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Lost Profits and Unjust Enrichment damages for the misappropriation of trade secrets

Luigi Alberto Franzoni and Arun Kumar Kaushik

This paper analyses civil remedies for the misappropriation of trade secrets. We study the impact of different damages doctrines on the firm's competitive behavior and on the incentives to misappropriate. We find that the owner of the trade secret is better off under the Lost Profits regime, while the rival (independently of whether he has obtained the technology by misappropriation or by independent development) is better off under the Unjust Enrichment regime. Unjust Enrichment provides less incentives to misappropriate and yields a smaller market deadweight loss. The choice beween the two rules essentially depends on the lawmaker's goal.

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