Protecting Trade Secrets in FDA Submissions from FOIA Disclosure in the Wake of FDA Layoffs

In the wake of recent mass layoffs at the U.S. Food and Drug Administration (“FDA”), the FDA is likely to have fewer resources to manage its regulatory responsibilities. One area that may be significantly impacted by such workforce reduction is the FDA’s review of Freedom of Information Act (“FOIA”) requests. To obtain regulatory approvals for products in the United States, life science companies must disclose trade secrets and other confidential information (including data on safety and efficacy) to the FDA, but like all federal agencies, the FDA is subject to mandated disclosure of its records via FOIA. FOIA’s requirements for mandated disclosures have always stood in tension with companies’ goals to protect their trade secrets and other confidential information, but now that the FDA will likely face greater administrative burdens in reviewing FOIA requests, it is all the more critical that companies familiarize themselves with the law surrounding FOIA requests and take steps to minimize the risk of disclosure.

This article provides an overview of how the FOIA process works in relation to FDA records and explores the current law surrounding Exemption 4 of FOIA, which exempts trade secrets and qualifying confidential information from FOIA disclosure. The article concludes by laying out practical tips for companies to leverage Exemption 4 to protect their trade secrets and other confidential information both by making it easier for over-tasked FDA employees to efficiently and accurately find grounds to overcome the FOIA’s presumption of disclosure and by putting companies in the best position to respond to FOIA requests.

Mandated FOIA Disclosure and Exemptions from Disclosure

The FDA fields thousands of FOIA requests every year,¹ and it can take months to determine what, if any, requested information is disclosable. To override the presumption of disclosure in response to a FOIA request and withhold requested information, a government agency must justify² the withholding based on one (or more) of nine FOIA exemptions.³ Title 21 Chapter 1, Subchapter A, Part 20, Subpart D of the Code of Federal Regulations (CFR) lists FDA-specific exemptions,⁴ and each of these exemptions has an analog in FOIA.⁵

The exemption that comes into play for life sciences companies that seek to protect their trade secrets and certain confidential information from FOIA disclosure is found in Section 20.61 of Subpart D. This exemption, whose FOIA analog is “Exemption 4”,⁶ protects trade secrets and commercial or financial information by stating that “data and information submitted or divulged to the Food and Drug Administration which fall within the definitions of a trade secret or confidential commercial or financial information are not available for public disclosure.”⁷ Where a portion of a requested record falls into this, or any other, exemption, the FDA must redact that portion, note the applicable exemption, and continue on to disclose any non-exempt portions of the record “unless the two are so inextricably intertwined that it is not feasible to separate them.”⁸

The Elements of Exemption 4

Exemption 4 only applies to information that qualifies as either (1) a trade secret, or (2) confidential or privileged commercial or financial information.⁹ The FOIA Improvement Act of 2016 introduced a third requirement that agencies only withhold information pursuant to any FOIA exemption where the agency “reasonably foresees that disclosure would harm an interest protected by an exemption.”¹⁰ We discuss each of these three elements below.

1. “Trade Secrets”

   Trade secrets is the first category of information covered by Exemption 4. In contrast to the common and more basic definition of trade secret used under many state laws,¹¹ the U.S. Court of Appeals for the District of Columbia Circuit held in Public Citizens Health Research Group v. FDA in 1983 that a trade secret in the context of Exemption 4 is more narrowly 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, and that has a direct relationship with the productive process.”¹² This definition also aligns with the definition of trade secret in the FDA statute.¹³ In 1990, the U.S. Court of Appeals for the Tenth Circuit substantiated the D.C. Circuit’s interpretation, noting in Anderson v. HHS that to define trade secrets any more broadly would “render superfluous” the second category of information covered by Exemption 4 (confidential or privileged commercial and financial information).¹⁴

   Examples of information that may fall under the trade secrets category of Exemption 4 include drug formulas and compositions, manufacturing processes and sterilization methods.¹⁵ This first category of covered information is the narrower of the two and applies to a minority of Exemption 4 cases; where valuable information falls short of a trade secret, this second prong provides a broader umbrella under which to find protection.¹⁶

2. Confidential or Privileged, Commercial or Financial Information

   1. “Commercial or Financial”

      Courts have interpreted “commercial or financial information” in Exemption 4 as covering information relating to business that could have a commercial or financial impact, including annual reports, supplier lists, new drug development, units sold and business-related decisions and conduct.¹⁷ Information can be commercial or financial in nature whether possessed by a commercial entity, an individual or a nonprofit, as long as the information relates to “trade or commerce.”¹⁸ As the purpose of Exemption 4 is to protect the “submitter’s economic or business interests,” information will only qualify as commercial or financial if its disclosure would harm commercial or financial interests (and not, for example, reputational interests).

