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Confidentiality Agreements and the Aleynikov Case: A Cautionary Tale

Employees, particularly those with access to sensitive company information, are typically required by their employers to maintain the confidentiality of such information. This requirement may be found in the employee handbook or may be contained in a restrictive covenant agreement, employment agreement, or severance agreement. Violating a confidentiality obligation can have serious consequences, including hefty monetary damages in a civil lawsuit. For one Goldman Sachs employee, however, the consequences were even more severe: Sergey Aleynikov was criminally prosecuted--twice--for taking confidential material with him when he resigned his position. His controversial second conviction was overturned earlier this week.

Aleynikov was convicted by a Manhattan jury on May 1 for unlawful use of secret scientific material. In a ruling by Justice Daniel P. Conviser of the Supreme Court of New York County on Monday, the conviction was reversed due to insufficient evidence. The charges against Aleynikov stemmed from his downloading of source code prior to departing his job at Goldman Sachs for a position with a competitor in 2009. To get a conviction for unlawful use of secret scientific material, the prosecution was required to prove that Aleynikov made a tangible reproduction of the source code materials. Justice Conviser found that the prosecution failed to prove that the defendant made any such tangible reproduction.

The district attorney's office has stated that it is considering appellate options.

Monday's decision marked the second time Aleynikov has had a conviction reversed in this years-long saga. He was first brought up on federal charges in 2009, culminating in a 2010 conviction on two counts of theft of trade secrets and transportation of stolen property. He was sentenced to eight years in prison. He served a year of that sentence before the United States Court of Appeals for the Second Circuit, in an April 2012 decision, overturned the conviction on appeal. Months later, Aleynikov was arrested again and charged with violating New York state law, including the unlawful use of secret scientific material, based on the same conduct.

Although, for now at least, the defendant has emerged the victor, the case should continue to serve as a cautionary tale for employees who consider violating confidentiality or trade secret restrictions. To be sure, criminal charges for such activity are the exception not the rule -- and this case may serve to deter prosecutors from pursuing such charges under similar circumstances in the future. But the case still stands as a reminder that hell hath no fury like an employer seeking revenge. Short of bringing criminal charges, an employer may opt to bring a civil suit seeking an injunction and monetary damages. The employer may also be contractually entitled to take back compensation, such as severance, already paid to the employee. Moreover, the public nature of a lawsuit-not to mention the employer's ability to give negative employment references-may result in irreversible damage to the employee's reputation. Employees are Therefore well advised to exercise caution before clicking that "download" button.

Any employee with questions about his or her rights or obligations regarding the use of an employer's information or property should speak with employment attorney experienced with restrictive covenants, such as a member of the Executive and Professionals Practice Group at Outten & Golden (212.245.1000).

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