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".
Legal setting in which doctrine arose.
Why doctrine developed under federal law but is now under state law.
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.
Previous state of unfair competition law.
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.
Background.
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.
Supreme Court ruling.
The Supreme Court ruled in favor of the AP, with Justice Pitney writing for the majority. Justices Holmes and Brandeis wrote dissents.
Majority opinion.
The majority opinion by Justice Pitney recognized that the information found in the AP news was not copyrightable. Instead, Pitney approached the issue from the perspective of unfair competition. He found that there was a "quasi-property right" in the fresh news as it is "stock in trade to be gathered at the cost of enterprise, organization, skill, labor and money, and to be distributed and sold to those who will pay money for it." Given the "economic value" of the news, a company can "therefore" have a limited property interest in it against a competitor (but not against the general public) who would attempt to take unfair advantage of the information.
The Court characterized INS's behavior as "misappropriation." Due to the tenuous value of "hot" news, Pitney narrowed the period for which the proprietary right would apply: copying was forbidden "only to the extent necessary to prevent that competitor from reaping the fruits of complainant's efforts and expenditure."
The Court justified its creation of a "quasi-property right" in these terms:
 ;templatestyles src="Template:Blockquote/styles.css" / ;[INS] is taking material that has been acquired by AP as the result of organization and the expenditure of labor, skill, and money, and which is salable by AP for money, and that INS in appropriating it and selling it as its own is endeavoring to reap where it has not sown, and by disposing of it to newspapers that are competitors of AP's members is appropriating to itself the harvest of those who have sown.
    [A] court of equity ought not to hesitate long in characterizing it as unfair competition in business.
. . . [H]e who has fairly paid the price should have the beneficial use of the property. It is no answer to say that AP spends its money for that which is too fugitive or evanescent to be the subject of property. That might, and for the purposes of the discussion we are assuming that it would furnish an answer in a common-law controversy. But in a court of equity, where the question is one of unfair competition, if that which AP has acquired fairly at substantial cost may be sold fairly at substantial profit, a competitor who is misappropriating it for the purpose of disposing of it to his own profit and to the disadvantage of AP cannot be heard to say that it is too fugitive or evanescent to be regarded as property. It has all the attributes of property necessary for determining that a misappropriation of it by a competitor is unfair competition because contrary to good conscience.
Holmes dissent.
Justice Holmes dissented, arguing that the law of unfair competition requires a misrepresentation. If the misrepresentation here is that some people may think AP copied the news from INS, the proper remedy would be only to prohibit INS (for a limited time) from copying from AP unless it provides a notice that it copied from AP.
Brandeis dissent.
Justice Brandeis dissented on the grounds that "reaping where another sowed" is not an actionable tort: "[O]rdinarily one is at perfect liberty to find out, if he can by lawful means, trade secrets of another, however valuable, and then use the knowledge so acquired gainfully, although it cost the original owner much in effort and in money to collect or produce."
Brandeis closed his dissent with an argument that the Court was ill-suited to act as a legislature and the matter should be left to the wisdom of Congress:
The creation or recognition by courts of a new private right may work serious injury to the general public, unless the boundaries of the right are definitely established and wisely guarded. ... A Legislature, urged to enact a law by which one news agency or newspaper may prevent appropriation of the fruits of its labors by another, would consider . . . [possible adverse effects on the public and other businesses]. Legislators might conclude that it was impossible to put an end to the obvious injustice involved in such appropriation of news, without opening the door to other evils, greater than that sought to be remedied.
 Courts are ill-equipped to make the investigations which should precede a determination of the limitations which should be set upon any property right in news or of the circumstances under which news gathered by a private agency should be deemed affected with a public interest. Courts would be powerless to prescribe the detailed regulations essential to full enjoyment of the rights conferred or to introduce the machinery required for enforcement of such regulations. Considerations such as these should lead us to decline to establish a new rule of law . . .
Subsequent developments.