      While the interpretation of “commercial or financial” has not historically been the subject of much judicial scrutiny relative to other elements of Exemption 4, several courts have diverged in recent years and given the term a more restrictive definition.¹⁹ For example, in Citizens for Responsibility and Ethics in Washington v. U.S. Department of Justice, the D.C. Circuit held that the Bureau of Prisons’ records related to their pentobarbital supply chain, including contractors’ names, contract terms, lot numbers, and dates of purchase, did not qualify as “commercial” under Exemption 4.²⁰ The court explained that “commercial” in the context of Exemption 4 only covers information that “in and of itself, demonstrably pertains to the exchange of goods or services or the making of a profit,” and not to “information only tenuously or indirectly concern[ing] the exchange of goods or services or the making of a profit.”²¹ For example, disclosure that results in reputational harm that then causes commercial harm is insufficient to meet the standard.²²

      It remains to be seen whether the D.C. Circuit’s more probing approach to assessing the “commercial or financial” element of Exemption 4 will find its way into future case law as courts continue to build a firmer modern playbook of Exemption 4 jurisprudence.²³

   2. “Confidential or Privileged”

      With no express statutory definition, courts have been left to their own devices in construing the term “confidential” in Exemption 4. The longstanding historical standard emerged in 1974, when the D.C. Court of Appeals in National Parks v. Morton held that information is confidential under Exemption 4 if disclosure is likely either to (1) “impair the government’s ability to obtain necessary information in the future,” or (2) “cause substantial harm to the competitive position” of the submitter.²⁴

      However, in 2019, after over four decades of the National Parks standard, the U.S. Supreme Court upended Exemption 4’s confidentiality analysis. The Supreme Court in Food Marketing Institute v. Argus Leaders Media flatly rejected the National Parks test, stating that it reflected “a casual disregard of the rules of statutory interpretation.”²⁵ Based on the “ordinary, contemporary, common meaning” of “confidential” when FOIA was enacted, the Supreme Court found that “confidential” meant simply “private” or “secret.”²⁶ The Court then created a two-pronged test: information is confidential (1) “whenever it is customarily kept private, or at least closely held, by the person imparting it,” and (2) “only if the party receiving it provides some assurance that it will remain secret.”²⁷ The first prong of this test can include a variety of practices, including internal access restrictions, restrictive markings on documents, and the existence of customary confidentiality or non-disclosure agreements.²⁸ The Department of Justice (“DOJ”) has issued guidance stating that the second prong requires a holistic consideration of whether “the context in which the information was provided to the agency reflects…either [an] explicit or implicit” assurance of confidentiality.²⁹

      Many scholars and practitioners have criticized Argus Leader for stripping Exemption 4 of the National Parks competitive harm requirement, which had long acted to reign in the scope of the exemption. Some worry that the decision signals a trend toward unchecked expansion of other FOIA exemptions and a weakening of the power of FOIA requests, which may result in even more information being withheld from the public.³⁰

3. FOIA Improvement Act of 2016: The Foreseeable Harm Requirement

   Although current DOJ guidance advises that agencies “no longer apply the ‘substantial competitive harm’ test from National Parks” in assessing confidentiality,²¹ some courts have recently harnessed the “foreseeable harm” requirement added by the FOIA Improvement Act of 2016 (“FIA”) as a substitute. FIA did not apply in Argus Leader, and the language in it has been relied on by some courts as a way to reinstate a harm requirement and redirect Exemption 4 analysis back to the bedrock principle that information is presumed to be disclosable.³²

   FIA states that an agency may only withhold information if the agency “reasonably foresees that disclosure would harm an interest protected by an exemption.”³³ In Ctr. for Investigative Reporting v. CBP, The U.S. District Court for the District of Columbia has articulated this standard to require that disclosure “would harm an interest protected by [Exemption 4], such as by causing ‘genuine harm to [the submitter’s] economic or business interests,’” or by “dissuading others from submitting similar information to the government.”³⁴ The D.C. District Court also noted that FIA’s foreseeable harm requirement “replaces to some extent the ‘substantial competitive harm’ test that the Supreme Court overruled” in Argus Leader.³⁵

   In 2022, in Seife v. FDA, the U.S. Court of Appeals for the Second Circuit followed the reasoning of the D.C. District Court, holding that FIA’s “foreseeable harm requirement refers to harm to the submitter’s commercial or financial interests,” as well as confidentiality interests.³⁶ Courts have been careful, however, not to effectively circumvent Argus Leader’s express rejection of a competitive harm requirement and contravene the U.S. Supreme Court’s decision, and some courts are hesitant to reintroduce a harm element altogether.²⁷

   The Second Circuit stands so far as the only circuit court to decide on this issue. As more courts weigh in, it remains to be seen whether FIA’s foreseeable harm requirement will act as a meaningful prong of Exemption 4 analysis, even in the face of Argus Leader, or whether it will be eliminated from the analysis.

