Schlessinger: RA229); that the value of Order Book Builder (OBB) alone was between $3 million and $5 million (McSwain: RA1094; Schlessinger: RA281- (Continued…) -50- Id. But that argument collapses when examined against the statute defendant violated. First, defendant was convicted of Unlawful Use of Secret Scientific Material, which prohibits the reproduction of secret computer code but does not require proof of the traditional “taking” at the heart of every larceny. Moreover, the People were not required to prove that defendant exercised permanent control over the source code itself but rather that he exercised permanent control over the use of computer source code, a point defendant effectively concedes in his brief. Measured against the statutory requirements, then, it does not matter that Goldman retained the use of its own code even after defendant copied it. Indeed, this is exactly the sort of criminal conduct contemplated by the Unlawful Use statute. Nor does In re Reinaldo O., 250 AD2d 502 (1st Dept 1998), a case on which defendant relies, advance his claim. In Reinaldo O., the Appellate Division upheld a juvenile delinquency adjudication for the commission of grand larceny where a thief stole a credit card, wrote down the number, and returned the card; the court held that the defendant intended to “appropriate” the credit card because he acquired the credit ______________________ (…Continued) 82, Kumar: RA1218-20); that specific components copied by defendant were valuable on their own (Schlessinger: RA269–86; Walker: RA458, RA460; Shakhovich: RA549, RA571-74, RA576); and that the value of the code lay partially in its exclusivity to Goldman (Schlessinger: RA220-21, 230; Freeman: RA409; Walker: RA455-56, RA460-61; Kosovsky: RA548-49). When defendant copied Goldman’s code onto the German server, and later to Teza’s servers, he deprived Goldman of the exclusive possession and use of the code, a significant aspect of its worth (Schlessinger: RA220-21, RA230; Freeman: RA409; Walker: RA455-56, RA460-61; Kosovsky: RA548-49). -51- card number, allowing him to make purchases up to the credit limit. In re Reinaldo O., 250 AD2d at 503. From this holding, defendant extrapolates that, to prove the intent element at defendant Reinaldo’s trial, the People were required “to prove that [Reinaldo] intended to acquire at least the major portion of [the line of credit]” (Def. Brief: 53). But in Reinaldo O., the Appellate Division did not engage in any type of “comparative analysis” between the credit limit and the amount charged on the card. Rather, the intent to appropriate was proven simply by the fact that the defendant had access to the full credit limit. Reinaldo O., 250 AD2d at 502. Reinaldo O. demonstrates that a defendant can intend to appropriate property that an owner still retains – in short, it stands in complete opposition to defendant’s position. Defendant also cites People v. Jennings, 69 NY2d 103 (1986), in an effort to establish that “every ‘appropriation’ entails a ‘deprivation.’” (Def. Brief: 45, 47). Jennings involved a complex larceny prosecution arising from the defendants’ temporary use of lawfully-possessed money for unauthorized purposes (among them, making short-term investments). Jennings, 69 NY2d at 116-117. In each incident charged in Jennings, the funds were returned to their owner within 72 hours, as previously agreed to by the owner. Id. at 117. The Court found that this “short-term taking” of money was akin to “joyriding,” and therefore was not a larceny. Id. at 124. In the portion of the opinion quoted by defendant, the Court described larcenous intent as a purpose “to exert permanent or virtually permanent control over the property taken, or to cause permanent or virtually permanent loss to the owner of -52- the possession and use thereof.” (Def. Brief: 47, quoting Jennings, 69 NY2d at 118 (emphasis added)). In other words, one can commit larceny with either the intent to appropriate property, or to deprive an owner thereof. By reading the word “or” out of the Jennings quote, defendant distorts the meaning of the Court’s holding. In fact, the intent to appropriate and the intent to deprive are distinct from one another under New York law. The Unlawful Use statute requires proof of only the former: the intent to appropriate. Defendant’s misstatements of the law are not confined to New York state cases. Complaining that the Appellate Division “ignored” precedent mandating his so-called “zero-sum game analysis of appropriation,” (Def. Brief: 49), defendant relies on the unrelated Second Circuit opinion in Almeida v. Holder, 588 F3d 778 (2d Cir. 2009). In Almeida, the appellant had been convicted under Connecticut’s second- degree larceny