Lost Profits and Unjust-Enrichment Damages for the Misappropriation of Trade Secrets

Abstract

This paper analyzes civil remedies for the misappropriation of trade secrets. We study the impact of different damages doctrines on firms’ competitive behavior and on the incentives to misappropriate. We find that the owner of a trade secret is better off under the lost-profits regime, while the rival (independently of whether he obtained the technology by misappropriation or by independent development) is better off under the unjust-enrichment regime. The unjust-enrichment regime provides fewer incentives to misappropriate and yields a smaller market deadweight loss. The choice between the two rules essentially depends on the lawmaker’s goal