Applicability of Trade Secrets Act to Intra-Governmental Exchange of Regulatory Information, 99-8
| Decision Date | 05 April 1999 |
| Docket Number | 99-8 |
| Citation | 23 Op. O.L.C. 74 |
| Parties | Applicability of Trade Secrets Act to Intra-Governmental Exchange of Regulatory Information |
| Court | Opinions of the Office of Legal Counsel of the Department of Justice |
WILLIAM MICHAEL TREANOR Deputy Assistant Attorney General Office of Legal Counsel.
The disclosure to certain federal financial regulatory agencies of propriety information of the Office of Federal Housing Enterprise Oversight obtained from the finance institutions it regulates would be "authorized by law" within the meaning of the Trade Secrets Act and therefore would not violate that Act's prohibitions against unauthorized agency disclosures of trade secrets or other confidential business information.
MEMORANDUM OPINION FOR THE GENERAL COUNSEL OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHTThis responds to your request for our opinion regarding the applicability of the Trade Secrets Act, 18 U.S.C. § 1905 (Supp. II 1996) ("TSA"), to the Office of Federal Housing Enterprise Oversight's ("OFHEO") proposed provision to other federal agencies of certain proprietary information that it receives in carrying out its statutory responsibilities.[1] For reasons set forth below, we conclude that the TSA does not prohibit the inter-agency official purpose disclosures outlined in your request.
OFHEO is a federal agency, within the Department of Housing and Urban Development, created by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, Pub. L. No 102-550, 106 Stat. 3941, 3944, (codified at 12 U.S.C §§4501-4641 (1994)) ("FHE Act" or "Act"). Its purpose is, inter alia, to ensure that the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, "the Enterprises") "are adequately capitalized and operating safely" in accordance with governing legislation. See 12 U.S.C. § 4513(a). The Enterprises are the nation's largest housing finance institutions. OFHEO's oversight and regulatory responsibilities with respect to them are similar to those exercised over banks and financial institutions by agencies such as the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. See OFHEO Letter at 1.
In carrying out its responsibilities under the Act, OFHEO from time to time requires the Enterprises to submit various reports on their financial condition and [ 75] operations. See 12 U.S.C. §4514. These reports, as well as other regulatory information obtained from the Enterprises by OFHEO in performing its duties, sometimes include sensitive proprietary information. OFHEO Letter at 2.
As explained in your letter, OFHEO desires to exchange regulatory information obtained from the Enterprises (including some proprietary information) with certain other federal financial regulators in order to facilitate "fulfilling its safety and soundness mission." Id. at 2. For purposes of this opinion, therefore, we assume that these arrangements will materially enhance OFHEO's performance of its statutory responsibilities. If such disclosures do take place, we are advised that the governmental recipients of the information would be required to maintain its confidentiality and would, of course, be subject to the provisions of the TSA in their own handling and maintenance of that information. See Id. at 2.
The TSA prohibits officers and employees of federal agencies from publishing or disclosing trade secrets and other confidential business information "to any extent not authorized by law." 18 U.S.C. § 1905.[2] Because some of the proprietary information OFHEO wishes to share with other federal financial regulators would be of the type otherwise covered by the TSA, you seek the Department's legal opinion whether the proposed provision of such information to other federal agencies under the circumstances outlined in your letter would violate the TSA.
