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The Process for Calculating Losses Under the Computer Fraud and Abuse Act

In recent times, courts have found themselves struggling to determine losses that are compensable under a civil suit that is brought under the Computer Fraud and Abuse Act (CFAA).  As a consequence, courts have reached inconsistent holdings on whether costs unrelated to damage to a computer are covered under the provisions of the statute.

Fore example, in the case of P.C. of Yonkers, Inc., v. Celebrations! The Party and Seasonal Superstore, L.L.C., a federal court in New Jersey held that the cost of responding to, investigating, and remedying the defendants' use of a computer to misappropriate trade secrets constituted "loss" within the meaning of the CFAA.

On the other hand, in L-3 Communications Westwood Corp. v. Robicharux, a federal court in Louisiana ruled that "loss of trade secrets and lost profits" did not constitute loss within the meaning of the statute unless the loss stemmed from damage to or inoperability of a computer system itself. The court in the Louisiana case also suggested in dictum that certain costs incurred while investigating the loss of trade secrets were not compensable.

Understanding the obvious confusion amongst the courts over what losses are recoverable under the CFAA, companies seeking to use that statute to pursue hackers or disloyal former employees are advised to itemize any costs incurred in investigating damage to a computer or losses resulting from the interruption of service.  They are advised to itemize these losses in addition to those sustained because of the misappropriation of trade secrets or costs associated with responding to such misappropriation.


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