We have been looking at the Bayh-Dole Act’s secrecy provision regarding invention use reports. That provision was changed from “may” to “shall” in 1984, and we have argued that the change in wording requires us to look for a change in meaning. “May” exclude from disclosure any information that is confidential is not at all the same as “shall” exclude from disclosure all information regardless of whether it is confidential. I know, it’s all convoluted and federal agencies aren’t going to change their practices and no one is going to sue to get a court to explain how Bayh-Dole doesn’t do what the implementing regulations make it do. So what follows is just to document what’s going on. It’s not entirely wasted effort, however, because we learn something new about Bayh-Dole by working through its secrecy requirements.
Bayh-Dole’s secrecy provision at 35 USC 202(c)(5) depends on how it conforms with the federal Freedom of Information Act (FOIA). The provision in Bayh-Dole says that use report information is to be treated as information excluded from FOIA disclosure. Sounds simple enough. What could possibly go wrong? For that, let’s look at FOIA disclosure requirements. We will have to work through all this more carefully. Let’s get at it.
FOIA (5 USC 552) is a general law of government disclosure, expressly requiring disclosure for some information and requiring disclosure if the public requests disclosure for most everything else that’s not legally exempted from disclosure. It is important, therefore, to understand what FOIA permits to be exempted from disclosure. What’s not exempted is generally disclosable. FOIA was amended in 2016, and some of the changes appear to have an effect on how Bayh-Dole’s secrecy provisions should be interpreted.
As the Supreme Court put it in Federal Open Market Committee v Merrill, FOIA is meant
to establish a general philosophy of full agency disclosure unless information is exempted under clearly delineated statutory language.
The question then arises: Does Bayh-Dole clearly delineate an exemption from FOIA?
Let’s look at federal public disclosure law more closely to see what Bayh-Dole could possibly be up to. Here’s the start of the exception list in federal disclosure law at 5 USC 552, section (b):
(b) This section does not apply to matters that are–
That is, these matters are not subject to an obligation to disclose under FOIA.
(1)(A) specifically authorized under criteria established by an Executive order to be kept secret in the interest of national defense or foreign policy and (B) are in fact properly classified pursuant to such Executive order;
This is executive order stuff–defense security classifications, for instance, for national security and foreign policy. Executive orders classifying information take precedence over public disclosure obligations. There are no executive orders classifying Bayh-Dole invention use reports.
(2) related solely to the internal personnel rules and practices of an agency;
Rules an agency establishes for personnel–again, those rules take precedence. Nothing to do with Bayh-Dole. But now we come to something of interest–how any statute can exempt something from FOIA:
(3) specifically exempted from disclosure by statute (other than section 552b of this title), provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld;
Here are requirements that Bayh-Dole must meet if it is to exempt information by statute: (1a) the statute must require “matters be withheld from the public” and (1b) there’s no discretion on withholding or (2) the statute sets out rules for withholding. That’s what Bayh-Dole does in Section 205, but not in Section 202(c)(5), which neither requires matters to be withheld or states a rule about it. Instead, 202(c)(5) requires federal agencies to treat information “as” information that would be exempt under a different FOIA exemption, (b)(4). This is convoluted.
Here’s the provision in the FOIA exceptions from which Bayh-Dole draws language, at (b)(4):
(4) trade secrets and commercial or financial information obtained from a person and privileged or confidential;
That is, FOIA does not apply to trade secrets or to (i) “commercial or financial information” (ii) obtained from a person and (iii) “privileged or confidential.”
In essence, what FOIA does here is to exempt trade secrets, and then restate the requirements in the case that comparable information is not technically a trade secret. The Department of Justice has an extended discussion of the exemption at (b)(4), including the wild and crazy history of (b)(4) in the courts. We will get to that, too, in time.
Here’s the definition of trade secret from 18 USC 1839:
(3) the term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information;
So let’s say that some financial information fails (B)–that is, it might not have independent economic value from not being generally known. It’s just information that someone doesn’t want to reveal publicly. Thus, not a trade secret, but a secret nonetheless. Thus, FOIA’s (b)(4) exemption refers both to trade secrets, and for non-public stuff that has no value in trade (or is not involved in trade), commercial or financial information that is otherwise privileged or confidential–regardless of its independent economic value.
If FOIA does not apply to such information, then there is no need to exempt it from FOIA by agreement. It is already exempt. Perhaps now you see the problem. Bayh-Dole does indeed specifically exempt some information by statute–that’s what section 205 does for invention disclosure and patent applications. But 202(c)(5) doesn’t do the same thing. Instead, 202(c)(5) requires federal agencies, if they ask for invention use information, to treat that information as a kind of information that is exempt–even, apparently, if that information is not of the kind that is exempt. Does treating information as exempt make that information exempt? Does the law require agencies to agree by contract that they will treat that information as exempt? Does promising to treat information as exempt then make it exempt? It’s all very strange. Why be so convoluted?
