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NY Code Dispute Suit Criminalizes IP Theft

07/29/14

NY Code Dispute Suit Criminalizes IP Theft


IP litigation is about to take a sharp turn, now that Wall Street could lose money. Though the bank executives responsible for the 2008 recession escaped prosecution, others are getting hit, as large firms have changed the way IP law works, criminalizing it, instead of regarding it as a dispute of contract litigation. Kang Gao, who worked for New York City's Two Sigma Investments, is one among a handful under fire to try the precedent of jailing coders. He is accused of stealing source code, the electronic equivalent of trading strategies. Such code is considered among the most important assets a firm holds, as it allows high frequency trading (HFT) to gain a microsecond on their competition and give them the competitive advantage.

IP litigation attorney jobs in New York and elsewhere have a new dimension added to IP law. What pressure could change IP law so drastically? Joel Reidenberg, academic director of Fordham University's Center on Law and Information Policy in New York, explains, as reported by ValueWalk.com, "The concern about HFT is that these are highly proprietary programs, Wall Street depends on them. If someone can jump ship and potentially corrupt the high-frequency program, it's going to skew the market."

The source code, which has all the aura of a magical elixir, is escalating in importance. This is why employees such as Gao are being hit so hard, with a potential four-year prison term. Though there must be an argument that such cases will affect the public in general, the case can probably be made.

"We used to live in a day where, on Wall Street, things such as client lists or Rolodexes or other antiques were the tools of doing business," said Anthony Sabino, law professor at St. John's University's Peter J. Tobin College of Business. "In our hyper-electronic world, so many of our business methodologies have been reduced to source code."

Mental strategies have been coded out, and that physical code is worth considerable amounts of money.

Criminalizing IP disputes has shocked many, including New York Supreme Court Justice Jeffrey K. Oing, who is overseeing this lawsuit. He wondered if jailing Gao was "over the top."

"Something just doesn't ring right in this case," he said, though he had overseen suits where employees were accused of taking trade secrets, "none, none of them have ever risen to a level of criminal indictment."

Perhaps the attempt to inflate the charges highlights the sheer anxiety Wall Street feels, having compressed so much power into such a transportable substance as code.

Intellectual property litigation in New York and elsewhere may have to change how they think and proceed regarding intellectual theft. That, at least, is the interest in the Big Banks of Wall Street.

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