Assignment

Trade Secret

Essentially, a company may disclose proprietary information, especially trade secrets to

government agencies, and/or courts. And those governmental agencies/courts could be required
to disclose that valuable information to anyone who requests it. There are some measures in
place for businesses to protect such information in these circumstances. For example, there are
procedures to seal documents filed with the court during litigation. Additionally, there is an
exemption under FOIA to protect trade secret information where agencies mandate disclosure of
trade secrets in confidence in order for companies to maintain regulatory compliance. However,
disclosing trade secrets to the government is inherently risky despite these limited protections.
First, the procedures are different for each government agency and not all information
submitted to an agency is protected for all purposes or for all time. Moreover, even with
protections in place, inadvertent disclosures can and do occur. Accordingly, there is always a risk
when submitting information to the government that the trade secret status of the information
will be lost due to an inadvertent disclosure by a governmental official. (Textbook, ch. 11).
Second, trade secret owners, due to ignorance or human error, may incorrectly file the
required documents with required designation or proof of valuable trade secret. Failure to follow
the applicable procedures in a timely manner can result in the loss of trade secrets and the
disclosure of confidential information.
Third, under FOIA, anyone may request copies of documents without proof of standing,
legitimate interest, or any other threshold requirement. Most FOIA requests come from
businesses seeking information on their competitors. If trade secret information is disclosed
through a FOIA request, it could become the kind of private use of information that constitutes a
taking under the Fifth Amendment Takings Clause. FOIA therefore presents a considerable risk
of loss to trade-secret holders. (Textbook, ch. 11). The last decade has been marked by increases
in businesses seeking to obtain competitors’ trade secrets because it is a relatively inexpensive
and easy way for them to scout out their competitors. (W. Whitaker Rayner, Protecting Trade
Secrets Furnished To The Government, July 29, 2014,
https://www.tradesecretsinsider.com/protecting-trade-secrets-furnished-to-the-government/).
 Fourth, FOIA contains exemptions against disclosure of trade secrets. However, the
Supreme Court has found these exemptions to be permissive, not mandatory. Thus, while FOIA
permits the agencies to withhold company records containing trade secrets, it does not require
them to do so. For example, subsection 3 of 5 U.S.C. § 552(b) (“Exemption 3”), exempts
information that is “specifically exempted from disclosure by statute,” and subsection 4
(“Exemption 4”) exempts “trade secrets and commercial or financial information obtained from a
person and privileged or confidential.” However, none of the exemptions apply to Congress.
There is thus the risk that Congress could request information from an agency, increasing the
chances that the information could be leaked or that a member of Congress could discuss the
information openly on the congressional floor and thereby destroy its trade secret status.
(Textbook, ch. 11).
In sum, making disclosures of trade secrets to the government is highly risky to a
business especially when it voluntarily or involuntarily discloses its trade secrets.

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