By Joshua Rich --
Although patentees generally do not have great concerns about the Freedom of Information Act (FOIA) because of the U.S. Patent and Trademark Office's secrecy requirements, they may lose control over their information under FOIA if they submit it to other parts of the government. Prior to the Food Marketing Institute case, companies faced the possibility that they could lose their trade secrets if they sought government contracts if they could not show that disclosure would cause them substantial competitive harm. Now, those companies need only show that they -- and the government -- intended to keep the information secret in order to prevent disclosure under FOIA.
In the Food Marketing Institute case, a South Dakota newspaper was working on an article on food stamp fraud; to support the article, it submitted a FOIA request to get store-level data for every store in America that accepted Supplemental Nutrition Assistance Program (SNAP) benefits. FOIA generally requires Federal agencies to disclose public records, except as provided by statute. One of the exceptions is Exemption 4, which shields from disclosure "trade secrets and commercial and financial information obtained from a person and privileged or confidential."[1] The Supreme Court was asked to determine the scope of Exemption 4. In a 6-3 decision, it held that information would be exempted from disclosure if it was private or secret and the government had provided some assurance that the information would remain secret -- it did not require any showing of competitive harm that would come to the person from whom the information was obtained if the information was disclosed.
In 2011, the Argus Leader newspaper of Sioux Falls, South Dakota learned of concerns of "retailer trafficking" of SNAP benefits, where retailers exchange SNAP benefits for cash. Under SNAP, program participants usually use electronic benefit cards to buy food from eligible retailers and the sales information is electronically transferred to a state electronic benefits processor who approves or denies the transaction. The state processor then reports the information to the U.S. Department of Agriculture (which administers the SNAP program for the federal government). The reporter working on the story therefore filed a FOIA request with the USDA asking for information including store-level information on SNAP benefits for every store in the United States (about 320,000 stores) over a five year period.
The USDA refused to produce the store-level information on grounds including Exemption 4. Eventually, the District Court applied the test required by the U.S. Court of Appeals for the Eighth Circuit, which had adopted the D.C. Circuit's test from National Parks & Conservation Assn. v. Morton, 498 F.2d 765 (D.C. Cir. 1974). Specifically, the District Court required to the USDA to show that the information was not only secret, but also "likely . . . to cause substantial harm to the competitive position of the person from whom the information was obtained."[2] The District Court held a trial where witnesses for the USDA testified that retailers closely guard their store-level data and that disclosure would harm their stores' competitive positions by allowing competitors to model consumer behavior better. While the District Court found that created a prospective risk of harm to the stores, it found the risk was only incremental, not "substantial." Thus, it ordered the information to be turned over.
The USDA alerted the retailers who take part in the SNAP program that it would not appeal, and the Food Marketing Institute stepped in to try to prevent the documents from being disclosed. In the meantime, the USDA assured them (and the District Court) that it would not turn the documents over until the appeals were exhausted. However, the U.S. Court of Appeals for the Eighth Circuit affirmed the District Court's decision finding that the potential harm -- while real -- would not be substantial, rejecting any argument that confidentiality alone would be sufficient to satisfy Exemption 4, and reaffirming the application of the National Parks test in the Eighth Circuit.
When the case reached the Supreme Court, it first considered whether the National Parks test should apply at all. That is, the question presented was whether "the statutory term 'confidential' in FOIA Exemption 4 [should] bear its ordinary meaning, thus requiring the Government to withhold all 'commercial or financial information' that is confidentially held and not publicly disseminated-regardless of whether a party establishes substantial competitive harm from disclosure." Ultimately, the Supreme Court's answer was yes.
Justice Gorsuch, writing for the six member majority, started his consideration of the scope of Exemption 4 with the language of the statute itself. The meaning of the key statutory term, "confidential," was the same when FOIA was enacted in 1966 as it is today -- "private" or "secret." Contemporary dictionaries suggested that confidentiality might therefore require two conditions. First, it must customarily be kept private (or at least closely held) by the person imparting it. Second, the person receiving the information must customarily provide an assurance that it will stay secret. Certainly, the first condition must be satisfied for information to be considered "confidential," it is less clear that the second must also be satisfied.
