Mgmt 108 case 2

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Mgmt 108 case 2

Exemption 4 Freedom of Information Act Guide, May Exemption 4 Exemption 4 of the FOIA protects "trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential. Its very existence encourages submitters to voluntarily furnish useful commercial or financial information to the government and it correspondingly provides the government with an assurance that such information will be reliable.

The exemption also affords protection to those submitters who are required to furnish commercial or financial information to the government by safeguarding them from the competitive disadvantages that could result from disclosure.

FDA, 3 has adopted a narrow "common law" definition of the term "trade secret" that differs from the broad definition used in the Restatement of Torts. Circuit's decision in Public Citizen represented a distinct departure from what until then had been almost universally accepted by the courts -- that "trade secret" is a broad term extending to virtually any information that provides a competitive advantage.

In Public Citizen, the term "trade secret" was narrowly 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.

Circuit's narrow definition of the term "trade secret," finding it "more consistent with the policies behind the FOIA than the broad Restatement definition. To do so, the information must be commercial or financial, obtained from a person, and privileged or confidential.

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Circuit has squarely held that a submitter's "nonprofit status is not determinative of the character of the information it reports," holding instead that "information may qualify as 'commercial' even if the provider's. For example, the D. Circuit recently rejected an agency's rather strained argument that data pertaining to the location of endangered pygmy owls qualified as "commercial or financial" information "simply because it was submitted pursuant to a government-to-government cooperative agreement" whereby a state agency provided "access to its database in return for money" from the federal government.

Circuit reasoned that "[s]uch a quid-pro-quo exchange between governmental entities does not constitute a commercial transaction in the ordinary sense. Circuit found, the requested "owl-sighting data itself [was] commercial neither by its nature having been created by the government rather than in connection with a commercial enterprise nor its function as there [was] no evidence that the parties who supplied the owl-sighting information [had] a commercial interest at stake in its disclosure.

Circuit was "unpersuaded" that Exemption 4 applied. Circuit found that research designs submitted as part of a grant application were not "commercial," despite claims that "[t]heir misappropriation," which "would be facilitated by premature disclosure, [would] deprive[ the researcher] of the career advancement and attendant material rewards in which the academic and scientific market deals.

Circuit declared that "a noncommercial scientist's research design is not literally a trade secret or item of commercial information, for it defies common sense to pretend that the scientist is engaged in trade or commerce.

Circuit held that if that interest is "founded on professional recognition and reward, it is surely more the interest of an employee than of an enterprise" and so is beyond the reach of Exemption 4.

Circuit noted that it certainly was possible for a given grantee "to have a commercial or trade interest in his research design," but it emphasized that "the burden of showing" such an interest "was on the agency. Circuit concluded that in that case, the agency had entirely failed to "carr[y] its burden on this point.

The term "person" refers to a wide range of entities, 40 including corporations, banks, state governments, agencies of foreign governments, and Native American tribes or nations, who provide information to the government.

Documents prepared by the government can still come within Exemption 4, however, if they simply contain summaries or reformulations of information supplied by a source outside the government, 45 or contain information obtained through a plant inspection. In earlier years, courts based the application of Exemption 4 upon whether there was a promise of confidentiality by the government to the submitting party, 49 or whether the information was of the type not customarily released to the public by the submitter.

Morton, 51 long considered to be the leading case on the issue, which significantly altered the test for confidentiality under Exemption 4. In National Parks, the Court of Appeals for the District of Columbia Circuit held that the test for confidentiality was an objective one.

Circuit declared in National Parks that the term "confidential" should be read to protect governmental interests as well as private ones, according to the following two-part test: Circuit expressly reserved the question of whether any other governmental interests -- such as compliance or program effectiveness -- might also be embodied in a "third prong" of the exemption.

Seventeen years later, in a surprising development, D. NRC, that if it were a question of first impression, they would "apply the common meaning of [the word] 'confidential' and [would] reject" the National Parks test altogether.

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Circuit's addition of "some two-pronged 'objective' test" for determining if material was "confidential" in light of the unambiguous language of the exemption. Circuit had "endorsed the National Parks definition many times," thus compelling them to follow it as well.

Circuit could have an opportunity to consider whether the definition of confidentiality set forth in National Parks -- and followed by the panel majority in Critical Mass -- was indeed faithful to the language and legislative intent of Exemption 4. Circuit issued its en banc decision in Critical Mass.

After examining the "arguments in favor of overturning National Parks, [the court] conclude[d] that none justifies the abandonment of so well established a precedent. Circuit determined that "[i]n obedience to" stare decisis, it would not "set aside circuit precedent of almost twenty years' standing.

Circuit went on to "correct some misunderstandings as to its scope and application. Circuit's en banc decision 68 and it thus stands as the leading Exemption 4 case on this issue.S.N.

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Mgmt 108 case 2

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