BFV Perspectives, Noncompete & Trade Secrets, | Jul 08, 2019

Sharing Trade Secrets with the Federal Government? Supreme Court Issues Ruling

In the case of Food Marketing Institute v. Argus Leader Media, the Supreme Court provides insight into sharing trade secrets with the federal government. In particular, it addresses what information can be legitimately deemed confidential when that information is provided to the government. Notably, there are two important lessons that businesses can take away from this ruling.

But first, let’s discuss the ruling. The original dispute in the case arose in response to a Freedom of Information Act (FOIA) request to the Department of Agriculture (USDA) to disclose the Supplemental Nutrition Assistance Program (SNAP) data that it possessed for various grocery retailers.  The USDA denied the FOIA request on the grounds that the SNAP data it possessed for the retailers was confidential, and therefore protected by Exemption 4 of FOIA.  Exemption 4 states that a government entity may withhold information from a FOIA request if that information constitutes: “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” 

Though trade secrets are mentioned by the exemption, in the decision, the Supreme Court primarily sought to establish a definition of the statutory term “confidential” and reconcile the standards applied by lower courts pursuant to Exemption 4.  While the court may have circumvented a direct discussion of trade secrets, its decision provides valuable insight into what information can be legitimately deemed confidential when dealing with the government.

In the decision, the Court grappled with what information can be considered confidential under Exemption 4. Justice Gorsuch, writing for the majority, arrived at two main conclusions using amalgams of precedent and dictionary definitions.  Those two conclusions (one of which was posed as a question) are:

(1) information shared freely cannot be considered confidential; and

(2) can information lose its confidentiality if the receiving party makes no assurances of keeping it confidential? 

The Court came to the conclusion that the relevant information (grocery retailers’ SNAP data) satisfied the first condition simply because SNAP data is not freely shared by retailers.  Moreover, the Court concluded that because the government makes assurances of confidentiality before receiving data from retailers, the second condition need not be definitively answered for the time being.

Ultimately, the Court ruled in favor of the Food Marketing Institute as retailers’ SNAP data satisfied both conditions mentioned above.  Justice Gorsuch delivered a clear conclusion to the Court’s opinion: “At least where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is ‘confidential’ within the meaning of Exemption 4.”  The Court declined to read a “substantial competitive harm” requirement into the Exemption as some federal courts of appeal had done.  While leaving no question about the definition of “confidential,” the Court did not provide any clarity to the definition of trade secrets for purposes of the FOIA Exemption. 

The decision provides important guidance for companies that share confidential information with the federal government.  Businesses can take away two lessons from this decision about sharing trade secrets with the federal government.  First, if you are providing information to the government that you share freely and don’t keep confidential, you should not expect it to be protected from the prying eyes of the public or any special interest groups that may seek the information through a FOIA request.  Second, you need to be sure to obtain assurances of confidentiality from the government, if you want the information to be exempt from FOIA requests.

For additional information, please read my previous blog on Food Marketing Institute v. Argus Leader Media.

Thank you to Henry Fink, BFV’s summer intern, for his help in writing this blog post.

BFV Perspectives, Noncompete & Trade Secrets, | Jul 08, 2019
Benjamin I. Fink
Benjamin I. Fink

Benjamin Fink is known for his work in noncompete, trade secret and competition-related disputes. A shareholder at Berman Fink Van Horn, Ben concentrates his practice in business and employment litigation.