Podcast: DtR NewsCast of Hot Cyber Security Topics

I had the pleasure of joining the DtR Gang for another podcast on Down the Security Rabbit Hole and, as usual with this bunch, it was more fun than anything — but I learned a lot as well. Let me just tell you, these guys are the best around at what they do and they’re really great people on top of that!

This episode had the usual suspects of Rafal Los (@Wh1t3Rabbit), James Jardine (@JardineSoftware), and Michael Santarcangelo (@Catalyst), though James was riding passenger in a car and could only participate through IM. Also joining as a guest along with me was was  Philip Beyer (@pjbeyer).

Go check out the podcast and let us know what you think — use hashtag #DtR on Twitter!

Thank you Raf, James, Michael and Phil — this was a lot of fun!

FBI Director Talks Cyber Espionage: Chinese Like “Drunk Burglar”


“[T]here are two kinds of big companies in the United States. There are those who’ve been hacked by the Chinese and those who don’t know they’ve been hacked by the Chinese” -FBI Director

The pervasive threat that cyber espionage poses to American business is not a new topic on this blog — we have been talking about it for a few years. But you do not have to take my word for it; there is a “higher authority” on the subject. No, not that high! But the Director of the FBI is pretty high.

Here is the transcript of what FBI Director James Comey had to say about the Chinese cyber espionage efforts. If you follow the link at the bottom, you can watch the video of his interview:

“What countries are attacking the United States as we sit here in cyberspace?”

“Well, I don’t want to give you a complete list. But the top of the list is the Chinese. As we have demonstrated with the charges we brought earlier this year against five members of the People’s Liberation Army. They are extremely aggressive and widespread in their efforts to break into American systems to steal information that would benefit their industry,” said FBI director Comey.

“What are they trying to get?”

“Information that’s useful to them so they don’t have to invent. They can copy or steal to learn about how a company might approach negotiations with a Chinese company, all manner of things,” said Comey.

“How many hits from China do we take in a day?”

“Many, many, many. I mean, there are two kinds of big companies in the United States. There are those who’ve been hacked by the Chinese and those who don’t know they’ve been hacked by the Chinese,” said Comey.

“The Chinese are that good?”

“Actually,” the FBI director replied, “not that good. I liken them a bit to a drunk burglar. They’re kicking in the front door, knocking over the vase, while they’re walking out with your television set. They’re just prolific. Their strategy seems to be: We’ll just be everywhere all the time. And there’s no way they can stop us.”

via FBI Director: Chinese Like ‘Drunk Burglar’ | The Weekly Standard.


Hackers’ Cracked 10 Financial Firms in Major Assault – Russian Officials Involved?

There is nothing new about cyber attacks coming from Russia, however, to actually be able to tie them to Russian government officials — albeit loosely — would be another step. Is this a hunch or do they have something more?

Related: US Indicts Chinese Army Officers for Hacking US Companies

The huge cyberattack on JPMorgan Chase that touched more than 83 million households and businesses was one of the most serious computer intrusions into an American corporation. But it could have been much worse.

Questions over who the hackers are and the approach of their attack concern government and industry officials. Also troubling is that about nine other financial institutions — a number that has not been previously reported — were also infiltrated by the same group of overseas hackers, according to people briefed on the matter. The hackers are thought to be operating from Russia and appear to have at least loose connections with officials of the Russian government, the people briefed on the matter said.

via Hackers’ Attack Cracked 10 Financial Firms in Major Assault – NYTimes.com.

Podcast: CFAA, Shellshock and Cyber Security Research — What the Heck Do We Want?

Today I had a blast doing a podcast on the CFAA, Shellshock, and cyber security research with Rafal Los (@Wh1t3Rabbit), James Jardine (@JardineSoftware), and Michael Santarcangelo (@Catalyst) — in fact, we had so much fun that I suspect Raf had quite a time trying to edit it!

The starting point for our discussion was a recent article written by security researcher and blogger Robert Graham (@ErrataRob) titled Do shellshock scans violate CFAA?

