Misappropriation doctrine

The misappropriation doctrine is a U.S. legal theory conferring a "quasi-property right" on a person who invests "labor, skill, and money" to create an intangible asset. The right operates against another person (usually a competitor of the first person) "endeavoring to reap where it has not sown" by "misappropriating" the value of the asset (ordinarily by copying what the first person has created). The quoted language and the legal principle come from the decision of the United States Supreme Court in International News Service v. Associated Press, 248 U.S. 215 (1918), also known as INS v. AP or simply the INS case.

The misappropriation doctrine originated as federal common law but since 1938 it has been based on state law. The current viability of the misappropriation doctrine is uncertain because of subsequent developments in U.S. patent and copyright law that "preempt" state law that operates in the same field of law, as is explained in the article on INS v. AP.

In 1918 when the Supreme Court decided the INS case, a body of federal common law concerning business practices and torts existed that the Supreme Court had power to declare or create. This legal regime stemmed from the 1842 decision of the Supreme Court in Swift v. Tyson. That case held that the federal courts, when deciding legal issues not specifically addressed by the applicable state legislature, had the authority to develop a federal common law. In 1938, however, in Erie Railroad Co. v. Tompkins, the Supreme Court overruled Swift v. Tyson. Consequently, since that time the misappropriation doctrine fell under the control of the laws of the various states, which were therefore free to accept or reject it.

Before the INS case, unfair competition law was generally considered to be limited to cases of "palming off"—where the defendant deceived customers by causing them erroneously to believe that the defendant's product emanated from the plaintiff, and as a result diverted trade from the plaintiff to the defendant. The INS case extended the concept of unfair competition to a much wider range of business conduct, based on the particular court's concept of morality.

The INS case, the cornerstone of the misappropriation doctrine, arose out of a dispute between two news gathering organizations, the Associated Press (AP) and the International News Service (INS) over reporting World War I news. The Allied Powers (England and France) perceived William Randolph Hearst's INS to be unduly favorable to the Central Powers (Germany and Austria); therefore, the Allies barred INS from using Allied telegraph lines to report news; this effectively prevented INS from reporting war news. To deal with this, INS copied AP's news bulletins from publicly accessible sources, rewrite them, and distributed the rewrites to INS's client newspapers. The AP then brought an action seeking to enjoin INS from copying AP-gathered news.

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