Washington Court Clarifies Pleading Requirements for CFAA Claims
Trade secret disputes increasingly center on an ex-employee copying trade secret information from the former employer’s computer system and using that information to benefit his or her new employer. Civil claims under the federal Computer Fraud and Abuse Act (CFAA) can be a useful tool for employers seeking to enjoin ex-employees and competitors from benefiting from unlawfully obtained trade secret information and to recoup losses. In order to assert a civil claim under the CFAA, a plaintiff must plead losses aggregating at least $5,000 over a one-year period. The decision in Del Vecchio v. Amazon.com, Inc., No. C11-cv-00366-RSL, from the U.S. District Court for the Western District of Washington, indicates that employers asserting CFAA claims must plead facts that clearly reflect actual losses of $5,000 and facts connecting those losses to an ex-employee’s unlawful theft of trade secrets in order to survive a motion to dismiss. Employers should carefully detail the calculation of actual losses and facts reflecting the connection between those losses and the theft of the trade secrets in dispute to avoid dismissal of a CFAA claim.
In Del Vecchio, the court granted the defendant company’s motion to dismiss the plaintiffs’ CFAA claim. The plaintiffs were individuals who claimed that the company had unlawfully transferred cookies onto their computers. They alleged that the company had placed internet cookies on their computers against their wishes by “‘exploiting’ a known frailty in the cookie-filtering function of Microsoft’s Internet Explorer browser software” in violation of the CFAA. Citing the U.S. Supreme Court’s Iqbal/Twombly precedent requiring that a complaint “state a claim to relief plausible on its face,” the court in Vecchio dismissed the plaintiffs’ CFAA claim, finding that the plaintiffs failed to allege facts sufficient to demonstrate that a $5,000 loss had occurred.
The plaintiffs argued that the company’s collection and use of their “private information” through placement of the cookies “had economic value far in excess of $5,000 in that, regardless of whether and to what extent such information was economically exploitable by [the plaintiffs], an online advertiser such as the company could utilize such information, and the company did in fact utilize such information, to derive very substantial financial gain.” The court in Del Vecchio rejected the plaintiffs’ position that the court should consider alleged “non-monetary detriments,” such as the plaintiffs’ argument that they had been “deprived . . . of the opportunity to exchange their valuable [personal] information” and restriction of “consumer choice,” when determining whether the plaintiffs had adequately pled facts sufficient to demonstrate that a $5,000 loss had occurred. In rejecting this argument, the court noted that the CFAA “makes clear that losses must aggregate to at least $5,000” and that “[n]on-monetary detriments plainly have no relation to this requirement.”
The court noted that the plaintiffs’ argument essentially conceded that their “private information” at the heart of the dispute had no economic value to them or to others until it was organized and catalogued by the company in a manner that allows advertisers to use the information in a targeted manner. The court held that “[i]t is not enough to allege only that the information has value to Defendant; the term “loss” requires that plaintiffs suffered a detriment – a detriment amounting to more than $5,000.”
The plaintiffs also argued that the company’s cookies “defeated their valuable browser and anti-virus software” because the cookies “slowed down their internet connection and allowed [the company] to repeatedly access information stored on their computer.” The court also held that this alleged category of loss was also deficient because “[n]ot one Plaintiff allege[d] that he or she experienced any noticeable difference in his or her computer’s performance traceable to [the company’s] actions.” The plaintiffs failed to allege any facts about how their purchase of anti-virus software related to the company’s actions.
Although the Del Vecchio case did not involve an employer suing an employee, the decision has implications for employers seeking to bring claims against former employees under the CFAA. In the trade secret context, the Del Vecchio decision shows that it is not enough for an employer asserting a CFAA claim to assert that it has incurred $5,000 in losses due to an ex-employee’s theft of trade secrets. Employers should plead specific facts showing the actual value of the trade secrets at issue or the actual profits lost as a result of the theft, as well as facts establishing a connection between the loss and the theft. Otherwise, their CFAA claims may be vulnerable to a motion to dismiss.