Here, Justice Gorscuch was untroubled by determining whether confidentiality under Exemption 4 would require both conditions: the requested data unquestionably did. The Food Marketing Institute had intervened specifically because the individual stores wanted to keep the information secret, and customarily did. And the USDA had promised the stores that it would keep the information secret, unless it was ordered not to do so. Thus, the majority found that the information need not be turned over, regardless of what the exact test under Exemption 4 would be.
Despite the clarity of the dictionary definitions, the majority felt the need to address the National Parks test. It found no basis for the requirement that a disclosure result in "substantial competitive harm" in the statutory language, early case law, or any "other usual source." The D.C. Circuit had cited legislative history for FOIA in support of the test, but Justice Gorsuch referred to that as a "selective tour through the legislative history." But the plain language of the statute itself had been sufficient to allow interpretation of Exemption 4. And there was no good reason for applying the National Parks test when the information was required to be provided to the government, but not when the information was provided voluntarily (as the D.C. Circuit had subsequently found in Critical Mass Energy Project v. NRC, 975 F.2d 871 (D.C. Cir. 1992)). Thus, the majority rejected the D.C. Circuit's National Parks decision in favor of the plain language of Exemption 4.
Justice Breyer, joined by Justices Ginsburg and Sotomayor, dissented from the decision based primarily on both the uniformity of decisions below and policy issues. While the courts below had adopted different tests for Exemption 4, they had all required some showing of competitive harm for the exemption to apply. Thus, the majority's decision allowed Exemption 4 to shield far more than any circuit would have otherwise. And that was a substantial concern for the dissenting Justices: that Exemption 4 might swallow FOIA whole. That is, the goal of FOIA has always been disclosure of information to increase the transparency of government (at least as balanced against certain specific, narrow policy exceptions). But if the questions are just whether the parties providing information and the government agency working with those parties -- which is often subject to "capture" by the parties -- want to keep the information secret, they may be able to shield it from disclosure under FOIA. Thus, the dissenting Justices fear that the decision will substantially narrow the effect of FOIA.
The Food Marketing Institute case reflects a sea change in the application of FOIA to confidential information. Previously, even trade secrets (as defined by the traditional definition under the Uniform Trade Secrets Act or Defend Trade Secrets Act) could be subject to disclosure under FOIA if the trade secret owner cannot prove that the disclosure would cause it substantial competitive harm. Now, Exemption 4 covers not only traditional trade secrets, but also merely confidential business information that has been shared with the government under an expectation of secrecy. Thus, in many cases, information that would have been disclosed under FOIA can now be withheld under Exemption 4.
Food Marketing Institute v. Argus Leader Media (2019)
Opinion by Justice Gorsuch, joined by Chief Justice Roberts and Justices Thomas, Alito, Kagan, and Kavanaugh; opinion concurring in part and dissenting in part by Justice Bryer, joined by Justices Ginsburg and Sotomayor
[1] 5 U.S.C. § 552(b)(4).
[2] See Argus Leader Media v. United States Dept. of Agriculture, 889 F.3d 914, 915 (8th Cir 2018).
Re: .."patentees generally do not have great concerns about the Freedom of Information Act (FOIA) because of the U.S. Patent and Trademark Office's secrecy requirements."
Given the number and massive scope of hacks into other U.S. Government databases, and the extent and sophistication of foreign government technology espionage, what is your assumed level of secrecy confidence based on? Has the PTO ever explained its IT security level for unpublished applications? Are they encrypted? Do examiners have no way to download or transfer such data?
Posted by: Paul F. Morgan | July 05, 2019 at 11:53 AM
Mr. Morgan,
Are you presuming that just because other governments routinely hack into and "loot" information that is gathered under the presumption of secrecy, that any such presumption is necessarily destroyed?
I would answer your "what is your assumed level" question with the answer that the LAW still regards that the submitted information IS confidential prior to publication.
Period.
THAT is all that is needed.
And I would then have to wonder about those that seemingly have forgotten one of the critical notions in the US Sovereign patent system that the exchange between the inventor and the government was NEVER merely publication for a chance of a patent grant, and that the very basis as to WHY pre-publication information shared IS secret appears to have been not considered in your question.
Posted by: Skeptical | July 05, 2019 at 12:52 PM