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Warning! Sharing Your Netflix, Inc. (NFLX) Password is a Federal Crime

Netflix Inc (NASDAQ:NFLX)

Netflix, Inc. has more than 80 million subscribers around the world, including over 45 million subscribers in the U.S. Probably, there are millions of others who enjoy streaming service thanks to their friends and relatives for sharing passwords. It has become a social activity to share passwords for streaming sites like Netflix and HBO Go, but it could also be a federal crime. According to the reports, a ruling in the Ninth Circuit Court of Appeals have determined that sharing your Netflix, Amazon Prime and HBO Go passwords constitutes a criminal act under the Computer Fraud and Abuse Act (CFAA).

Netflix Inc (NASDAQ:NFLX)

The ruling was connected to the ongoing United States v Nosal case against David Nosal, The Guardian reported. Nosal is a former employee of Korn/Ferry, a recruitment firm. He left the firm in 2004 to start his own company to compete with Korn/Ferry. The firm filed a lawsuit against him for accessing the firm’s computers using other worker password.

Netflix CEO: It’s a Positive Thing

In 2008, Nolan was charged with hacking under the CFAA. The court decided that he acted “without authorization” in violation of the law. The conviction was upheld by the Ninth Court.

Judge Margaret McKeown said that the case is not about password sharing, but it’s about an employee who accessed the firm’s computers using other employee’s credentials. The CFAA states that this is illegal to access a computer system “without authorization.”

Stephen Reinhardt, another judge in the case, said that the decision “threatens to criminalize all sorts of innocuous conduct engaged in daily by ordinary citizens.”

“In my view, the Computer Fraud and Abuse Act (“CFAA”) does not make the millions of people who engage in this ubiquitous, useful, and generally harmless conduct into unwitting federal criminals. Whatever other liability, criminal or civil, Nosal may have incurred in his improper attempt to compete with his former employer, he has not violated the CFAA.”

It seems that both HBO and Netflix, Inc.  are not worried about passwords sharing activity. It’s interesting to note that the majority of companies consider password sharing as a violation of their terms of service.

Earlier this year, Netflix CEO Reed Hasting said that the passwords sharing is “a positive thing, not a negative thing”. Hastings who was attending CES in January, said that it’s a “positive thing, not a negative thing,” though it’s not clear if he meant within households or more broadly, The Daily Dot reported.

$500 Million Lost Due To Passwords Sharing

According to a report from Variety, the subscription VOD players lost millions of dollars due to the passwords sharing practice. Research firm Parks Associates estimated that the practice will cost the sector upwards of $500 million worldwide in 2015.

Netflix, according to the Variety report, has been effectively dealing with password-sharing issue. The company in 2013 offered a family plan with up to four concurrent streams for $11.99 monthly, versus two streams for the standard $8.99 service.

Last week, a customer filed a class action lawsuit against Netflix, Inc. in California over new monthly subscription prices. The plaintiff, George Keritsis, says the online streaming giant guaranteed that he would be charged $7.99 per month for the life. But the company has breached its contract by raising its monthly subscription fees.

As we reported previously, Netflix’s rates hike makes sense as the company is investing money to produce an original content. The company continues to battle the likes of Hulu, HBO, YouTube and Amazon as they all work to develop the best original video content. Original content is key to attracting subscribers and the streaming giant is getting ready to unveil its latest original series “Stranger Things” this summer.

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