De-CFAA-Nating Federal Law: Appeals Courts Weaken Electronic Data Use Protections

The federal Computer Fraud and Abuse Act, 18 U.S.C. § 1030, (CFAA) is — for most of corporate America — one of the most powerful weapons available to protect trade secrets. Like many state computer crimes laws, CFAA was enacted to prevent "hacking." Its scope is much broader, however, because it contains various prohibitions against accessing a computer "without authorization" or in a manner that "exceeds authorized access." For many in the business community, CFAA has become a preferred method of seeking injunctive relief, damages, attorneys' fees, and other remedies from disloyal employees, competitors, and others who have made improper use of proprietary information stored on the company's computer system — or who have destroyed electronically stored information altogether. For example, the U.S. Court of Appeals for the Seventh Circuit1 held several years ago that an employee who erased crucial data on his company laptop before turning it in at the end of his employment violated CFAA. Int'l Airport Ctrs., LLC v. Citrin, 440 F.3d 418, 419-21 (7th Cir. 2006).

A July 26, 2012 federal appeals court decision, however, is the latest in a series to raise questions about the viability of CFAA as a remedy for such misconduct. In WEC Carolina Energy Solutions LLC v. Miller, ___ F.3d __, 2012 U.S. App. LEXIS 15441 (4th Cir. July 26, 2012), the U.S. Court of Appeals for the Fourth Circuit2 held that CFAA provides no remedy against a former employee who before resigning had downloaded his employer's proprietary information at the behest of a competitor. The Fourth Circuit found that the defendant's use was not "without authorization" or in a manner that "exceeds authorized access" on the following basis:

To protect its confidential information and trade secrets, WEC instituted policies that prohibited using the information without authorization or downloading it to a personal computer. These policies did not restrict Miller's authorization to access the information, however.

The fact that CFAA can provide the basis for criminal penalties was among the rationales articulated by the Fourth Circuit for its narrow reading of the statute. However, the same is true of the Copyright Act, which criminalizes copying by both unlicensed users and licensees exceeding the scope of their authorization. The Fourth Circuit also reasoned that employers had other "means to reign in rogue employees," including claims for misappropriation of trade secrets. But the...