Fair Compensation in IP: Addressing Unjust Enrichment

Every creative work – a novel, a piece of software, a patented formula, a brand logo – represents real investment: time, skill, money, and effort. When someone uses that work without authorization and profits from it, something fundamentally unfair has occurred. The creator loses; the user gains. This is precisely what the unjust enrichment theory of intellectual property addresses. It sits at the intersection of equity and IP law, asking a straightforward question: should someone be allowed to keep a benefit they obtained at another’s expense, without paying for it?

What is unjust enrichment? 🔗

Unjust enrichment is a legal principle that arises when a person or entity obtains a benefit at another’s expense without any valid legal justification. It is not about breach of contract or commission of a tort in the traditional sense – it is about the simple moral proposition that you should not profit from something that rightfully belongs to someone else. In the IP context, when a third party uses a creator’s work – a film script, a patented drug formula, a registered trademark – without authorization and derives economic gain, that gain is considered unjust. The creator, who invested in producing that work, is entitled to receive what the unauthorized user wrongly retained.

The theory is grounded in the broader law of restitution. Restitution law focuses not on compensating for loss suffered, but on restoring to the rightful party a benefit that was wrongly taken or retained. Unlike contractual or tortious remedies, restitutionary liability arises by operation of law – regardless of whether parties had any agreement. In India, the foundational basis for this is found in Sections 68-72 of the Indian Contract Act, 1872, which deal with obligations resembling quasi-contracts – situations where one party is unjustly enriched at another’s expense even in the absence of a formal contract.

The core logic: why is enrichment “unjust” in IP? 🔗

Intellectual creations occupy a unique position. Unlike physical property, a book or a patented invention can be used by multiple people simultaneously without depleting the original. This makes IP especially vulnerable to free-riding – where others exploit the work without contributing to the creator’s reward. The unjust enrichment theory steps in to address this structural vulnerability by insisting that those who benefit from someone’s creative or inventive effort must compensate the originator.

The underlying rationale, as economic analyses of unjust enrichment law articulate, is that an unjust gain may be extracted and returned to the more deserving party – the one whose loss or effort generated the gain in the first place. In IP law, this translates into a clear principle: if your business profits because you used someone else’s song, patent, or brand without permission, those profits do not belong to you.

The link between unjust enrichment and restitution in IP 🔗

Restitution, as a remedy, operates differently from damages. Damages focus on the loss suffered by the plaintiff. Restitution – specifically disgorgement of profits – focuses on stripping the defendant of the gains made through wrongful conduct. Traditional principles of restitution and unjust enrichment support disgorgement awards when they are directed at conscious wrongdoers and the gains are attributable to the wrongful conduct. The aim is not just to compensate but to deter – to ensure that infringement is never a profitable business strategy.

In practical terms, this means that if a company uses a patented process without a licence and earns significant revenue from it, a court applying unjust enrichment principles can order that company to hand over those profits to the patent holder. The logic is clean: you enriched yourself using something that was not yours. You must give it back.

Unjust enrichment across IP domains in India 🔗

Copyright 🔗

Copyright infringement is perhaps the most common context in which unjust enrichment principles come into play. When a publisher reproduces substantial portions of a textbook, when a film producer adapts a screenplay without consent, or when a streaming platform hosts unauthorized content, they are deriving economic value that belongs to the original author. In the landmark Supreme Court case R.G. Anand v. Delux Films, the court recognized that unauthorized adaptation of creative works enriches the adaptor at the original creator’s expense – a foundational acknowledgment of unjust enrichment thinking in Indian copyright jurisprudence. The Copyright Act, 1957 provides both civil and criminal remedies for infringement, and the civil route – specifically the claim for rendition of accounts and profits – is directly rooted in restitutionary logic.

Patents 🔗

In patent law, the theory becomes particularly significant. When companies use patented technologies without a proper licence, they avoid paying royalties while profiting from the inventor’s innovation. Scholarly arguments in patent law have consistently held that a patent owner should have access to a restitutionary disgorgement remedy – one that can recapture wrongful gains, deter infringement, and encourage parties to bargain for licences rather than simply appropriate protected technologies. In India, the Delhi High Court’s ruling in the Ericsson case awarded damages worth INR 2.44 billion in a Standard Essential Patent infringement suit – the largest patent damages award in India’s history – reflecting how seriously courts now treat the unjust retention of benefits from patented inventions.

Trademarks 🔗

Trademark infringement and passing off present some of the clearest cases of unjust enrichment. When a business mimics a well-known brand’s name, logo, or packaging, it rides on the goodwill and reputation that the original brand spent years and resources building – without making any equivalent investment. As Indian courts have repeatedly held in passing off actions, the defendant profits from the plaintiff’s reputation, which is textbook unjust enrichment. In cases like Cadbury India Ltd. v. Neeraj Food Products, courts emphasized that such conduct allows infringers to benefit from others’ market reputation without corresponding investment, and that this is both inequitable and actionable.

How Indian courts calculate unjust enrichment-based damages 🔗

Quantifying unjust enrichment in IP disputes is not straightforward. Indian courts have developed a structured approach over time. The Delhi High Court, in Koninlijke Philips N.V. v. Amazestore and Ors. (2019), consolidated the framework for calculating damages, calibrating the award based on the degree of bad faith: from a simple injunction for first-time innocent infringers, to full compensatory and aggravated damages for deliberate and repeated violators.