As I mentioned on the show, when I first saw Robert’s article, I viewed it with skepticism. However, after actually reading it (yeah, I know — makes sense, right?), I found the article to be very well written, sound on the principles and issues of the CFAA — in my view, Robert did a great job of framing some key issues in the debate that definitely needs to happen.

From the article, our discussion expanded to a general discussion of the Computer Fraud and Abuse Act, its confusion as to application to “security research,” and whether it is even possible for Congress to “fix” the CFAA.

I do not think Congress is able to “fix” the CFAA right now for many reasons. However, I believe we pointed out some additional issues that must be taken into consideration during the public debate in determining what we as a society really value and want on these issues. Until “we the people” can figure that out, I see no way for Congress to “fix” this law which means the Common Law method is what we are left with.

Anyway, this post is just skimming the surface — Raf turned this into a really nice podcast so check it out: Down the Security Rabbithole.

Thank you Raf, James and Michael — this was a lot of fun!

No, the CFAA Does Not Require Taking Actions to Prevent the Hacking of Others

For all of the things the CFAA may (or may not) require, it does not require taking actions to prevent the hacking of others. We are not (yet) the guardians of the hacking universe!

In a factually interesting case that offers a great read on attorney professionalism, the United States Court of Appeals for the Seventh Circuit has confirmed that the Computer Fraud and Abuse Act (CFAA), 18 USC § 1030, does not require taking actions to prevent others from hacking into websites — even when the allegation is being made of internet service providers (ISP) that allegedly failed to take actions to prevent the hacking of their users websites.

In Lightspeed Media Corp. v. Smith, 761 F.3d 699 (7th Cir. 2014), the court addressed an appeal brought after the district court granted a motion to dismiss all claims, including the Computer Fraud and Abuse Act claim, which the court said was frivolous:

Lightspeed’s suit against the ISPs was premised on the notion that because the ISPs challenged appellants’ subpoena of the personally identifiable information of Smith’s 6,600 “co-conspirators,” they somehow became part of a purported plot to steal Lightspeed’s content. If there was any conceivable merit in that theory, then perhaps fees would have been inappropriate. But there was not.

Count I alleged that the ISPs violated the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. §§ 1030 and 1030(g), by failing to prevent hacking. The only alleged assistance to hackers, however, was the challenge to the subpoena. As expansive as the CFAA is, see Orin S. Kerr, Vagueness Challenges to the Computer Fraud and Abuse Act, 94 MINN. L. REV. 1561, 1563-65 (2010), this is a frivolous charge.

The Plaintiff’s original allegations are set forth below:

We are not guardians of the hacking universe!

We are not guardians of the hacking universe!

(link to Lightspeed’s full First Amended Complaint)

For all of the criticism of the expansiveness and unpredictability of the CFAA, and much of it is well deserved, we can now be confident that it does not impose a duty to take steps to prevent the hacking of others — and thank God!

Collin County Bench Bar Presentation on Cyber Risks to Lawyers #CCBBF

Collin County Bench Bar Presentation Digital Information Law

Collin County Bench Bar Presentation Digital Information Law

This morning I have the privilege of speaking at the Collin County Bench Bar Conference and talking with a tremendous group of Collin County Judges and Lawyers about the risks that lawyers, their clients, and their law practices face from data insecurity issues.

Here is the Prezi presentation that I will be using – take a look and tell me what you think! Cyber Fraud, Data Breaches, and Corporate Espionage: How They Impact Your Law Practice

p.s. The theme for the weekend is The Kentucky Derby if you were wondering how the horse fit in!

Yes, Texas is a good state for plaintiffs to bring a CFAA claim.

©2011 Braydon Fuller

©2011 Braydon Fuller

Is Texas a good state for a plaintiff to bring a Computer Fraud and Abuse Act (CFAA) claim?

Yes it is, and a recent case reaffirms that the Federal District Courts in Texas are generally favorable jurisdictions for plaintiffs with CFAA claims because of two key issues, access and loss jurisprudence.

