The Optimal Scope of Trade Secrets Law

Quaderni - Working Paper DSE N° 1020

28 Pages Posted: 28 Jul 2015

See all articles by Luigi A. Franzoni

Luigi A. Franzoni

University of Bologna

Arun Kumar Kaushik

O. P. Jindal Global University

Date Written: July 27, 2015


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).

Keywords: trade secrets law, unfair competition, parasitic competition, slavish imitation, passing off

JEL Classification: K1, L1

Suggested Citation

Franzoni, Luigi Alberto and Kaushik, Arun Kumar, The Optimal Scope of Trade Secrets Law (July 27, 2015). Quaderni - Working Paper DSE N° 1020, Available at SSRN: or

Luigi Alberto Franzoni (Contact Author)

University of Bologna ( email )

P.zza Scaravilli 2
Bologna, 40124
0512098488 (Phone)
+39-051-221968 (Fax)


Arun Kumar Kaushik

O. P. Jindal Global University ( email )

Sonepat Narela road
Sonepat, Haryana 131001


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