Supreme Court Expands Protections to Companies Providing Proprietary Information to the Federal Government

As I’ve written about previously (see here and here), the Supreme Court heard argument earlier this year in a case that implicates trade-secrets issues, Food Marketing Institute v. Argus Leader Media. I covered the oral argument for this blog. Today, the Court entered its opinion, authored by Justice Gorsuch.

In short, this case addressed whether satisfying the Freedom of Information Act’s (FOIA) exemption for “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” requires a showing of substantial competitive harm. 5 USC § 552(b)(4).

As I suspected, the majority (Justices Gorsuch, Roberts, Thomas, Alito, Kagan, and Kavanaugh) answered this question in the negative and abdicated the competitive-harm requirement. Instead, the Court adopted a more permissive test:

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.

During oral argument, trade secrets came up in the context of one of the appellee’s attempts to justify the competitive-harm test. Argus Leader argued that by referring to confidential commercial information, the statue used a term of art that required treating this information under the then-existing trade-secrets law. Because that law required showing competitive harm, Argus Leader argued, Exemption 4 required the same.

The Court rejected this argument:

Argus Leader points to no treatise or case decided before Exemption 4’s adoption that assigned any such meaning to the terms actually before us: “commercial or financial information [that is] privileged or confidential.” So even accepting (without granting) that other phases may carry the specialized common law meaning Argus Leader supposes, the parties have mustered no evidence that the terms of Exemption did at the time of their adoption.

This opinion aids companies who provide proprietary information to the federal government, as it removes the most troublesome hurdle to exempting that information from FOIA disclosure. But importantly, under the new test, the government must provide an assurance of privacy before Exemption 4 applies. Thus, any company providing proprietary information to the federal government should first receive that assurance.

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