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The optimal scope of trade secrets law

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  • Franzoni, Luigi Alberto
  • Kaushik, Arun Kumar

Abstract

The paper investigates the optimal scope of trade secrets law. In the model, one innovative firm invests resources first to produce knowledge, and then to protect it from unwanted disclosure. A rival firm invests to ferret out this knowledge. Trade secrets law affects this “secrecy contest” by reducing the probability of unwanted disclosure given the efforts of the parties. We show how optimal trade secrets policy depends on structural market features and cost parameters. In the final section, we consider the limit case in which the innovation lies on the face of the product, and derive the optimal scope of legal provisions preventing copycat imitation of products (unfair competition, passing off).

Suggested Citation

  • Franzoni, Luigi Alberto & Kaushik, Arun Kumar, 2016. "The optimal scope of trade secrets law," International Review of Law and Economics, Elsevier, vol. 45(C), pages 45-53.
    • Handle: RePEc:eee:irlaec:v:45:y:2016:i:c:p:45-53
    DOI: 10.1016/j.irle.2015.11.004
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    References listed on IDEAS

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    1. Natarajan Balasubramanian & Jagadeesh Sivadasan, 2011. "What Happens When Firms Patent? New Evidence from U.S. Economic Census Data," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 126-146, February.
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    Cited by:

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    2. Luigi Alberto Franzoni, 2020. "Trade secrets law," Working Papers wp1150, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Huatao Peng & Chen Zhou & Yang Liu, 2020. "Entrepreneurial Experience and Performance: From the Aspect of Sustainable Growth of Enterprises," Sustainability, MDPI, vol. 12(18), pages 1-24, September.

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    More about this item

    Keywords

    Trade secrets law; Unfair competition; Parasitic competition; Slavish imitation; Passing off;
    All these keywords.

    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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