New Public Records Act Opinion Considers Extent of Trade Secret Privilege

Best Best & Krieger LLP

Best Best & Krieger LLP

Drug Company’s Mandatory Release of Price Increase May Compromise Privilege, Permitting Disclosure Under the CPRA

A California appellate court recently held that disclosure of trade secret information to third parties, even if mandated by statute, may compromise the privilege. The Second District Court of Appeal in Amgen Inc. v. The California Correctional Health Care Services considered a California Public Records Act request for records a third party claimed were protected by the trade secret privilege.

While the April 9 decision didn’t involve a trade secret claim by a government entity, it could have implications for local agencies hoping to use this privilege to withhold public records under the CPRA.

In this case, a private pharmaceutical manufacturer was required by statute to disclose price information to more than 170 drug purchasers. One of those purchasers was the California Correctional Health Care Services, which received a CPRA request from Reuters News for the same information. The private pharmaceutical manufacturer intervened, claiming that the price information was a trade secret and could not be disclosed.

The appellate court repeatedly noted that the initial disclosure to the California Correctional Health Care Services and other purchasers may have destroyed the privilege because the purchasers could obtain economic value from the information and the purchasers could further disseminate this information. Specifically, the purchasers could derive economic value by using the price information to find cheaper alternatives, which was contemplated by the statute that mandated the disclosure. This case did not address whether the trade secret privilege was appropriately applied to the price information.

Unlike the private pharmaceutical manufacturer in the case above, Government Code section 6254.5 sets out a roadmap for government entities to make disclosures required by statute without waiving an exemption under the CPRA. If local agencies release information that it is required to disclose under a state statute, then Government Code section 6254.5 explicitly provides that there is no waiver of the 31 exemptions in Government Code section 6254 “or similar provisions of law,” such as the trade secret privilege in Evidence Code section 1060.

However, even under the provisions of Government Code section 6254.5, local agencies should be mindful of whether recipients of the information can derive independent economical value from the disclosure. This could affect the underlying trade secret analysis, as was the case in Amgen. In addition, agencies should consider whether it can control the further dissemination of the information, which may implicate First Amendment and other CPRA concerns.

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