statute. Id. Later, that conviction was used as the basis of a federal deportation order. Almeida appealed, claiming that second-degree larceny under Connecticut law did not qualify as a “theft offense” that would make him removable under the immigration laws. Id. at 781. According to Almeida, because the requisite mens rea under Connecticut’s larceny statute (like New York’s) was the intent to appropriate or deprive, it was not a “theft offense,” which had been characterized by the Board of Immigration Affairs as necessarily including an intent to deprive. Id at 782. Almeida cited the example of a thief who steals cable service, while the owner continues to use it, arguing that the thief in that scenario has no intent to deprive. Id. -53- at 788. The court disagreed, noting that the thief in Almeida’s hypothetical did deprive the owner of something – the exclusive use of the cable service that he stole. Id. Plainly, the holding in Almeida arose in an unusual context, with no application here. But even if the holding were relevant to these proceedings, it would not help defendant. Almeida teaches that an owner’s “rights and benefits” in property are many, and that the right to exclusive possession is among the most “essential” of those rights. Id. at 788. In other words, there is no “zero-sum game,” even in a larceny prosecution: [Almeida] suggests that a person who gained unauthorized access to another person’s internet or cable television service – an act of appropriation specifically defined as larceny by [the Connecticut statute] – would not deprive the subscriber of property because the parties could use the service simultaneously. In fact, the hypothesized scenario evidences an intent to deprive a person of the rights and benefits of ownership in two respects. First, to the extent the subscriber is deemed an owner of the services he paid for, the appropriation evidences an intent to deprive the owner of the right to exclude others from the use of his service. Second, to the extent the service provider is the owner of services he makes available only to those who pay a fee, Almeida’s hypothetical describes a straightforward theft offense within the meaning of 8 U.S.C. § 1101(a)(43)(G). Id. (internal quotations and citations omitted). Almeida makes clear that a thief and an owner can simultaneously possess different rights, or economic “values” and “benefits,” associated with stolen property. Defendant’s characterization of this -54- holding – “that only one party at a time can control the use of property” (Def. Brief: 52) – is simply fallacious. Indeed, in the case at bar, Goldman was deprived of its exclusive access to the code copied by defendant, even though the jury was not called upon to address that issue. *** In short, the evidence established conclusively that defendant intended to control permanently the use of the code that he reproduced from Goldman’s system. The evidence also explained the motive behind this crime: defendant believed that he could use Goldman’s code to jump-start his own work writing high-frequency trading code for Teza. The People’s witnesses agreed with him on that point. However, even if the defendant were wrong – even if the Goldman source code would not have been as useful as the defendant thought it was when he made his unlawful reproduction of it – he was still acting with the requisite intent when he copied the source code, because his intent was to exercise permanent control over the use of that copied material and not to return it.16 16 Defendant also insists that the “rule of lenity” requires that the intent element be interpreted in his favor (Def. Brief: 20, 21, 24, 55-56). As discussed in footnote 14, supra, the rule of lenity does not apply in this case. The Unlawful Use statute is not ambiguous, and the meaning of the word “appropriate,” which is defined in Penal Law §155.00(4), is equally plain. CONCLUSION The order of the Appellate Division should be affirmed. Respectfully submitted, CYRUS R. VANCE,JR. District Attorney New York County danyappeals@dany.nyc.gov BY: .HRpp;ELIZ, Assistant Diÿtfict Attorney HILARY HASSLER ELIZABETH ROPER DANIEL HOLMES JEREMY GLICKMAN Assistant District Attorneys Of Counsel September 8, 2017 -55- WORD COUNT CERTIFICATION I, Elizabeth Roper, Assistant District Attorney, hereby certify that the word count for this brief is 13874, excluding the Table of Contents, Table of Authorities, and this Certification. The word processing system used to prepare this brief and to calculate the word count was Microsoft Word 2016. The brief is printed in Garamond, a serifed, proportionally spaced typeface. The type size is 14 points in the text and headings, and 13 points in the footnotes. jo Elizabeth Roper