Best Practices

The law surrounding FOIA’s Exemption 4 in the wake of Argus Leader will likely continue to evolve, and the process of granting or denying a disclosure request can potentially be contentious. Companies should therefore be attentive to evolving jurisprudence and be prepared to put forth as sound a case for nondisclosure as possible, as early as possible. Below are some best practices for obtaining protection of trade secrets and confidential information through Exemption 4.

• Clearly designate information as exempt under Exemption 4 before submission and thoroughly explain why the information is exempt.³⁸ Failing to pre-designate records leaves the decision in the hands of potentially over-tasked FDA employees to determine whether there is a “substantial reason to believe” that the records could fall under Exemption 4 or that disclosure “would result in competitive harm.”³⁹ It is therefore critical to present the arguments for exemption to the FDA clearly and early.
• Rather than designating submitted records as confidential as a whole, be as specific as possible and identify the specific portions of the record that qualify as exempt, providing reasons for exempting each such element. This will expedite the process and will allow the FDA to disclose any portions of the submitted records that are not exempt.
• Notwithstanding Argus Leader’s rejection of National Park’s competitive harm requirement, prepare for a showing of competitive harm. This is particularly important if the information is designated as a trade secret rather than simply as confidential commercial or financial information, as an important element of a trade secret is that its nondisclosure provides a competitive advantage.⁴⁰
• Anticipate higher levels of scrutiny on internal practices for maintaining confidentiality in the wake of Argus Leader. Consider implementing tangible confidentiality protections, such as non-disclosure agreements, physical and technical safeguards and restrictive markings. Ensure that confidential information is not shared with third parties without demonstrable assurances of confidentiality. Where the submitted information belongs to a third party, Exemption 4 will still shield that information from disclosure; accordingly, protective actions taken by that third party will still be considered for this requirement.⁴¹
• Anticipate what forum a dispute would take place in and be familiar with circuit-specific case law and Exemption 4 interpretation. The circuit splits and changing landscape of Exemption 4 jurisprudence mean that what works in one court may not work in another.
• Be prepared for a FOIA request for submitted information and have a response ready that specifically and comprehensively explains why the information is entitled to Exemption 4 protection. The submitting company will have only 10 days to put together objections if the FDA notifies the company that it is planning to disclose information.⁴²

Although disclosure of confidential information and trade secrets in regulatory filings to the FDA is required for life sciences companies, companies can still maintain control over the secrecy, and protect the value, of this information. By taking proactive steps like those mentioned above and considering the trend of case law surrounding Exemption 4, companies can best position themselves to ensure that their valuable information is kept private while in the hands of the FDA, even when the subject of a FOIA request.