There is significant precedential support for the view that the kind of disclosures described in your letter would not violate the TSA. A number of federal court opinions have expressed the view that the TSA applies only to the public disclosure of covered information and does not apply to official intra-governmental disclosures of such information. Additionally, two opinions of this Office have concluded that the TSA does not prohibit the exchange of trade secret or proprietary information between federal agencies for lawful governmental purposes — at least where such disclosures are authorized by the Paperwork Reduction Act [ 76] of 1980, Pub. L. No. 96-511, 94 Stat. 2812 ("PRA"), see 44 U.S.C. § 3510(a) (Supp. I 1995), or by any other federal statute, either explicitly or implicitly. An additional opinion of this Office, moreover, emphasizes the broader principle — grounded on the President's executive powers set forth in Article II of the Constitution — that the exchange of commercial regulatory information among federal government agencies for legitimate government purposes is presumptively lawful, and that only explicit statutory language prohibiting such disclosure can overcome that presumption.[3] These opinions would suggest the conclusion that the TSA does not apply to any authorized inter-agency disclosures. It is not necessary, however, for us to reach that issue, because we conclude that the disclosures at issue here would be "authorized by law" within the meaning of the TSA itself. At a minimum, the precedents call for a generous reading of statutes that may implicitly authorize inter-agency disclosures such as those in question, and we thus read the FHE Act as providing such authority here, as we discuss in Part II.C, below.
In Emerson Elec. Co. v. Schlesinger, 609 F.2d 898 (8th Cir. 1979), the Eighth Circuit considered whether the Equal Employment Opportunity Commission and the Department of Labor's Office of Federal Contract Compliance could lawfully exchange certain information and records that those agencies had gathered from regulated companies reflecting the companies' compliance with federal employment discrimination laws. The court assumed arguendo that the information in question was of the type protected by the TSA. Based upon the pertinent "pronouncements of Congress, the President and the agencies" — notably, certain statutory provisions authorizing inter-agency cooperation, see 42 U.S.C. § 2000e-4(g)(1) (1994) — the court first concluded that the particular exchanges of information proposed would be "authorized by law" within the meaning of the TSA even if that act were otherwise applicable to the inter-agency exchanges. 609 F.2d at 907. The court then proceeded to elaborate upon the proper relationship between inter-governmental information exchanges and the TSA.
It is again worth emphasizing that the disclosure contemplated ... is between two agencies, both of which are charged with the task of eliminating employment discrimination. We seriously doubt whether §1905 was intended to prohibit any interagency information transfers. Since the Federal Reports Act, 44 U.S.C. §§3501-3512, directly controls exchanges between agencies, it appears that [ 77] §1905 was designed to apply only to public disclosures of trade secret material.
Id. at 907 (emphasis added).
In her separate opinion in Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), Justice O'Connor expressed a similar view, observing: "The question of interagency use of trade secrets before 1972 is more difficult because the Trade Secrets Act most likely does not extend to such uses.'" Id. at 1023 (O'Connor, J., concurring in part and dissenting in part) (emphasis added). Other courts have also expressed a restrictive interpretation of the TSA in this respect. See Tri-Bio Laboratories, Inc. v. United States, 836 F.2d 135, 141 n.7 (3d Cir. 1987) () (emphasis added), cert, denied, 488 U.S. 818 (1988); Interco, Inc. v. FTC, 490 F.Supp. 39, 40 (D.D.C. 1979) (documents including trade secrets could be disclosed by FTC to State Attorneys General who provide reasonable assurances of confidentiality because such disclosure would be "authorized by law" under a broad reading of section 6(0 of the Federal Trade Commission Act). Cf. United States v. Wallington, 889 F.2d 573, 579 (5th Cir. 1989) ().[4]
This Office invoked the above-quoted interpretation of the court in Emerson Electric in reaching the conclusion that, in light of the Paperwork Reduction Act, the TSA did not prohibit the Department of Justice from sharing proprietary information obtained from companies under the National Cooperative Research and Production Act ("NCRPA"), 15 U.S.C. § 4305(d) (1994), with other federal departments and agencies. See Memorandum for Anne Bingaman, Assistant Attorney General, Antitrust Division, from Walter Dellinger, Assistant Attorney General, Office of Legal Counsel, Re: Sharing of Materials with other Federal Agencies (May 31, 1994) ("1994 Opinion"). As we noted in that opinion:
We have also considered whether provision of the information to other federal agencies might be prohibited by the Trade Secrets Act (TSA), 18 U.S.C. § 1905, which prohibits federal officials from [ 78] disclosing, "in any manner or to any extent not authorized by law, " trade secrets or similar information in...
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