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Federal court revives cross-border data theft case

Stealing company secrets has been a problem for businesses as long as there have been businesses to steal from. A federal appeals court has handed international companies a victory in a case where a Canada-based employee allegedly stole proprietary information from a computer server based in Connecticut. The ruling is important because it legally places the crime scene at the location where the data lives, instead of where the perpetrator went online to steal it. Waterbury, Connecticut-based MacDermid Chemicals can now pursue civil action under Connecticut law against a former account manager who lives and worked in Fort Erie, Ontario.

The 2nd U.S. Circuit Court of Appeals ruling paves the way for other companies with far-flung employees and offices to go after hackers, thieves and other miscreants in U.S. civil courts instead of seeking damages in foreign courtrooms. In the MacDermid case, the former account manager allegedly began e-mailing customer information, lab reports and price lists shortly after learning that she was about to be fired. The defendant admits to e-mailing but claims she did it because she couldn't print from her company-issued laptop. Her former employer sued for damages but a federal court judge dismissed the action, saying he had no jurisdiction in a case where a person allegedly e-mailed information from one location in Canada to another location in Canada.

The Appeals Court unanimously disagreed and said that it didn't matter that the defendant was in another country and has never even been to Connecticut. The server and the allegedly purloined data live in the United States and that is where the case should be pursued. MacDermid claims the account manager knew the server location and that the information she's accused of taking was on that machine. The justices wrote, "Efficiency and social policies against computer-based theft are generally best served" by handling suits in the states where the files are actually stored. No criminal charges have been brought against the ex-employee.

The 2nd Circuit Court of Appeals does not have jurisdiction in Washington but what happens in one federal appeals court can influence the others, and precedent is always king when it comes to the law. So in similar circumstances, and depending on whether your company is doing the suing, or you are on the receiving end of that lawsuit, this is either great news and a victory for American business or a good time to check in with your attorney.

Source: Claims Journal, "Appeals court allows firm's cybertheft claim against employee," Jonathan Stempel, Dec. 28, 2012

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