misappropriation
Misappropriation is a context-dependent legal term for the unauthorized acquisition, use, disclosure, or misuse of; funds, property, confidential information, or other protected material. It does not describe a single, uniform legal claim. Its elements, remedies, and consequences depend on the particular governing area of law and the jurisdiction.
In trade secret law, the Defend Trade Secrets Act (DTSA) authorizes a federal civil action when the trade secret relates to a product or service used in, or intended for use in, interstate or foreign commerce. 18 U.S.C. § 1839(5) defines misappropriation to include acquiring another person’s trade secret while knowing or having reason to know that it was acquired by improper means. It also includes certain unauthorized disclosures or uses of another person's trade secret, including when the person used improper means to obtain the information or knew or had reason to know that the information was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use. Improper means include theft, bribery, misrepresentation, breach, or inducement of a breach of a duty to maintain secrecy, and espionage. The definition excludes reverse engineering, independent derivation, and other lawful means of acquisition.
In legal ethics, misappropriation can refer to a lawyer’s unauthorized use of money entrusted by a client. In the case In re Wilson, 81 N.J. 451 (1979), the Supreme Court of New Jersey defined misappropriation for purposes of that opinion to include unauthorized temporary use of client funds for the lawyer’s own purposes, whether or not the lawyer obtained a personal benefit. Other jurisdictions may define the term or impose discipline differently.
Misappropriation can also describe a narrow form of unfair competition involving time-sensitive information. International News Service v. Associated Press, 248 U.S. 215 (1918) is the historical foundation of what is commonly referred to as the “hot news” doctrine. Any surviving hot news claims will arise under state law, and may be preempted by the Copyright Act. In National Basketball Association v. Motorola, Inc., 105 F.3d 841 (2d Cir. 1997), the Second Circuit, applying New York law, described a narrow claim requiring that the plaintiff generate or collect information at a cost, that the information have highly time-sensitive value, that the defendant free-ride on the plaintiff’s costly efforts in direct competition with the plaintiff’s product or service, and that continued free-riding threaten the existence or quality of that product or service.
Securities law uses the related misappropriation theory of insider trading. Under United States v. O’Hagan, 521 U.S. 642 (1997), a person may violate Exchange Act § 10(b) and SEC Rule 10b-5 by using material nonpublic information to trade securities, without disclosing that use to the source of information, in breach of a duty of loyalty and confidentiality owed to that source. Because the meaning of misappropriation depends on the applicable/governing law, available remedies may also vary, and may include damages, injunctive relief, restitution, professional discipline, or criminal penalties.
[Last reviewed in June of 2026 by the Wex Definitions Team]
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