The Threat of Disclosure of Proprietary Information Under the California Public Records Act

by K&L Gates LLP
Contact

Companies responding to requests for proposal (“RFPs”) or contracting with California state or local governmental agencies need to be aware of the special pitfalls posed by the California Public Records Act (“PRA”). [1] California PRA practices differ in some significant respects from those in other jurisdictions. California’s PRA requires disclosure of most public records with only limited, narrow exceptions. “Records” has been interpreted broadly, and includes all forms of communication related to public business. Of special importance is that agency records subject to disclosure generally are deemed to include non-public information submitted by contractors in proposals responding to RFPs or as otherwise submitted when required by contract.

Generally, Section 6253 of the California Government Code requires that a government agency disclose the requested information or raise an objection within 10 days of a public records request. Typically, several days pass before the agency apprises the affected contractor that its documents are about to go out the door, if at all; there is no statutory requirement to provide notice to the contractor. This leaves a contractor with very little time to take effective action.

The limited exceptions to disclosure include trade secrets and a catchall provision applying where the court, after weighing various factors, finds that the public interest in non-disclosure clearly outweighs the public interest in disclosure. For example, a court has held that the public interest in disclosure did not outweigh the non-disclosure of applications submitted to the governor by persons who wanted an appointment to a county board of supervisors. On the other hand, another court has held that the public interest in the disclosure of financial statements used to evaluate a rate increase the city granted to a waste disposal company outweighed non-disclosure, and accordingly, permitted disclosure of the financial statements of the private company.

There is strong public policy in favor of disclosure and a finding that the public interest favors non-disclosure is seldom made.  Section 6254(k) of the California Government Code contains an exemption for trade secrets under the California Evidence Code. Section 1060 of the Evidence Code permits the owner of a trade secret to refuse disclosure unless it would conceal fraud or work an injustice. The trade secret exception is narrow and fact-based, with specific factors that the courts have developed over the years. Courts also apply a balancing test between the public policy in favor of disclosure and the confidentiality of the information designated a trade secret by a company.

PRA requests are a growing concern for companies and for government agencies having an interest in strong competition. A robust response to an RFP often includes detailed confidential and proprietary information in response to direct requests or to burnish credentials. Companies commonly disclose non-public information in describing their operations in detail and highlighting their expertise and methods to obtain a competitive advantage to win government contracts. Further, disclosure goes beyond the RFP stage. As a condition to awarding a contract, an agency may require the contractor to disclose additional non-public information about its operations. Later, after the contract is in place, the contractor may be contractually required to make ongoing disclosures about its confidential operations.

The potential for abuse of the PRA is clear. PRA requests are recognized as an easy, inexpensive way to gather non-public information. Originally, as envisioned by the legislature, PRA requests were utilized by media and good-government groups looking to inform the public of government activities. Now, requests are as often made by competitors and by data mining companies gathering information for industry reports.  This problem is not going away and in fact is becoming more troublesome; as government agencies increasingly contract with private companies, competitors and data mining companies will likely continue to increasingly exploit the PRA to obtain valuable confidential information.

Generally, courts are inclined to interpret the PRA liberally, leaving little room for a company to successfully assert an exception to prevent disclosure. In some bleak situations, there is not much that can be done: once a public records request has been made, there can be scant opportunity for the affected company to try to prevent the disclosure of its confidential and often proprietary information. The courts are available to deal with disclosure issues in “Writ of Mandate” proceedings, but it takes time to gather and present compelling arguments, which often have intensive factual as well as legal dimensions.

At the front end, companies can take several proactive steps in anticipation of a PRA request before disclosing information to the agency and once a public records request has been made. Before responding to an RFP, companies need a clear and comprehensive understanding of how the PRA works, including the specific exceptions to disclosure, and an assessment of how their proprietary interests might be compromised by disclosure. With this in mind, they can make informed decisions as to what to include in proposals submitted in responses to RFPs, and what not to include, and put the agency on notice as to the sensitivity of the data. 

So what can be done? Consistent with the aggressive pursuit of the contract, the selection of the information to be disclosed in a response to an RFP should first be reviewed carefully by both the company and its counsel in a damage assessment that weighs the usefulness of the information against the impact of potential disclosure later. Then, at a minimum, any confidential information submitted should be clearly marked as a “trade secret.” It is important to designate only the specific information that is confidential as a “trade secret” and not to over-designate all information as a “trade secret.” Before submitting information, a potential contractor should inquire as to whether the agency has a policy in place for the handling of PRA requests.  Some government agencies have well-developed policies on how to request confidential treatment of documents and the processing of public records requests. 

To try to ensure that a company is timely made aware of a request for its confidential information, ideally the governmental agency should be contractuall required to notify the company upon the receipt of a public records request. Most important, companies should have a strategy in place to quickly address a public records request in the brief time permitted to raise an objection, including detailed explanations as to any legitimate trade secret claims.

With an awareness of the PRA and a strategy in place to deal with potential public records requests, a company can contract with government entities and have optimal chances of limiting the potential disclosure of its proprietary information.

[1] CA Gov. Code §§ 6250-6276.48.

 

Written by:

K&L Gates LLP
Contact
more
less

K&L Gates LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.