Reallocating Gains: A Systematic Approach to Disgorgement of Profits

The article argues that a 'bilateral' conceptualization of disgorgement of profits provides appropriate solutions when gains have been made in violation of rights. For reasons of deterrence, it is usually clear that the defendant should disgorge (part of) his gain. The deterrence argument, however, does not explain why the claimant should receive it. The article develops a differentiated model considering both the positions of the right-holder and of the profit-maker. Its main proposition is that both should be put into the position they would have been in had the profit-maker made the gain in a lawful way. To this end, he would have had to come to an agreement with the right-holder regarding the use of the right. This hypothetical contract, the particulars of which are elaborated in this article, is used as a starting point to find appropriate solutions for the reallocation of profits.