Court Carves Back Oracle’s Computer Fraud and Abuse Act Claims Against Alleged “Gray Market” Reseller
California federal court finds no CFAA violation for disseminating software updates obtained from subscription to software support service, and requires fraud-based CFAA claims to be pled with particularity – Oracle America, Inc. v. Service Key, LLC, 2012 WL 6019580 (N.D. Cal. Dec. 3, 2012).
DLT was a member of the Oracle Partner Network (OPN), a program for third party companies interested in reselling Oracle hardware and software. To facilitate their role as resellers, OPN members receive login-in credentials to access Oracle’s support websites. Oracle alleged that DLT fraudulently used its access to obtain Oracle’s proprietary software patches and updates, which DLT then provided to its own customers. Oracle further alleged that DLT gave its access credentials to Oracle’s websites to “unwitting third parties” (apparently including the Navy and FDA) who were unaware that DLT lacked authorization to do so. Oracle sued DLT under numerous theories, including violations of the CFAA.
Certain CFAA claims alleged that DLT “exceed[ed] authorized access” in obtaining information from Oracle’s support systems. The court agreed with DLT that dismissal of such claims was required under United States v. Nosal, 676 F.3d 854 (9th Cir. 2012) (en banc). In Nosal, an en banc panel of the Ninth Circuit ruled that misuse or misappropriation of information to which one has authorized access does not violate CFAA provisions based on access to a computer “without authorization or exceeding authorized access.” Oracle’s complaint alleged that DLT used its access credentials for an unauthorized purpose (although Oracle apparently tried to distinguish Nosal by re-characterizing the complaint in subsequent briefing as alleging that DLT accessed Oracle’s websites without authorization). That’s precisely the kind of conduct that Nosal said was not actionable under the CFAA, the court ruled. However, DLT could still be liable under the CFAA for trafficking passwords to Oracle’s support sites because such a claim is not based upon unauthorized access to a protected computer.
Oracle also ran into trouble with the requirement in Rule 9(b) of the Federal Rules of Civil Procedure that claims alleging fraud or mistake to be pled with particularity. One of Oracle’s CFAA claims alleged that DLT “knowingly and with intent to defraud . . . exceed[ed] authorized access, and by means of such conduct further[ed] the intended fraud . . . .” 18 U.S.C. § 1030(a)(4). The court concluded that the claim was “grounded” or “sounded” in fraud and thus subject to Rule 9(b). Oracle did not adequately detail its fraud to meet the Rule 9(b) pleading requirement.
The one bright spot for Oracle in the decision was the court’s rebuff of DLT’s argument that Oracle did not properly allege damages. Oracle alleged that it incurred costs as a result of investigating and conducting a damage assessment in response to DLT’s actions, and the court found that enough to satisfy the damage requirement. The court also rejected a similar argument that Oracle did not sustain damages in excess of $5,000. That argument referred to the fraud-based CFAA violation, an element of which is that the fraud resulted in the defendant obtaining “anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $5,000 in any 1-year period[.]” 18 U.S.C. § 1030(a)(4) (emphasis added). The $5,000 threshold is not meant to be a measure of damages, the court held. Rather, the threshold refers to the value of the computer use relevant in determining whether a CFAA violation exists. In any event, the court said, Oracle did allege that DLT obtained something of value, i.e., its software.
LegalTXTS Lesson: If you’re in the Ninth Circuit, recovery under the CFAA for illicit use or dissemination of proprietary computer information is a challenge. Liability for hacking into a computer system is well-established, see Mintz v. Mark Bartelstein & Associates, Inc., 2012 WL 5391779 (C.D. Cal. Nov. 1, 2012), and so is giving away passwords to protected sites as the Oracle decision teaches. Asking permission to access your work computer “one last time” to delete personal files before switching jobs and then downloading a bunch of proprietary data also will get you in trouble (see Weingand v. Harland Financial Solutions, 2012 WL 2327660 (N.D. Cal. June 19, 2012), and my post on it here).
When it comes to misuse or misappropriation of information that was obtained with authorized access, however, Nosal makes it pretty clear that’s not a violation of the CFAA. The Oracle decision follows that rule. Other circuits, like the Third Circuit, go the opposite direction—hence decisions like Synthes, Inc v. Emerge Medical, Inc., 2012 WL 4205476 (E.D. Pa. Sept. 19, 2012), which held that it is a violation of the CFAA to induce employees of a competing company who have authorized access to the company’s computer system to download proprietary information and give it to you (see my post on it here).