Monday, August 28, 2006, 8/28/2006 07:42:00 AM

Help! The Government's Got My Trade Secrets.

We've written extensively about the mostly unhappy intersection of trade secrets law with laws regarding disclosure of information in the hands of governments and their agencies and instrumentalities. A recent case from Judge John Bates of the U.S. District Court for the District of Columbia elucidates -- happily this time -- the intersection between government contracting laws and regulations, the Freedom of Information Act ("FOIA") and the federal Trade Secrets Act, 18 U.S.C. ยง 1905.

The case, Canadian Commercial Corp. v. Dep't of the Air Force, 2006 WL 2207604 (D.D.C. Aug. 3, 2006), was a so-called "reverse FOIA" action which grew out of a FOIA request by a competitor of the plaintiff, Canadian Commercial, that lost an Air Force bid for turbojet engines. The request sought certain financial data submitted to the government in connection with the bid including line-item unit and other pricing information regarding Canadian Commercial's subcontractor's fully-burdened labor rate, material mark-up, and pricing for engine repair services.

Canadian Commercial contended the information should not be provided under FOIA under so-called Exemption 4 which permits the government to withhold information responsive to a FOIA request if the information is (1) commercial or financial, (2) obtained from a person, and (3) privileged or confidential. That third prong, the only one at issue, turned first on whether the information was submitted voluntarily or involuntarily. In that latter case (which the court determined to be the applicable one), the court was then required to determine whether the information was likely to either (1) impair the government's ability to obtain necessary information in the future, or (2) cause substantial harm to the plaintiff's future competitive position.

The case is a long and difficult one (46 pages in the court's pdf version), but suffice it to say that plaintiff beat the Air Force and enjoined the release of the bulk of the information at issue. Along the way, the court ruled that the Air Force was not entitled to much, if any, deference in its determinations under FOIA. The court also ruled that the Federal Trade Secrets Act precluded the government from releasing information that falls within Exemption 4 and that the Federal Acquisition Regulation did not otherwise permit release under the Trade Secrets Act.

The opinion, though long, is a good primer for lawyers (like me, I'll confess) who don't know much about the subject.
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