Documents Submitted To Government Might Become Public
If you’ve shared any confidential or proprietary information with a United States government agency regarding your organization be warned. In light of recent changes to the Freedom of Information Act (FOIA), you must stand poised to respond if this information is the focus of a FOIA request.
Congress passed and President Barack Obama this past summer signed into law the FOIA Improvement Act of 2016 (Public Law No. 114-185), which adds to and amends the Freedom of Information Act 5 U.S.C. § 552 (FOIA). The stated purpose of the amendments to FOIA is to create a “presumption of openness” limiting the federal government’s discretionary power to withhold requested information to those discrete circumstances when the government can establish that the disclosure would result in “foreseeable harm.”
For those who transact business with or even simply communicate with the government (referred to as “submitters” in FOIA parlance), the FOIA changes mean that nonprofit submitters must proactively respond when a FOIA request potentially targets confidential, proprietary data and/or trade secrets, such as donor lists, allocation of resources, and fundraising strategies that have been shared with government entities.
The 2016 FOIA Improvement Act did not disturb FOIA Exemption 4, which protects from disclosure of “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” Under Exemption 4, the government is prohibited from disclosing:
A. Trade secrets (defined as a secret, commercially valuable plan, formula, process, or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort when there is a direct relationship between the information at issue and the productive process) or
B. Other proprietary/confidential information, which must meet these three prongs:
1) The information is related to a commercial business or trade (which includes nonprofits);
2) The information was obtained from a person or entity that is outside the federal government; and,
3) The information is not the kind of information that the submitter releases to the public (e.g., it’s not available on the commercial entity’s website or is otherwise publicly available, and the commercial entity takes reasonable steps to keep the information private), and the disclosure of this commercial information would likely either impair the federal government’s ability to obtain similar-type information in the future, or the disclosure of such information would cause substantial competitive harm to the submitter (for nonprofits, this includes a nonprofit’s business model that other nonprofits could try to duplicate).
Unlike the application of other FOIA exemptions, in their interpretation of Exemption 4, courts have applied the federal law protecting trade secrets (Uniform Trade Secrets Act and the Defend Trade Secrets Act) in conjunction with FOIA to determine that the government lacks any discretion to disclose trade secret or commercial confidential/ proprietary information in response to a FOIA request.
As a result, once the agency determines or the submitter establishes that a trade secret is contained in a document that is responsive to a FOIA request, the agency may not disclose that trade secret in response to a FOIA request.
Accelerating the Production of Information
The 2016 FOIA Improvement Act was passed to accelerate the FOIA process and to compel government FOIA officials to provide as much information as soon as possible in response to a FOIA request. Specifically, the Act now imposes a penalty (i.e., the waiver of the statutory FOIA fees) on the agency for failing to provide a timely FOIA response.
The Act also requires that the FOIA response segregate exempt information from releasable information in the same document, as an agency can no longer seek to refuse to produce a document containing exempt information. Instead, the agency must still produce the requested document with only the protected information redacted.
The Act makes clear that federal agencies lack the discretion to withhold requested information unless disclosure would directly harm an interest protected by one of the nine FOIA exemptions or the public disclosure is prohibited by law.
The Act also requires the agency receiving the request to produce electronic copies of documents/data, which can be instantly disseminated by the requesting party, rather than paper documents. It specifies that a federal agency’s letter in response to a FOIA request must advise the requester that it has the right to appeal the agency decision to deny the disclosure of prohibited information and the right to seek agency dispute resolution services to resolve all remaining issues arising out of a denial to disclose requested information.
Importantly, the Act requires the creation of a consolidated federal government FOIA web portal to streamline the request process by creating a uniform electronic request format while also allowing the same FOIA request to be simultaneously submitted to multiple agencies.
The Office of Management and Budget (OMB), working with the Attorney General’s office, is tasked with leading the effort to establish and manage this portal. OMB expects to launch this new FOIA portal before the end of September. Currently, 16 federal agencies receive and administer FOIA requests through https://foiaonline.regulations.gov
Preserving Trade Secret, Confidential Data
Preserving Trade Secret, Confidential Data As a result of the changes to FOIA accelerating the pace of the production of requested documents, submitters must be poised to respond immediately — as soon as the government provides notice that a FOIA request seeks disclosure of the submitter’s data and/or documents.
As an initial step, whenever any person or entity first shares information/data with the federal government that should be protected from public disclosure through FOIA, the title page and each subsequent page of the confidential document or data should be plainly marked with a legend stating, “(C)onfidential and proprietary information which is exempt from disclosure under FOIA.” Taking this step alone puts the agency receiving the request on notice that a FOIA exemption might apply and that the submitter must be given the opportunity to explain why the requested information is protected from FOIA disclosure as soon as that document is targeted by a FOIA request.
Next, when the agency contacts the submitter (as Executive Order 12,600 requires, and as is implemented through each federal agency’s FOIA regulations) to advise that a request seeks the disclosure of their information, the submitter should promptly respond by identifying:
1) The specific information (not the document as a whole) within each responsive document that is exempt from disclosure;
2) Which of the nine FOIA exemptions prohibits disclosure (as stated above, Exemption 4 protects trade secrets and confidential/proprietary data);
3) The rationale supporting the claimed exemption; and,
4) The specific competitive harm that the submitter would suffer if the requested information was disclosed. Also, the submitter (or submitter’s counsel) must seek to maintain an open dialogue with the assigned agency FOIA official throughout the process to promptly address and resolve any agency concerns about what should and should not be disclosed before the agency takes a final disclosure position, which is often difficult to unwind.
Finally, the submitter must be poised to assert a “reverse FOIA” action to prevent the disclosure of trade secrets or other confidential/proprietary commercial information in the event that the agency disregards the submitter’s exemption recommendations before the agency actually releases the submitter’s trade secrets and confidential information in response to a FOIA request.
Douglas Proxmire is a partner in Venable LLP’s Government Contracts Group in the Tysons Corner, Va. He advises clients on matters involving government and construction contract formation and dispute resolution, including complex contract drafting, claim preparation, and litigation arising out of a wide range of technology, heavy industrial, and commercial contracts. His email is dcproxmire@Venable.com