Striking a Balance: When Should Trade Secret Laws Shield Disclosures to the Government?
45 Pages Posted: 9 Jun 2010 Last revised: 28 Jul 2013
Date Written: February 10, 2012
Earlier this year, Toyota issued recalls on over eight million vehicles because of faulty acceleration. Assume that the National Highway Traffic Safety Administration (NHTSA) requests that Toyota allow the government access to the data in black boxes on the recalled cars. The black boxes are operated by proprietary software and can only be accessed with special codes by Toyota. Assume further that Toyota refuses to provide the Black Box data to the government, claiming that it would reveal its trade secrets. How should courts approach what I coin these refusal-to-submit cases? There is a void in the literature and the case law on appropriate theoretical and doctrinal approaches for the special circumstances created by these cases.
The socio-political climate and pending regulatory action in the United States makes this a pressing and timely issue, and one that is likely to continue. The recent financial crisis brought multi-million dollar corporations as well as individuals on the eve of retirement to financial ruin, and required government bail-outs to avert even further widespread economic disaster. In the wake of these events comes a push for greater transparency of governmental decisions and greater oversight of private companies by the government in the hope of better protecting the public. Moreover, almost immediately upon taking office the Obama Administration ordered several agencies, including the FDA and the EPA, to review the propriety of keeping certain company-submitted information secret.
Even without any changes, the current patchwork of agency regulations and practices could pose risks to company trade secrets in the hands of the government, since trade secrets involve a unique form of property right that can vanish upon disclosure. Accordingly, the decision whether to produce trade secret information to the government in the first instance is not one to be made lightly. This Article therefore takes on the novel approach of focusing on the front end of the process - the submittal of company trade secrets to the government in the first instance.
The Article is the first to identify this gap in the law and to examine the problem from the lens of trade secret law with an eye toward developing a more principled approach to resolving these cases. I examine cases that address, in other contexts, when one party can be ordered to produce its trade secrets to another. Lessons from these cases ultimately help frame the proposed “shield or disclose” model. Moreover, in the process of deriving guidance for the creation of the shield or disclose model, the Article makes a further contribution by analyzing the varied and obscure patchwork of agency rules, to succinctly identify themes and approaches relevant to the refusal-to-submit problem.
Keywords: trade secrets, government disclosure, disclose to government, shield, trade secret regulation, FOIA, produce to government, refuse to submit, trade secrecy, Toyota, proprietary information, confidential information, black box, transparency, agency protect trade secrets
JEL Classification: K20, K30, K29
Suggested Citation: Suggested Citation