1. See https://www.fda.gov/regulatory-information/freedom-information/fda-foia-logs.
2. See Seife v. FDA, 43 F.4th 231, 235 (2d Cir. 2022).
3. 21 CFR §§ 20.60 – 67; 5 U.S.C. § 552.
4. 21 CFR § 20.66.
5. 5 U.S.C. 552.
6. 5 U.S.C. 552(b)(4).
7. 21 CFR § 20.61.
8. 21 CFR § 20.22(a).
9. 21 CFR § 20.61.
10. 5 U.S.C. § 552(a)(8)(A)(i); see also https://www.justice.gov/oip/oip-guidance-applying-presumption-openness-and-foreseeable-harm-standard.
11. See Restatement (First) of Torts § 757 cmt. b. (Am. L. Inst. 1939) (stating that trade secrets include “any formula, pattern, device or compilation of information which is used in one’s business, and which gives [one] an opportunity to obtain an advantage over competitors…”).
12. Pub. Citizen Health Rsch. Grp. v. FDA, 704 F.2d 1280, 1288 (D.C. Cir. 1983).
13. 21 CFR § 20.61(a).
14. Anderson v. HHS, 907 F.2d 936, 944 (10th Cir. 1990).
15. See https://www.fda.gov/media/92115/download.
16. See https://www.justice.gov/oip/media/1386526/dl?inline at page 4.
17. See, e.g. 100 Reps. LLC v. DOJ, 248 F. Supp. 3d 115, 136 (D.D.C. 2017); Seife v. FDA at 234; Elec. Priv. Info. Ctr. v. DHS, 117 F. Supp. 3d 46, 62-63 (D.D.C. 2015); San Juan Citizens All. v. U.S. Dep't of Interior, 70 F. Supp. 3d 1214, 1219 (D. Colo. 2014); Pub. Citizen Health Rsch. Grp. v. HHS, 975 F. Supp. 2d 81, 105 (D.D.C. 2013). See also https://www.fda.gov/media/92115/download.
18. See Wash. Rsch. Project, Inc. v. HEW, 504 F.2d 238, 244 (D.C. Cir. 1974); see also Wash. Post Co. v. HHS, 690 F.2d 252, 266 (D.C. Cir. 1982); N.H. Right to Life v. HHS, 778 F.3d 43, 50 (1st Cir. 2015); Sharyland Water Supply Corp. v. Block, 755 F.2d 397, 398 (5th Cir. 1985).
19. See, e.g. N.Y. Times Co. v. U.S. Dep’t of Justice, 19 Civ. 1424, 2021 WL 371784 (S.D.N.Y. Feb. 3, 2021); Ctr. for Investigative Reporting v. U.S. Dep’t of Labor, 424 F. Supp. 3d 771, 776–79 (N.D. Cal. 2019); 7Jud. Watch, Inc., 525 F. Supp. 3d 90, 95–98.
20. Citizens for Resp. & Ethics in Wash. v. DOJ (CREW), 58 F.4th 1255, 1259, 1260-61 (D.C. Cir. 2023).
21. Id at 1265.
22. Id at 1266, 1269.
23. See also https://michiganlawreview.org/narrowing-foias-exemption-for-business-secrets/.
24. National Parks & Conservation Association v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974).
25. Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2365 (2019).
26. Id. at 2363 (quoting Perrin v. United States, 444 U.S. 37, 42 (1979)).
27. Id.
28. See, e.g. Am. Small Bus. League v. DOD, 411 F. Supp. 3d 824, 831 (N.D. Cal 2019); Seife v. FDA.
29. https://www.justice.gov/oip/exemption-4-after-supreme-courts-ruling-food-marketing-institute-v-argus-leader-media; see also WP Co. v. SBA, No. 20-1614 (D.D.C. Nov. 5, 2020); Am. Small Bus. League, 411 F. Supp. 3d at 830.
30. See David E. Pozen, Freedom of Information Beyond the Freedom of Information Act, 165 U. Pa. L. Rev. 1097, 1099–1100 (2017); https://michiganlawreview.org/narrowing-foias-exemption-for-business-secrets/; see also Adira Levine, FOIA Disclosure and the Supreme Court, 46 Harv. Env’t. L. Rev. 261, 285 (2022) (describing how the Court’s “broadening of FOIA’s exemptions” in these cases “likely foretells a future willingness to stray from the narrow reading of exemptions prescribed by the objectives and context of the statute and recognized in many judicial decisions over time”).
31. See https://www.justice.gov/oip/exemption-4-after-supreme-courts-ruling-food-marketing-institute-v-argus-leader-media.
32. See, e.g. Ctr. for Investigative Reporting v. CBP, 436 F. Supp. 3d 90, 113 (D.D.C. 2019).
33. 5 U.S.C. § 552(a)(8)(A)(i)(I).
34. Supra note 33.
35. Id.
36. Seife v. FDA at 240-42.
37. See, e.g. Am. Small Bus. League v. DOD (declining to, against plaintiff’s pleas, “effectively reinstate the competitive harm test for Exemption 4”); see also N.Y. Times Co., 529 F. Supp. 3d at 288.
38. 21 CFR § 20.61(d).
39. 21 CFR § 20.61(e), (f)(4).
40. See Pub. Citizen Health Rsch. Grp. v. FDA, 704 F.2d 1280, 1288 (D.C. Cir. 1983); see also 21 CFR § 20.61(a).
41. See https://pmc.ncbi.nlm.nih.gov/articles/PMC4382727/ (citing Bd. of Trade v. Commodity Futures Trading Comm’n, 627 F.2d 392, 405 (D.C. Cir. 1980); Critical Mass Energy Project v. Nuclear Regul. Comm’n, 830 F.2d 278, 280-81 (D.C. Cir. 1987)).
42. 21 CFR § 20.61(e).