Hedge fund managers zealously guard their trade secrets from unauthorized access and use and seek to prosecute misappropriation or misuse of such trade secrets because they represent a significant asset of the firm.  In December 2010, Sean R. O’Brien and Sara A. Welch, Managing Partner and Counsel, respectively, at O’Brien LLP, published in the Hedge Fund Law Report an article analyzing the government’s efforts to regulate and protect, through the aggressive enforcement of criminal laws, the trade secrets underlying proprietary hedge fund trading strategies.  See “Protecting Hedge Funds’ Trade Secrets: The Federal Government’s Enforcement of Criminal Laws Protecting Proprietary Trading Strategies,” Hedge Fund Law Report, Vol. 3, No. 48 (Dec. 10, 2010).  At that time, the government had recently obtained the criminal convictions of two former employees of high-frequency trading firms who were alleged to have misappropriated computer code relating to high frequency trading systems.  Two recent rulings by federal appellate courts have significantly reined in the government’s efforts in this area.  The appellate courts have significantly narrowed the scope of criminal liability that may be imposed upon an employee who is alleged to have misappropriated elements of proprietary trading strategies, especially if the challenged conduct involves only the taking of “intangible” aspects of those strategies.  The rulings are therefore of great interest to both hedge fund managers and their employees.  This follow-up article by O’Brien and Welch discusses the rulings and the reasoning in the two federal appellate court decisions.