Viewing Windows Through Bars – Former Microsoft Employee Takes Plea in Criminal Trade Secrets Case

While most trade secrets cases are litigated in civil court, one former Microsoft employee learned the hard way that the theft of trade secrets is also a federal crime. Alex A. Kibkalo, a former Microsoft Corp. employee, was being prosecuted for leaking valuable company trade secrets to a blogger for publication. On March 31, 2014, Kibkalo’s counsel and the prosecution advised a district court judge in Washington that the government and Kibkalo had reached a plea agreement. Pursuant to the terms of the agreement, Kibkalo will spend three months in federal prison and pay Microsoft Corp. restitution of $22,500.

Kibkalo’s prosecution and plea came to a quick conclusion after the Department of Justice filed a complaint on March 21, 2014. The investigation leading up to Kibkalo’s arrest and prosecution was the culmination of a Microsoft internal investigation launched in 2012 following media leaks relating to the company’s trade secrets, proprietary computer source code for the Microsoft Activation Server Software Development Kit and unreleased updates to the company’s Windows 8 operating system. In the course of that investigation, Kibkalo, a seven year employee, allegedly admitted that he had obtained and leaked the company trade secrets to a well-known blogger based in France.

Perhaps not coincidentally, Kibkalo’s decision to quickly agree to a plea came on the heels of the district court’s finding that he represented a flight risk and should be detained in a federal detention center during the trial. By agreeing to a plea, Kibkalo also avoided the possibility of a far lengthier sentence and fines under the Federal Sentencing Guidelines if he had been convicted at trial.

Kibkalo’s plea is a big win for Microsoft Corp. and should deter others from misappropriating its trade secrets in the future. In an odd twist, however, the details of Microsoft’s internal investigation have resulted in a public backlash after it was revealed that the company had gathered incriminating evidence, in part, by surreptitiously viewing the Microsoft-owned Hotmail email account of the blogger who published the leaked information.

Irrespective of the controversy surrounding how the evidence was gathered, Microsoft’s successful referral of the matter for criminal investigation and prosecution is noteworthy as it underscores the intersection of civil and criminal law relating to trade secrets. While most victims of trade secrets misappropriation will continue to seek relief in civil courts, requesting preliminary injunctive relief and damages, they should also consider the potential benefits of attempting to refer the matter for criminal investigation and prosecution. This is particularly true in instances where the victim is concerned about sending a strong message to deter others from stealing or leaking company secrets.

The case is USA v. Alex A. Kibkalo, case number 2:14-cr-00087, in the U.S. District Court for the Western District of Washington in Seattle.

We at Gibbons will continue to update you on developments and trends regarding the protection of trade secrets.