Subsequently, the Delhi High Court’s Intellectual Property Division Rules, 2022 laid down six specific factors for computing damages in IP suits. These include the lost profits of the injured party, the profits earned by the infringing party, the royalty or licence fee that would have been payable had the use been authorized, the duration of the infringement, the degree of intent or negligence, and the infringer’s conduct in mitigating harm. This framework closely mirrors the unjust enrichment principle: the court’s starting point is what the infringer wrongfully retained, not merely what the creator can prove it lost.

Unjust enrichment theory and its relationship with other IP theories 🔗

The unjust enrichment theory does not operate in isolation. It works alongside – and reinforces – other foundational theories of IP protection. Locke’s labour theory holds that creators deserve rights because they have invested their labour in producing something. Unjust enrichment complements this by addressing what happens when others benefit from that labour without payment. Utilitarian theory justifies IP protection as an incentive structure for innovation – unjust enrichment ensures that incentive structure is not hollowed out by free-riders. Personality theory treats creations as extensions of the creator’s identity; unjust enrichment protects the economic dimension of that personal investment.

What makes unjust enrichment theory distinct is its focus on the defendant’s gain rather than the plaintiff’s loss. Other theories are primarily about why creators deserve protection. Unjust enrichment is about why those who exploit creative works without authorization have no right to keep what they have gained. As academic scholarship on copyright and unjust enrichment argues, focusing on the competitive benefits derived from copying helps ground IP protection in a more concrete and justiciable framework.

Limitations and criticisms of the theory 🔗

Despite its intuitive appeal, the unjust enrichment theory faces legitimate criticisms. The most persistent challenge is valuation. Determining what constitutes fair compensation for IP use is genuinely complex. What market price would a willing buyer and willing seller agree to? How much of the infringer’s profit is attributable to the protected IP and how much to their own business effort? These are difficult empirical questions, and as economic analyses of unjust enrichment and patent damages point out, the concept of a “reasonable royalty” can lack logical consistency when IP rights themselves are uncertain or probabilistic.

There is also the question of cumulative and indirect enrichment – particularly relevant in the digital age. When a platform profits from user traffic attracted partly by infringing content, or when an AI system trains on copyrighted works and generates commercially valuable outputs, it is not always easy to identify who was enriched, by how much, and at whose expense. Indian courts and the legislature are still working through these questions. Amendments to the Copyright Act on intermediary liability and ongoing debates about AI-generated content signal that unjust enrichment theory will need to evolve alongside technology.

A further concern is the boundary with the public domain. Knowledge builds incrementally. New works inevitably draw on prior art, folk traditions, and shared cultural heritage. Applying unjust enrichment theory too broadly risks over-privatizing the intellectual commons – making it difficult for subsequent creators to build on what came before. Courts and policymakers must, therefore, calibrate the theory carefully: preventing genuine exploitation while preserving the creative freedom that IP law is ultimately meant to foster.

Why this theory matters for creators, businesses, and students 🔗

For anyone studying IP law, the unjust enrichment theory offers a grounding rationale that cuts across technical doctrine. It answers the “why” behind remedies like account of profits, disgorgement, and restitutionary damages. It explains why courts look at what the infringer gained, not just what the creator lost. And it connects IP law to the broader moral framework of private law – the principle that no one should profit from another’s work without compensation.

For creators, it means the law does not just protect them from losing money – it can also recover the money that infringers wrongly made. For businesses, it is a reminder that unauthorized use of IP is not just a technical violation: it is an act of enrichment at the creator’s expense, and the law will treat it accordingly. As scholars studying restitution law in India note, Indian courts have not always applied these principles consistently, which makes it all the more important for practitioners and students to understand the theoretical foundations and push for coherent application.

What do you think? If a technology company trains an AI model on thousands of copyrighted works without paying the authors, and then profits commercially from that AI – does that constitute unjust enrichment under existing IP principles, or does it require an entirely new legal framework? And given that Indian courts are still calibrating how to value IP-based unjust enrichment, should India consider codifying a standalone statutory remedy for disgorgement of profits in all IP disputes?

References

1. https://www.law.cornell.edu/wex/unjust_enrichment
2. https://www.i-law.com/ilaw/doc/view.htm?id=406727
3. https://www.sciencedirect.com/science/article/abs/pii/S0144818800000508
4. https://www.bu.edu/bulawreview/files/2021/01/SAMUELSON.pdf
5. https://ssrana.in/litigation/ip-litigation/copyright-litigation/
6. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1523780
7. https://lkslaw.com/insights/articles/emerging-trends-of-award-of-damages-in-ip-suits
8. https://www.managingip.com/article/2b5rhoz3r9eaq25x89urk/sponsored-content/damages-in-ip-suits-a-rising-tide-in-india
9. https://scholarship.law.upenn.edu/faculty_scholarship/484/
10. https://www.sciencedirect.com/science/article/abs/pii/S0167624508000711
11. https://www.iima.ac.in/publication/law-restitution-unjust-enrichment-india