On February 3, 2014, the United States District Court, Southern District of Texas, denied the defendants’ Motion to Dismiss in Absolute Energy Solutions, LLC v. Trosclair, 2014 WL 360503 (S.D. Tex. Feb. 3, 2014) (related CFAAdigest post). This case involved 2 claims: misappropriation of trade secrets and Computer Fraud and Abuse Act.

Facts of the Case

The facts are fairly typical. According to the Complaint, Absolute Energy, the plaintiff, employed J. Trosclair. On April 18, 2013, Absolute Energy terminated J. Trosclair who then opened SBJ Resources, a company that competed with Absolute Energy. Absolute Energy alleges that upon J. Trosclair’s termination, his authorization to access Absolute Energy’s computer system (including email system) was terminated. R. Trosclair is J. Trosclair’s wife and was not employed by Absolute Energy which alleges R. Trosclair was never authorized to access its computer system.

After his termination, J. Trosclair and R. Trosclair accessed Absolute Energy’s computer system without authorization, sent, received, and forwarded email messages belonging to Absolute Energy, and engaged in a business endeavor that directly competed with Absolute Energy using Absolute Energy’s computer system, including to conduct business with Absolute Energy’s customers.

Absolute Energy Filed a Lawsuit

Absolute Energy filed a lawsuit against J. Trosclair and R. Trosclair for violating 18 U.S.C. § 1030 (a)(2) and (a)(4) of the Computer Fraud and Abuse Act and misappropriation of trade secrets (though it is not clear if this claim was pursuant to the newly enacted Texas Uniform Trade Secrets Act (TUTSA)).

The Trosclairs filed a Motion to Dismiss arguing the following points, and included declarations which contradicted the allegations in the Complaint:

  1. J. Trosclair was a 25% owner of Absolute Energy which gave him authorization to access its computers;
  2. the email account he was given was an email address and password for a Google operated email account that utilized computers and servers owned by Google, not Absolute Energy;
  3. The Google email system was used through J. Trosclair’s own personal computer and information received was automatically downloaded to that computer;
  4. Absolute Energy did not ever de-activate the Google email account that was assigned to J. Trosclair or notify him that he was not supposed to be using that account from his own personal computer;
  5. R. Trosclair’s only use of the Google email account was when she was gathering emails to forward to their attorney for purposes of an earlier lawsuit that J. Trosclair had filed against Absolute Energy in state court;
  6. Absolute Energy did not have a written employment agreement nor did it promulgate employee guidelines that prohibited employees from emailing Absolute Energy documents to other personal computers; and
  7. Absolute Energy failed to adequately plead a loss pursuant to 18 U.S.C. § 1030(g).

Absolute Energy filed a Response to the Motion to Dismiss in which it argued the following points:

  1. The allegations in the Complaint were adequate to support the CFAA claim and, instead of attacking the sufficiency of the allegations, the Trosclairs include declarations as evidence to contradict the substance of the allegations, which is improper for a Rule 12(b)(6) motion to dismiss;
  2. The allegations in the Complaint were sufficient to establish a loss as it alleged the Trosclairs caused a loss that exceeded $5,000 in value; and
  3. Given that for purposes of a Rule 12(b)(6) motion to dismiss the allegations asserted in the Complaint are to be taken as true, the motion should be denied.

Legal Principles and Court’s Analysis in Denying the Motion to Dismiss

The primary reason why the court denied the motion to dismiss is, what many laymen may feel like is a technicality, but in reality is a well-settled principle when dealing with motions to dismiss; that is, they are generally not the proper vehicle for addressing factual disputes. Generally they are intended for such cases where you say, “even if we assume that everything the plaintiff says is true, he still has no case because of x, y or z …” In this case, the Trosclairs tried to dispute the veracity of Absolute Energy’s factual allegations which, by definition, created a factual dispute that almost always requires denial of a motion to dismiss on such grounds. And, it did.

