Protecting Trade Secrets Under The Revised Illinois FOIA, Effective January 1, 2010
By John Zabriskie and Benno Weisberg
Imagine the following scenario: After a bidding contest against all of its major competitors, Company X wins a contract with a small city in downstate Illinois to fill the city's need for widgets over the next 3 years. The city's RFP called for detailed information about the bidders' operations. Before the ink has dried on the contract, the city receives two Illinois Freedom of Information Act ("FOIA") requests for copies of Company X's winning bid. One is from Company Y--a losing bidder and a fierce competitor of Company X. The other is from a reporter for the local newspaper who is writing an investigative report about possible corruption in the city's procurement practices. What can Company X do to prevent release of the detailed information about its operations (which Company X considers trade secret) to Company Y and the reporter?
The answer is likely to change as of January 1, 2010, when a substantially revised version of Illinois' FOIA will take effect. FOIA will still contain an exemption for trade secrets. However, Company X's ability to claim the exemption, and the time frame in which it must do so, may be different.
Substantively, the revised FOIA contains two noteworthy changes that may impact the city's determination of what information it will produce in response to the FOIA requests. First, a new section of the Act, Section 2.5, provides that "[a]ll records relating to the obligation, receipt, and use of public funds of the State, units of local government, and school districts are public records subject to inspection and copying by the public." At first glance, this provision echoes the definition of "public records" in the former version of the Act, which listed seventeen specific categories of information constituting public records, including "all information in any account, voucher, or contract dealing with the receipt or expenditure of public or other funds of public bodies." However, the new language more closely echoes article VIII, section 1(c), of the Illinois Constitution, which provides that "[r]eports and records of the obligation, receipt and use of public funds of the State, units of local government and school districts are public records available for inspection by the public according to law." In this regard, it's worth noting that the Illinois Supreme Court's recent decision in Stern v. Wheaton-Warrenville Cmty. Unit Sch. Dist, 233 Ill. 2d 396 (2009), expressly left unanswered the question of whether that constitutional provision required that a school superintendent's employment contract be disclosed in response to a FOIA request. Instead, the Court decided the case on the narrower grounds that the employment contract did not fall within the exemption for "personnel files" simply because the contract was contained in the superintendent's personnel file. Thus, new FOIA Section 2.5 may simply be a legislative effort to clarify that the category of public records designated by article VIII, section 1(c) of the Illinois Constitution is subject to FOIA and to provide the public with a defined tool for requesting such records within the framework of FOIA.
Second, the trade secrets exemption has been modified so that, to be considered exempt, information claimed to be trade secret or "commercial or financial information obtained from a person or business," must be "furnished under a claim that [it is] proprietary privileged or confidential, and that disclosure of the trade secrets or commercial or financial information would cause competitive harm to the person or business." In light of these changes, what Company X must do (at least going forward) is fairly plain: from now on, when Company X submits documents to an Illinois government entity, it must pre-designate information contained in those documents as trade secret and proprietary in order to be able later to claim the trade secrets exemption.
Other changes will make it easier for parties like Company X to protect their information, and others will make it harder. For instance, under the new law the city has different response times for responding to Company Y's and the reporter's respective requests. Company Y's request will likely be treated as a "commercial purpose" request, which means that the city has 21 business days to either produce the bid and contract, reject the request by citing an exemption, or provide the requester an estimate of the time it will take the city to provide the requested records and the cost of processing the request. Assuming that the phrase "solicitation . . . for sales or services" in the new definition of "commercial purpose" is construed as including a competitor's efforts to obtain contract and bid documents, Company X will have more time to marshal its factual and legal arguments for non-release and to work with the city to produce a redacted version of the requested documents.
By contrast, the reporter's request must now be answered within five business days (as opposed to seven business days under the current FOIA) and the city will be penalized if it fails to timely respond. Importantly, under both the former and the revised versions of the Act, the city is under no statutory obligation to give Company X notice of any FOIA request for its information. Thus, to the extent it can, Company X should secure a contractual requirement that it receive notice of any FOIA requests for its information. (Further, to the extent such a contractual obligation is not feasible--i.e., in the case of a losing bidder--it is prudent for private parties submitting information to government entities to stress the importance of receiving such notice, even as a courtesy.)
These changes (as well as numerous other changes in the Act) are part of a deliberate effort to overhaul what the new Act's most prominent advocate, Illinois Attorney General Lisa Madigan, referred to as the State's prevailing FOIA "culture" at a recent forum on the new law held at the Chicago Kent School of Law. Madigan and her deputy Chief of Staff, Kara Smith, emphasized at the forum that the amendments are designed to make it easier for the press and the public to gain access to information by requiring that the government respond more quickly to FOIA requests, providing additional consequences for State agencies that do not timely comply with requests, and narrowing the scope of certain exemptions.
Just what all of this means for Company X and other private parties doing business with Illinois government entities remains to be seen, but clients seeking to protect their trade secrets should be vigilant.
A redlined version of the statute, highlighting the differences between the old and new FOIA laws, is available on the Attorney General's website here.