Trade Secrets Trend To Watch In 2014: Government Regulations Requiring Public Disclosure Of Proprietary Information

http://blogs.orrick.com/trade-secrets-watch/files/2014/01/shutterstock_158124002-200x150.jpgIn the New Year, one of the trade secret trends we’re watching is the ongoing tension between a company’s interest in preserving its proprietary information and the public’s demand to know more about the goods or services it consumes. Last year we saw this play out in states requiring public disclosure of oil and gas companies’ secret fracking processes. But this problem is not limited to the oil and gas industry: as SeaWorld and Sanofi Aventis recently learned, many organizations can be impacted by a variety of different government regulations requiring companies to reveal proprietary information to the public.

SeaWorld dove into the trade secrets arena after being cited for violating Occupational Safety and Health Administration (OSHA) regulations following the death of an orca trainer. Despite OSHA regulations requiring companies to make public employee safety regulations, SeaWorld refused to voluntarily disclose updated trainer protocols, information that SeaWorld considered proprietary. In August 2013, Occupational Safety and Health Review Commission Administrative Law Judge Ken Welsch ruled that the safety protocols were not trade secrets, and ordered their release by late September 2013. In his opinion, Judge Welsch noted that none of the documents contained financial or commercial information, and that documents of that type are produced routinely in OSHA proceedings. Moreover, Judge Welsch noted that “[a]n observant paying [SeaWorld] customer could glean a great deal of the information found in the designated documents simply by paying attention.” Faced with SeaWorld’s claim that the information was proprietary, and apparently fearing criminal prosecution for unlawful disclosure of trade secrets, OSHA has refused to release SeaWorld’s safety protocols. OSHA’s fear of prosecution was not unfounded—federal government workers can be imprisoned for up to one year for unlawfully disclosing trade secrets.

Although the deadline for public release of those documents has passed, OSHA has not yet released them, maintaining its fear of being held liable for the release. This case is unusual because even the ruling of an administrative law Judge was insufficient to tip the balance in favor of disclosure of information already earmarked for disclosure by federal regulation. SeaWorld has appealed its citation to the U.S. Court of Appeals in the District of Columbia. Meanwhile, the Associated Press has stepped into the fray, filing a Freedom of Information Act (FOIA) request for the documents. SeaWorld and OSHA are likely to cite Exemption 4 to FOIA which prevents the release of trade secrets. Whether it will again be successful in resisting disclosure, particularly in light of Judge Welsch’s rulings, remains to be seen.

Another trade secrets battle between public and private interests may be forthcoming in a matter between the Food and Drug Administration (FDA) and the drug company Sanofi-Aventis. The FDA requires the public posting of label information for over-the-counter medications, but Sanofi-Aventis seeks to prevent such a disclosure for one of its new drugs on the basis that the information is a trade secret. Sanofi-Aventis is expecting to launch a new over-the-counter allergy drug, Nasacort, in the United States in early 2014. Rather than agree to release Nasacort’s label information, Sanofi-Aventis sued the FDA to prevent disclosure of what it considers to be company trade secrets.

The stakes for Sanofi-Aventis in protecting these trade secrets are high. Sanofi-Aventis sought but did not receive a three-year clinical investigation marketing exclusivity period for Nasacort. As a result, the public release of its label information would allow Sanofi-Aventis’ competitors to create their own generic products and enter the market at or near the same time as Sanofi-Aventis releases its new product. By contrast, if Sanofi-Aventis is successful it could establish a market share before any competitors enter the market. Blocking the release of the label would prevent competitors from making a competing product as the generic drug’s label must be identical to the brand name’s label.

As in SeaWorld’s case, access to the information is also being sought through FOIA. Companies seeking to make generics have filed FOIA requests in order to get the label information. In both cases, the battle is only beginning. Trade Secrets Watch will continue to monitor the latest developments in the coming months.