Definition
Misappropriation is the wrongful or fraudulent taking, use, or application of another's property, funds, information, or other assets by a person who has lawful access to or custody of them. The wrongdoing lies not in taking without access — that is theft — but in the abuse of a position of trust or the diversion of assets from their intended or authorized purpose.
The term carries distinct meanings across different legal contexts:
1. Fiduciary and financial misappropriation. The wrongful application of money, securities, or goods entrusted to an agent, banker, factor, trustee, or corporate officer. The person had lawful possession; the wrong is in dealing with the entrusted property fraudulently or for unauthorized purposes. In many jurisdictions this conduct is covered by embezzlement statutes.
2. Trade secret misappropriation. The acquisition, disclosure, or use of another's trade secret through improper means — including breach of a confidentiality agreement, industrial espionage, or exploitation of a relationship of trust. Governed primarily by the Uniform Trade Secrets Act (adopted in most states) and, at the federal level, by the Defend Trade Secrets Act of 2016.
3. Securities law — misappropriation theory. A basis for insider trading liability under federal securities law. Under this theory, a person who misappropriates confidential information for securities trading in breach of a duty owed to the source of the information — rather than to the trading counterparty — commits fraud cognizable under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Supreme Court endorsed this theory in United States v. O'Hagan, 521 U.S. 642 (1997).
4. Broader tortious and statutory misappropriation. Some state unfair competition doctrines recognize misappropriation of commercial value — most notably the appropriation of another's labor, skill, or investment in information or content without authorization. This line derives from International News Service v. Associated Press, 248 U.S. 215 (1918), though its reach varies substantially by jurisdiction.
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Common Language
Modern common usage (Wiktionary): The wrongful, fraudulent, or corrupt use of another's funds in one's care; also, the wrongful or dishonest use of something such as information.
Historical common usage (Webster's 1913): Wrong appropriation; wrongful use.
The common definitions are not wrong, but they are too narrow to guide legal research. In law, misappropriation has expanded well beyond financial custody to encompass trade secrets, securities fraud, and intangible commercial value — each governed by a distinct body of statute and doctrine. A researcher who treats misappropriation as simply "wrongful use of someone else's money" will miss the securities law and intellectual property dimensions entirely.
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Common Confusion
Misappropriation is frequently conflated with embezzlement and conversion. The distinctions matter for research. Embezzlement is a statutory criminal offense requiring proof of specific elements — typically a fiduciary relationship, fraudulent intent, and conversion to personal use — and varies considerably among jurisdictions. Conversion is a civil tort involving the wrongful exercise of dominion over another's personal property. Misappropriation is broader and more contextual: it can be civil or criminal, financial or informational, and it does not require personal enrichment in every context (disclosure of a trade secret to a competitor, for example, may not enrich the discloser directly). In historical sources, misappropriation often functions as a descriptive label pointing toward embezzlement; in modern law, it is also a term of art in IP and securities doctrine with its own independent content.
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Why It Matters in Research
The most important navigational fact about misappropriation is that the historical dictionaries treat it as a non-technical descriptor, while modern law has elevated it to a term of art in at least three distinct fields. Researchers working in historical sources will find misappropriation used loosely to describe what statutes now call embezzlement — Bouvier's and Black's both redirect readers to EMBEZZLEMENT and treat the term as informal. Do not assume this framing holds in post-twentieth-century material.
For securities law research, the misappropriation theory is inseparable from the insider trading literature. The distinction between the classical theory (a corporate insider trading on information owed to shareholders) and the misappropriation theory (an outsider trading on information misappropriated from a source to whom a duty is owed) is foundational to understanding the scope of Rule 10b-5 liability. O'Hagan is the controlling federal authority; researchers should trace the circuit split that preceded it.
For intellectual property research, misappropriation of trade secrets is a well-developed cause of action with statutory elements under the UTSA and DTSA. The definition of "improper means" and the breach-of-confidence pathway are the two primary avenues — they operate differently and require different proof. Researchers should also be alert to the older common law misappropriation doctrine derived from INS v. AP, which some states retain as a separate unfair competition theory applicable beyond trade secrets to "hot news" and similar contexts. Federal preemption arguments frequently arise in this space.
Jurisdictional variation is substantial across all three contexts. Criminal misappropriation statutes differ in elements and nomenclature. The UTSA has been adopted with variations. The hot-news misappropriation doctrine is recognized in some states and rejected or preempted in others.
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Historical Dictionary Support
Black's Law Dictionary (both editions), Rapalje & Lawrence, and Bouvier's speak with a single voice: misappropriation is not a technical legal term. All four treat it as a colloquial or descriptive label for conduct that statutes address under other headings, primarily embezzlement. Black's 2nd and Bouvier's both specify the covered actors — bankers, factors, agents, trustees, corporate directors, public officers — and the covered subject matter — money, goods, securities, property. This reflects the late nineteenth-century legal environment in which the distinction between larceny (taking without lawful possession) and embezzlement (fraudulent conversion by one who lawfully holds property) was of primary importance, and "misappropriation" described the latter without being its statutory name.
The reference in Black's 2nd to Stephen's Criminal Digest locates the doctrine in English criminal law scholarship. Bouvier's cross-reference to Sweet's Law Dictionary signals the term's English pedigree.
What the historical dictionaries miss entirely is the modern expansion of misappropriation into information and securities law. This is not a gap in their analysis — those doctrines did not exist — but it is a critical gap for any researcher using historical sources to understand contemporary doctrine. The word carried over; the content did not.
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Jurisdictional Note
The misappropriation theory of insider trading is a federal doctrine. Trade secret misappropriation is governed by a mix of state law (UTSA variants), federal law (DTSA), and — where applicable — common law misappropriation doctrine. The broader INS v. AP-style misappropriation tort is a state law matter; its availability and scope vary, and federal copyright preemption is a live issue in every jurisdiction where it is asserted.
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Encyclopedia Cross-Reference
business_104: Federal Securities — Insider Trading — Classical and Misappropriation Theories (The Law Mind Business Organizations & Corporate Law Encyclopedia)
ip_91: Trade Secret Misappropriation — Improper Means and Breach of Confidence (The Law Mind Intellectual Property Encyclopedia)
torts_117: Intentional Torts — Property and Economic — Trade Secrets Misappropriation (The Law Mind Torts & Personal Injury Encyclopedia)
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