Federal Criminal Fraud and the Development of Intangible Property Rights in Information

This article considers how criminal fraud came to apply to intangible objects. Traditional fraud, while a famously broad concept, required that a material misrepresentation caused the victim to lose tangible property. Federal courts broke from that tradition and recognized an intangible property interest in confidential business information. In addition to expressly expanding notions of property, the courts also indirectly expanded property subject to fraud by focusing on the conduct element. Courts found that certain conduct, such as breaching a duty of loyalty to an employer, was a misrepresentation of a material fact. Because the fraud statutes are based on property losses, punishing such conduct had the effect of bringing the intangible interest at issue into the property orbit. Interpreting the federal fraud statutes in these ways inevitably defined new property rights, even when civil law had yet to do so. Creating new rights in information in this way raises several concerns. First, courts cannot mark precise boundaries for rights in information, and individuals may inadvertently cross the imprecise boundary. Second, law-abiding individuals may desist from using information, even when such use is lawful. Finally, a criminal trial is not an adequate forum for considering the policy implications of creating new property rights. One way to mitigate, but not eliminate, these concerns is for courts to insist that the confidential information at issue has independent economic value