In a recent unpublished opinion, the Second Circuit Court of Appeals held that lost profits resulting from a misappropriation of proprietary information are not recoverable in a civil action brought under the Computer Fraud and Abuse Act (CFAA).

Under CFAA a recoverable loss is "any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service." 18 U.S.C. 1030(e)(11). The plaintiff alleged that two employees of defendant misappropriated confidential proprietary information from plaintiff’s computers and used the information to compete. The court held that the plain language of the statute treats lost revenue separately from incurred costs. Recovery of revenue is permissible only if it were connected to an interruption in service. Because there was no interruption of service in this case, the plaintiff’s alleged loss of $10M did not fall under CFAA’s loss definition.

The court also rejected plaintiff’s claim that $8,000 in travel expenses relating to "responding to an offense" or "conducting a damage assessment" do not fall under CFAA because the costs were too attenuated. According to the court, the statutory language "consistently has been construed to refer to costs associated with ‘investigating and remedying damage to a computer, or a cost incurred because the computer’s service was interrupted,’ not costs incurred investigating business losses unrelated to actual computers or computer services."

Nexans Wires S.A. v. Sark-USA Inc., 2d Cir., No. 05-3820, 2/13/06. Opinion here.