CFAA and Noncompete News

            Over the past two months, several interesting items of Computer Fraud and Abuse Act (CFAA) and noncompete news have crossed my desk.  Below are summaries of the two most important items:

            1. Encryption Can Be a CFAA Violation: In early December, Judge Denise J. Casper of the U.S. District Court in Massachusetts ordered a former employee of a company to, among other things, disclose the password that he put on an important file on the company’s server because the company was likely to prevail on its CFAA claim against the employee under the “preliminary injunction” standard.  In the case, just before the employee left the company, he ordered his assistant in China to condense the files from a project that he had been working on at the company into one file and to encrypt it with a “very long” password that he provided to her.  The employee then ordered the assistant to send a copy of the file to him.  Since that time, the company had been unable to access the file and continue the project.  Judge Casper applied the CFAA, which, among other things, imposes liability when a person exeeds his or her authorization to computers under certain circumstances.  Although she ruled, among other things, that the company had not demonstrated a likelihood of sucess on its trade secret claim against the employee because the parties had no agreement about who owned the information in the file, the company had shown that the employee likely violated the CFAA by “exceeding authorized access” to the company’s computers.  First, although the employee’s assistant actually accessed the computer, nothing in the CFAA bars liability as a co-conspirator or as an aider and abettor.  Second, because the employee was not authorized to “copy, download, encrypt and delete confidential technology files,” and because the employee acted without the employer’s consent or knowledge and tricked his assistant into believing that encryption was “necessary,” the employee “exceed[ed] his authorized access” and acted with the “means of deception” necessary under the CFAA.  Judge Casper made this decision by following the middle path that reconciles the narrow and broad interpretations of the CFAA that Judge Timothy Hillman of the District of Massachusetts took in a recent case.  Judge Casper’s decision in her case, Enargy Power Co. v. Wang, is available here

            2. Do Noncompetes Make Employees Less Motivated?: The answer is “yes” according to a new study out from the Harvard Business Review.  According to an article in the Boston Business Journal, volunteers in the study were paid to perform tasks online, some boring, some more creative.  Some of the participants in each group were then told that they would be asked to perform another paid task, but it would not be the same task.  61% of those under the “noncompete” restrictions gave up, but only 41% of those not under the restriction quit.  And the restricted volunteers made twice as many mistakes and spent less time on the “job.”  But one interesting find was that, for the people doing the creative tasks, the restriction had no effect.  From my experience, if a person does not like his or her job, that person will not be motivated even if the person has no noncompete, so I am not entirely sure whether this study adds much to the debate about whether noncompetes are worth it.  Even so, it is interesting to know that people are studying the economic and psychological effects of noncompetes.

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