Point of Law 1. A motion to dismiss a Computer Fraud and Abuse Act claim in which the the defendants’ argue that the plaintiff’s allegations are false because, contrary to plaintiff’s allegations, the defendants really were authorized to access plaintiff’s computers, is an argument that raises a factual dispute that could not be decided on a motion to dismiss. This is a procedural issue that is germane to all motions to dismiss, regardless of the particular subject matter of the claim.

In ruling on the motion, the court also provided some succinct statements of important principles concerning the Computer Fraud and Abuse Act:

Point of Law 2. The elements to a Section 1030(a)(2) claim require a plaintiff to show that a defendant: (1) intentionally accessed a computer, (2) without authorization or exceeding authorized access, and that he (3) thereby obtained information, (4) from any protected computer, and that (5) there was loss to one or more persons during any one-year period aggregating at least $5,000 in value.

Point of Law 3. The elements to a Section 1030(a)(4) claim require a plaintiff to show that a defendant: (1) accessed a protected computer, (2) without authorization or exceeding such authorization that was granted (3) knowingly and with intent to defraud, and thereby (4) furthered the intended fraud and obtained anything of value, causing (5) a loss to one or more persons during any one-year period aggregating at least $5,000 in value.

Point of Law 4. The court reaffirmed its adherence to the Intended Use Theory that is followed in the Fifth Circuit which stated that “[a]ccess to a computer and data that can be obtained from that access may be exceeded if the purposes for which access has been given are exceeded.” quoting United States v. John, 597 F.3d 263, 272 (5th Cir. 2010).

Finally, the court addressed the 18 U.S.C. § 1030(g) jurisdictional loss issue.

Point of Law 5. To satisfy the loss requirement and state a civil claim under the CFAA, plaintiff is not required to allege details or the exact nature of the loss. Rather, plaintiff must simply allege sufficient damages to establish that the elements of a 18 U.S.C. § 1030(g) claim have been met.

My Thoughts on the Case

Did the plaintiff adequate plead an unauthorized access to a protected computer?

Regarding the dispute over the access issue, I believe the court was correct in its ruling based on the arguments that counsel presented in their motions. As a general rule, a motion to dismiss should be denied when the arguments supporting the motion are that the plaintiff’s facts are wrong, as was the case here. However, I have a problem with it — and regular readers know that if I have a problem with a successful CFAA case, there just may be a problem there!

I recently defended a CFAA case in which the plaintiff’s allegations of access were simply bald allegations that were too vague and conclusory to determine how the wrongful access purportedly occurred or, more importantly, what protected computer was even accessed. In my view, two things that should be required for any CFAA wrongful access claim are (1) specificity as to what protected computer was accessed and (2) how the plaintiff believes the access occurred, in general. Because neither of these points had been pleaded in my case, in my motion to dismiss I thoroughly briefed the law that says a court is not always required to accept the plaintiff’s allegations as true because in cases where the plaintiff makes nothing more than “bald allegations” because they are conclusory and, as a matter of law, not entitled to be assumed true. Here is the general gist of the three questions a court should ask per this argument, a “no” to any one question means the allegations in the complaint are insufficient:

  1. Ignoring all “bald allegations” and “legal conclusions,” do the “factual allegations” support the elements of the claim?
  2. If so, does common sense and judicial experience suggest the plaintiff’s theory of the claim is plausible or that there are more likely alternative explanations?
  3. If not, are the factual allegations supporting the discrete nuances of the claim strong enough to nudge the claim across the line from conceivable to plausible?

If you are interested in reading more of this argument, here is the Brief in Support of Motion to Dismiss Amended Complaint. There are also significant issues with the “information and belief” allegations, which is another issue that I briefed in the foregoing motion, which could be helpful in this case as they are used quite freely.

There are several key allegations in Absolute Energy’s Complaint that are pleaded as bald allegations and/or pleaded on information and belief and, therefore, should not be entitled to the presumption of truth:

“12.     Upon information and belief, Jason and Rhonda did, after Jason’s termination from Absolute, access on multiple occasions the computer system and e-mail system and accounts of Absolute, without the knowledge, permission, or authorization of Absolute.”

