Exemption 4


 * This article is part of a series on Exemptions

Introduction
Exemption 4 is usually used by agencies to withhold trade secrets and confidential business information submitted to the government by private individuals and companies.

Under the exemption, an agency may withhold “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” The exemption applies to two types of records. The first category of records that falls under Exemption 4 is trade secrets. The second category consists of information that is a) commercial or financial, and b) obtained from a person, and c) privileged or confidential.

Text of Exemption 4
(b) This section does not apply to matters that are— [...]
 * (4) trade secrets and commercial or financial information obtained from a person and privileged or confidential;

Trade Secrets
While the term “trade secret” is not defined in the text of the FOIA, courts have adopted one of two definitions.

Prior to a 1983 ruling by the U.S. Court of Appeals for the D.C. Circuit, the definition courts generally relied on was what is commonly referred to as the “Restatement” test, so called after the legal treatise from which it was derived. According to this definition, a trade secret is: “any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Under this definition, “a trade secret can be any information used in a business which gives competitive advantage.”

A narrower definition was adopted later by the U.S. Court of Appeals for the D.C. Circuit in Public Citizen Health Research Group v. Food & Drug Administration, which has also been adopted by the U.S. Court of Appeals for the Tenth Circuit and some lower courts in other circuits. In these courts, a trade secret is 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.”

The “Public Citizen” definition applies only to information related to “the productive process itself,” rather than “collateral matters of business confidentiality such as pricing and sales volume data, sources of supply and customer lists.” That is, there must be “a direct relationship between the information at issue and the productive process.”

The distinctions between these definitions are important to understand because their applications have sometimes resulted in different outcomes. For example, in Public Citizen, the court overturned the lower court's application of the Restatement definition in finding that health and safety data from clinical studies constituted trade secrets. Instead, applying the narrower definition of “trade secret,” the court held that since “the relationship of the requested information to the productive process [was] tangential at best,” and the information was not a “plan, formula, process, or device,” it was not a trade secret under Exemption 4.

Commercial or Financial Information
In addition to trade secrets, Exemption 4 also applies to an independent category of records. An agency may also withhold information that is: “(1) commercial or financial; (2) obtained from a person, and (3) privileged or confidential.”

Trade Secrets
Regardless of which definition of “trade secret” is applied, both definitions have three elements in common. First, the submitter must use the information in business or trade, rather than for a non-commercial purpose. Second, the information must have commercial value. Finally, the information must have been maintained as a secret.

First, you should attempt to challenge whether the submitter used the information in business, and identify situations in which the submitter is not “engaged in trade or commerce” related to the information. For example, a court held that research designs for noncommercial scientists — such as university researchers — do not meet this criterion, as the scientists are not “involved in trade or commerce.” Non-commercial research, especially that conducted by non-profit outlets or philanthropic arms of for-profit entities, is more likely to be found “non-commercial.”

Second, in most cases you should argue that the information is not “commercially valuable” on the basis that it does not give the submitter a “competitive advantage. . . over competitors.” For example, a court rejected a company’s claim that certification materials it submitted to the federal government for an airplane were “commercially valuable” in the market for antique aircrafts, as it had not been shown that the company currently competed in that particular market or intended to do so.

Third, in disputing whether the alleged information is actually a “secret,” you should cite examples of its “actual public disclosure,” as such disclosure “eliminates the trade secret status of such information.” For example, as one court noted, if the submitter of documents gives the government permission to loan or distribute them to members of the public, “those documents are no longer ‘secret’ for purposes of Exemption 4.” In one case, where a company authorized the government to “loan” information it submitted about its antique airplane model to third parties seeking to make repairs or replacement parts, court held that that information “ceased to be ‘secret.’”