Why is PNC Bank Accusing Morgan Stanley of Corporate Espionage and Trade Secret Theft?

You No Let Me Download
©2011 Braydon Fuller

I often write about corporate espionage and trade secrets but I bet some of you may still be trying to imagine real-world scenarios that demonstrate exactly what those terms mean and how they apply. Let me tell you a story and see if it helps it make more sense.

Let’s Talk About Your Business

Let’s say you have a business and you have some really valuable information that your employees use when they are working for your business — the most important of which is the list of your customers and all of the background information you have compiled on those customers. Because you know how valuable this information is, you have had your company’s IT department implement certain technological limits to keep people from downloading that information to USB drives, Dropbox, or emailing it to their Gmail account. You’re really thinking ahead of the curve in trying to safeguard your trade secret information and you’re feeling pretty proud of yourself. And, you should, because most businesses don’t go to such efforts to protect their valuable trade secret information.

Zig Ziglar had a saying about dishonest employees: “If a person is dishonest, I hope he is dumb. I’d hate to have a smart crook working for me.

You, however, hired smart …

Now let’s imagine you had pretty senior and high ranking person in your company decide to leave to go work for one of your competitors where having your customer list (with all the extra information included) would be a great asset to them. And, you later come to believe, the competitor was actively trying to hire your employees and was trying to get them to take your trade secret information and bring it with them. You, however, have thrown a kink in their plans with your on-the-ball IT department’s information security practices. Or so you think.

Before telling you of her intentions to leave your company, this soon-to-be former employee still has access to your trade secret customer list from her computer and decides to access it on the system and pull it up for one last look. Can you imagine what she does next?

She whips out the trusty little smart phone and takes picture after picture after picture of all of the information on her computer monitor! She didn’t download it — she couldn’t. But she has it in several digital images on her mobile phone and when she goes out the door of your company, so too do your highly valuable trade secret customer lists.

Here Is The Real Life Case

This is a storified version of the allegations made by PNC Bank against its former employee, Eileen Daly, and her new employer Morgan Stanley in the case PNC Financial Services Group, Inc. v. Daly and Morgan Stanley, Inc. (Complaint) filed in the United States District Court for the Western District of Pennsylvania on March 14, 2014.

What makes this case (as alleged, anyway) a case of corporate espionage? Simple. It is one company trying to steal the valuable information of another company. It happens all the time. In this case it just so happened to be by an “insider” — a departing employee.

This is Clearly a Trade Secrets Case — But Could it Also Be a CFAA?

PNC sued the defendants for several causes of action, including misappropriation of trade secrets and unfair competition — exactly what you would expect in a case like this, right? It did not, however, sue them for “unauthorized access” in violation of the Computer Fraud and Abuse Act and, while I can think of several reasons why PNC may not have done so, it did get me to wondering if they could have. I mean after all, there have been much weaker CFAA cases filed in Pennsylvania District Courts.

What Does the Statute Say?

To violate the Computer Fraud and Abuse Act  under the most lenient part of the statute, the defendant must “intentionally access[] a computer without authorization or exceed[] authorized access, and thereby obtain[] … information from any protected computer;” 18 U.S.C. § 1030(a)(2)(C). And here, the information could not be downloaded, even though attempted, sooooo …..

Was There an Access?

Maybe so. She did have to access the computer system to retrieve the information and pull it up on her computer monitor. The question of whether her access was unauthorized or exceeded authorized access has not been conclusively determined by the Third Circuit, however, the bulk of the district court cases tend to follow the Strict Access Theory of the Ninth and Fourth Circuits, under which it probably would not have been improper, though in the Fifth and Eleventh Circuits under the Intended Use Theory, it may very well have been.

Was Information Obtained?

Yes, it was. The defendant took pictures of the trade secret customer lists — information — and kept those pictures on her smart phone. That sounds like the obtaining of information to me.

Was There a Loss?

I don’t think so. Without the “loss” there is no civil case unless there is “damage,” which is not very common. For the difference between the two, see Loss and Damage Are Not Interchangeable Under CFAA–District Court Blows Right Past CFAA’s “Loss” Requirement in Sysco Corp. v. Katz

The federal district courts in Pennsylvania are extremely strict when it comes to calculating the loss under 18 U.S.C. § 1030(g). Last year I handled the defense of a civil CFAA case in the Eastern District of Pennsylvania and thoroughly briefed two motions to dismiss that were heavily premised on the Pennsylvania district courts’ strict loss jurisprudence. (Here are the motions: Motion to Dismiss and Motion to Dismiss Amended Complaint) I convinced the plaintiff to dismiss the claims against my client with prejudice before the plaintiff filed a response or the court ruled on the motions, however, I remain very confident that the positions asserted in the motions were consistent with the courts’ standards on this issue and would have been successful. 

Under these standards, I cannot imagine how investigating the taking of pictures of a computer monitor could qualify as a “loss” or “damage” such to get the case past 18 U.S.C. 1030(g) and survive a motion to dismiss. I haven’t put a lot of thought into this, and am not saying it can’t happen, I just haven’t thought of how it would.

My guess is this is why the attorneys representing PNC didn’t bother throwing in a claim for violating the CFAA — well that, and, they probably didn’t see a need for it since they were already in federal court on diversity jurisdiction!

About the author

Shawn Tuma is a lawyer who is experienced in advising clients on complex digital information law and 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.

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