Although "INS" was a landmark case when it was decided, subsequent developments have diminished its significance and that of the misappropriation doctrine. A leading copyright law scholar has commented:
It has been suggested that the credence due the "International News Service" case today is minimal: that subsequent decisions have restricted its [misappropriation] doctrine to the news context and that, in any event, it is but a derelict of the federal common law, untenable after "Erie R.R. v. Tompkins".
Seventh Circuit Judge Posner similarly remarked that "INS" is "a decision no longer authoritative because it was based on the federal courts' subsequently abandoned authority to formulate common law principles . . . .
The misappropriation doctrine still persists, however, in the area of "hot news" and other time-value information and in those states that give the "INS" doctrine expansive scope against "immoral" commercial behavior, typically involving copying.
An additional factor affecting the scope and viability of the misappropriation doctrine has been the development of the federal preemption doctrine since the 1960s. This doctrine makes state law ineffective when it conflicts with or disturbs the balance between competition and monopoly struck in the federal intellectual property laws.
On the other hand, the misappropriation doctrine has not been preempted in areas where a type of copying is not regulated under federal copyright or patent law. But the limits of this dispensation are uncertain: the boundary condition may be that state law may operate so long as the omission from federal regulation is not the result of a congressional decision that the area should be left open to free competition; an alternative boundary rule may be that the state law must not upset a delicate balance which the court perceives that the federal system has struck.
Effect of "Kellogg" case.
In "Kellogg Co. v. National Biscuit Co.", in 1938, the Supreme Court considered a case arguably akin to "INS" but (with Justice Brandeis now writing for the Court's majority instead of dissenting as in "INS") denied relief. The "Kellogg" Court said:
Kellogg Company is undoubtedly sharing in the goodwill of the article known as "Shredded Wheat"; and thus is sharing in a market which was created by the skill and judgment of plaintiff's predecessor and has been widely extended by vast expenditures in advertising persistently made. But that is not unfair. Sharing in the goodwill of an article unprotected by patent or trade-mark is the exercise of a right possessed by all—and in the free exercise of which the consuming public is deeply interested.
One commentator maintained that one could properly—
 ... view "Kellogg" as vindication of the views that he [Brandeis] expressed in "INS". That Nabisco had invested in the shredded wheat product did not give it control over the use of the pillow shape (or the term SHREDDED WHEAT); it had no property right against misappropriation of the shape after the expiry of the patents. Instead, Brandeis inquired [only] whether Kellogg had engaged in any acts of misrepresentation.
Since Kellogg did not misrepresent its version of Shredded Wheat, the Court held it free to appropriate the unpatented, uncopyrighted biscuit features regardless of Nabisco's expenditure of labor, skill, and money, and it allowed Kellogg to reap where Nabisco had sown.
Effect of "Sears" and "Compco" cases.
In "Sears v. Stiffel" and "Compco v. Day-Brite", the defendants copied the unpatented, uncopyrighted product designs of the plaintiffs. The lower courts had applied what amounted to the "INS" misappropriation doctrine to hold the defendants guilty of unfair competition. The Supreme Court reversed, holding that state law was being used to create a state-law equivalent of the federal patent system, and that disturbed the balance Congress had struck in this area. One commentator explained: "Though "International News Service" has never been expressly overruled, the Court was, in "Sears" and "Compco", apparently rejecting its approach.
In 1989, the Court struck down a state law protecting boat designs that were neither patented nor copyrighted, in "Bonito Boats, Inc. v. Thunder Craft Boats, Inc.", thus reaffirming the preemption rule of the "Sears" and "Compco" cases barring "INS"-like protection of product designs where the patent or copyright laws might otherwise apply.
On the other hand, the Court has permitted state misappropriation law to apply against copying in areas not regulated by federal law, such as sound recordings before 1978. A comparison of these decisions with the 1989 "Bonito Boats" decision may suggest a less preemptive approach to subject matter in the neighborhood of copyright than in the neighborhood of patent law.
"Hot news" cases.
In a number of cases, courts have applied the misappropriation doctrine to copying in fact settings analogous to the circumstances of the "INS" case—a competitor's appropriation of information that is costly to generate and that has value for only a limited time.
The original