      • “computer system and e-mail system and accounts” is too generic of an allegation — which specific device or account is being claimed as a protected computer that was wrongfully accessed?
      • without more specificity as to what actual device or account was accessed, such a generic allegation should not suffice
      • how were the accesses accomplished? this too is important to know because it sheds a lot of light on the plausibility issue mentioned in the 3 question test.

“10.     Upon termination of Jason Trosclair’s employment, his authorization to access the computer system and e-mail accounts and/or system of Absolute was terminated.”

        • This goes to the plausibility issue — how was his authorization terminated?
        • Was he notified in an exit interview? Were his credentials revoked? Was there a policy somewhere that said it was terminated?
        • Without some specificity on this issue, this is nothing more than a “threadbare” legal conclusion that is not entitled to a presumption of truth.
        • Now add in the fact that he was a 25% owner of the company and his access to the email account was never shut off — does the mere fact that plaintiff pleaded “his authorization … was terminated” with nothing more push this across the line from conceivable to plausible?

The court ruled on the issues presented by counsel and, based on the arguments in the motions and responses, it made the safe ruling. However, based on the facts we learned from the Trosclair’s declarations, there are some significant issues that Absolute Energy will need to address with its case — if not its Complaint — otherwise this may be a short lived victory.

Did the Plaintiff adequately plead the jurisdictional threshold $5,000 loss?

Not even close (IMHO). I have written extensively about the $5,000 loss requirement (see posts). Have you, the readers of this blog, been paying attention? Let’s find out … according to the court:

Plaintiff has alleged a loss exceeding $5,000. See Complaint, ¶ 23. To state a claim under the CFAA, Plaintiff is not required to allege … details or the exact nature of the loss. Rather, Plaintiff must simply allege sufficient damages to establish that the elements of a Section 1030(g) claim have been met, as Plaintiff has done here. [The court then footnotes the following:] Plaintiff’s damages allegations are sparse but are sufficient for present purposes, when read in light of the allegations in ¶ 29 of the Complaint. Because it is better practice, Plaintiff will be required to elaborate on the damages in an amended complaint ….”

What do you think? Do you see what I see? 3 references to damages?!?! Damages??? Ok, let’s review: Loss and Damage Are Not Interchangeable Under CFAA–District Court Blows Right Past CFAA’s “Loss” Requirement in Sysco Corp. v. Katz

Let’s have a look at what Absolute Energy pleaded as its loss:

Absolute Energy - Loss

And then we have Paragraph 29, which the court found to be important:

Let me put this as simply as I can:



What did Absolute Energy plead?

  • “actual damages in excess of $75,000″ NO!
  • “obtaining value of more than $5,000″ NO!
  • “obtained information with a value in excess of $5,000″ NO!
  • “loss of business” NO!
  • “loss of prospective business” NO!
  • “economic costs associated with Defendants’ tortious acts” MAYBE
  • “attorneys’ fees” MAYBE

I have said all I can say about this case for now and it will be interesting to see how it progresses.

About the author

Shawn Tuma is a lawyer who is experienced in advising clients on complex intellectual property issues such as trade secrets litigation and misappropriation of trade secrets (under common law and the Texas Uniform Trade Secrets Act), unfair competition, and cyber crimes such as the Computer Fraud and Abuse Act. He is a partner at BrittonTuma, a boutique business law firm with offices near the border of Frisco and Plano, Texas which is located minutes from the District Courts of Collin County, Texas and the Plano Court of the United States District Court, Eastern District of Texas. He represents clients in lawsuits across the Dallas / Fort Worth Metroplex including state and federal courts in Collin County, Denton County, Dallas County, and Tarrant County, which are all courts in which he regularly handles cases (as well as across the nation pro hac vice ). Tuma regularly serves as a consultant to other lawyers on issues within his area of expertise and also serves as local counsel for attorneys with cases in the District Courts of Collin County, Texas, the United States District Court, Eastern District of Texas, and the United States District Court, Northern District of Texas.