December 6, 2010 – The trial of Sergey Aleynikov, a former Goldman Sachs computer programmer accused of stealing the computer code underlying Goldman’s high-frequency trading programs, has gotten underway.  In opening day arguments, Aleynikov's defense lawyer said he did not intend to take any proprietary code from Goldman. Rather, he intended to take only open source code.

What’s the difference?

Open source code is computer code that is publicly available on the Internet for use by anyone. But, depending upon how much of what he took was open source code, Aleynikov’s defense is a little like saying that, although he took the Coke formula, he only intended to take sugar and water.

Whether his defense will fly is likely dependant upon how much of what he took was open source code and how much was not. It will also likely matter how the open source code was used by Goldman Sachs, and what restrictions were placed on the use of this code by the parties who made it available on the internet.

Typically, in order to copy open source code from the Internet, a party must agree to the terms of a “click” or similar pop-up license. Although there are hundreds of different open source code licenses, many require that the user of the code must make publicly available any subsequent use of the code.

In other words, if Goldman’s high-frequency trading programs were built on the back of open source code, it will be more difficult for Goldman to claim trade secrecy for such programs.  

Whether Aleynikov’s defense prevails, this case presents an unmistakable and imperative lesson for companies that derive appreciable revenue from computer programs. Such companies should immediately assemble key personnel from management, business, information technology and inside and outside counsel with one agenda item:

Identify the top five most productive computer-based, proprietary assets and determine whether any of these assets have open source code embedded in their digital architecture.  

If the answer is yes, then the company needs to identify the different types of open source code that are involved, analyze the licensing requirements associated with each such code, assess the use and application of the code, and determine the exposure based on these factors. Open source licenses have conditions. A license to share is not the same as a license to steal.

To the extent there is a risk that the proprietary status and trade secret protections are diluted or compromised, then companies need to work with counsel to identify a cure.  Otherwise, companies could find themselves answering to a judge in the middle ground that may come to be known as the Aleynikov defense.

This story originally appeared on Securities Technology Monitor.

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