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U.S. appeals court revives workplace cybertheft lawsuit

By Jonathan Stempel

NEW YORK (Reuters) - In a decision that could make it easier for businesses to police cybertheft in the workplace, a U.S. appeals court revived a chemical company's lawsuit accusing a former Toronto-area employee of using her home computer to steal trade secrets from its Connecticut server.

Reversing a lower court ruling, the 2nd U.S. Circuit Court of Appeals in New York said U.S.-based MacDermid Inc may pursue civil damages claims against a former account manager under Connecticut state law, even though she conducted her alleged improper activity from her home in Fort Erie, Ontario.

Wednesday's decision may make it easier for U.S. companies to crack down on alleged computer theft that occurs in remote locations, including outside the country. In recent years, U.S. courts increasingly have dealt with cases involving downloads of corporate information by employees, both in criminal cases brought by prosecutors and civil cases filed by companies.

Jackie Deiter, the MacDermid account manager, had worked for the Waterbury, Connecticut-based company's MacDermid Chemicals unit in Mississauga, Ontario, from May 2008 until her termination in April 2011 for reasons unrelated to the lawsuit.

The company accused her of violating Connecticut laws on unauthorized computer access and misappropriating trade secrets by emailing customer data, laboratory reports, and pricing lists drawn from its Waterbury server. It said this occurred soon after Deiter had learned she was about to be fired.

Deiter admitted to emailing materials, but said in court papers that she did so for her job, and because she could not print at home from her employer-issued laptop.

U.S. District Judge Warren Eginton in New Haven, Connecticut said in November 2011 that he had no jurisdiction over MacDermid's lawsuit because Deiter had merely emailed information "from one computer in Canada to another computer in Canada."

But a unanimous three-judge panel of the 2nd Circuit said MacDermid's server was a computer under Connecticut law, and that it did not matter that Deiter had accessed it from outside the state, which she had never visited.

"Most Internet users, perhaps, have no idea of the location of the servers through which they send their emails," Circuit Judge Barrington Parker wrote for the panel.

"Here, however, MacDermid has alleged that Deiter knew that the email servers she used and the confidential files she misappropriated were both located in Connecticut," he added.

Parker also said "efficiency and social policies against computer-based theft are generally best served" by handling lawsuits in the states where computer files are misappropriated.

William Charamut, a lawyer for Deiter, declined to comment. Lawyers for MacDermid did not immediately respond to requests for comment. No criminal charges have been filed against Deiter.

In February, the 2nd Circuit threw out a federal criminal case against a former Goldman Sachs Group Inc computer programmer, saying his alleged theft of high-frequency trading code was not a crime under federal law.

Six months later, Manhattan District Attorney Cyrus Vance brought New York state criminal charges against the programmer, Sergey Aleynikov, over the same activity. Aleynikov has pleaded not guilty.

The 2nd Circuit has jurisdiction in Connecticut, New York and Vermont. It is among the more influential federal appeals courts, and other circuits often follow its reasoning.

The case is MacDermid Inc v. Deiter, 2nd U.S. Circuit Court of Appeals, No. 11-5388.

(Reporting by Jonathan Stempel in New York; Editing by Martha Graybow and Leslie Gevirtz)

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