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Key Facts
- Federal and state: Misappropriation is a context-dependent term, not one uniform claim with the same elements nationwide.
- Federal level: The Defend Trade Secrets Act defines trade-secret misappropriation to include specified acquisition, disclosure, or use involving improper means or a duty of secrecy.
- Federal level: Reverse engineering, independent derivation, and other lawful acquisition are excluded from the federal definition of improper means.
- State level: Depending on the state, unauthorized commercial use of a person’s identity may be addressed through a right-of-publicity, appropriation, or misappropriation claim.
- Federal level: Federal copyright law preempts state rights that are equivalent to copyright for works within copyright subject matter.
Misappropriation generally means taking, using, disclosing, or diverting something protected without legal authorization. The word does not identify one nationwide offense. Its meaning changes with the property or information involved, the governing statute or common law, and the jurisdiction.
In intellectual property disputes, the term most often appears in trade-secret law, state unfair-competition claims, and rights involving a person’s name or likeness. It also appears outside intellectual property, including disputes about entrusted money and the federal securities-law theory of insider trading.
Trade-secret law supplies a precise federal definition
The federal Defend Trade Secrets Act provides the clearest statutory definition. Under 18 U.S.C. § 1839, misappropriation includes acquiring another person’s trade secret while knowing or having reason to know that it was acquired by improper means.
The definition also covers certain disclosures or uses without consent. Liability can turn on whether the person used improper means, received information from someone who did, or knew that the information came with a duty to preserve secrecy or limit use.
Federal law defines improper means to include theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, and electronic or other espionage. It expressly excludes reverse engineering, independent derivation, and other lawful acquisition.
The information must qualify as a trade secret
Calling information confidential does not automatically make it a federal trade secret. Section 1839 requires information that derives actual or potential independent economic value from not being generally known or readily ascertainable through proper means, and the owner must have taken reasonable measures to keep it secret.
That definition can cover financial, business, scientific, technical, economic, or engineering information in many forms. Examples may include formulas, designs, prototypes, methods, techniques, processes, programs, or codes, but only when the statutory secrecy and value requirements are met.
A federal civil action under 18 U.S.C. § 1836 also requires the trade secret to relate to a product or service used in, or intended for use in, interstate or foreign commerce. State trade-secret statutes and common law may operate alongside federal law, subject to their own text and displacement rules.
State misappropriation claims cover other interests
State law sometimes uses misappropriation as part of unfair competition. The elements and scope depend on the governing state’s statutes and decisions rather than a uniform national test.
Rights of publicity provide another state-law setting. Depending on the state, unauthorized commercial use of a person’s name, image, likeness, voice, or other identity attribute may be described as appropriation or misappropriation. States differ on protected attributes, exceptions, who may sue, postmortem rights, and available remedies.
The term can also describe misuse of money held in trust or in a fiduciary capacity. Professional rules and state decisions may define that conduct differently from theft or embezzlement, and temporary unauthorized use can matter even when funds are later replaced.
Misappropriation is not the same as infringement
Infringement usually refers to violation of a specific intellectual property right, such as a patent claim, copyright exclusive right, or trademark right. Misappropriation often focuses instead on wrongful acquisition, breach of confidence, free-riding, or unauthorized exploitation recognized by a particular body of law.
The same facts can generate several theories, but labels are not interchangeable. Copying publicly available information may fail the federal trade-secret definition because lawful acquisition is not improper means, while the copying might still raise a different copyright, contract, or unfair-competition question.
Copyright preemption limits some state claims
Section 301 of the Copyright Act makes federal copyright law exclusive when a state claim concerns a work within copyright subject matter and asserts rights equivalent to copyright’s exclusive rights. A state misappropriation label cannot avoid preemption if the substance of the claim is equivalent.
The statute preserves state rights involving subject matter outside copyright and rights that are not equivalent to copyright’s exclusive rights.
Remedies depend on the governing claim
Under the federal trade-secret statute, possible civil remedies include injunctions, damages for actual loss and unjust enrichment, a reasonable royalty in appropriate circumstances, and enhanced damages or attorney fees under specified conditions. The statute also establishes a three-year limitations period measured from discovery or when reasonable diligence should have led to discovery.
Other misappropriation theories may allow different relief, including restitution, statutory damages, profits, disciplinary sanctions, or criminal penalties. Those possibilities cannot be generalized across jurisdictions because the cause of action, defenses, limitation period, and remedy rules may differ.