We will get to answers–provisional ones, of course, cheaper than the quarter million dollar answers that come from getting a matter to a court. Again, perhaps there’s some value in the exercise. Think of it as climbing some mountain for the first time. You know, “because it’s there” and the like. Climbing Bayh-Dole’s Secret Mountain. Might make a book title some day.
Originally, 202(c)(5) read “may treat”–that is, the “Provided that” which went along with the provision that permitted federal agencies to request use reports made clear that federal agencies had discretion under FOIA to exempt information that did meet (b)(4)’s conditions. That is, if an agency received commercial or financial information and that information were to be privileged or confidential, then the federal agency may [is permitted to, i.e., the law here by requiring the right to receive reports does not require disclosure of the information in those reports] withhold the information from FOIA disclosure. The information coming to the federal agency must be privileged or confidential to the submitter. Not all information in a use report need meet that standard–and here we are not talking about trade secrets, which 202(c)(5) omits. So it’s not that kind of confidentiality that is meant by (b)(4). It is some other sort of confidentiality.
But when Bayh-Dole is changed so 202(c)(5) reads “shall” instead of “may,” the meaning of the entire provision changes. The change is not merely to require an agency to exclude information from disclosure that FOIA already declares to be excluded–that would be utterly unnecessary. The change requires federal agencies to exclude information from FOIA that FOIA does not declare excluded from FOIA! And yet the change does not specifically exempt the information by statute–instead, it requires federal agencies to use a contract clause in which they agree not to disclose information that FOIA does not exempt.
Take a respite for logic. If 202(c)(5) required federal agencies to keep use report information secret, it would meet FOIA’s (b)(3) exemption and we’d be done. But it doesn’t.
If 202(c)(5) stated that federal agencies must contract to assure contractors that the agencies will not disclose any information that meets (b)(4)’s exemption, we’d also be done. Information that meets (b)(4) is exempt. Contractors would mark commercial and financial information that was privileged or confidential. The information would, arguably (this is law, after all, so anything we discuss here is arguable) be exempt from FOIA’s obligation to disclose and the federal agency could contract to agree not to disclose the information.
Neither of these happen here. Under the amended 202(c)(5), federal agencies are required to use a clause in a funding agreement, which if they exercise their right under that clause, they must treat all information received as “privileged and confidential” information and (also? therefore? if also?) exempt under (b)(4), even when that information is not (according to (b)(4), at least) exempt. Does a requirement to treat information as exempt somehow make that information exempt? That is, is the effect of the changed 202(c)(5) to declare that any information received is necessarily “commercial or financial”? Or that any information received is *both* “privileged and confidential”? Does the law work by establishing here an implicit statutory definition of “commercial and financial” information, so that FOIA’s (b)(4) exemption applies? That new definition would be of the form:
Information on the utilization or efforts to obtain the use of a subject invention is by definition commercial and financial information and also by definition is privileged and confidential.
Convoluted weirdness, if so. For (b)(4) to operate, the information has to be “commercial or financial” information. 202(c)(5) apparently solves this problem by defining the information received as “commercial and financial.” Then 202(c)(5) can ensure the requirement by also defining the information as “privileged and confidential.” No account of the information itself is needed. Is this what is going on? If so, is it legally sound? And, since we can’t answer that question, is it sound public policy?
Speaking plainly, invention use reports do not necessarily contain only “commercial or financial” information. A university could submit a use report that states there is no known use of the subject invention. What information there is “commercial” or “financial”? How then does that information meet (b)(4)? Doesn’t. Not (apparently) exempt from FOIA.
Invention use reports also are not necessarily “privileged” or “confidential”–otherwise, why would Bayh-Dole (as modified) have any need to assert that federal agencies may request use reports only on the condition that they treat the reports as privileged and confidential information, with such standing?
Bayh-Dole as modified in 1984 aims to have invention use reports kept secret, but in terms of mechanics, it doesn’t apparently do that. If information in the reports were already privileged or confidential commercial or financial information, then the FOIA exemption at (b)(4) would already apply. Nothing gets added by Bayh-Dole, if that’s the case. And if Bayh-Dole is aiming to use the exemption at (b)(3), then Bayh-Dole has to make it clear that federal agencies are not to release the information contained in such reports, and have no discretion in the matter–without regard to what the information is.
But Bayh-Dole does not do this either, and instead requires a contracting provision, which if federal agencies enforce, they must treat report information “as” information that meets the requirements for exemption from FOIA disclosure, even when the information does not and FOIA otherwise requires its disclosure in response to a FOIA request. That’s not at all the same thing as information that actually does meet the requirements for exemption from FOIA disclosure. It is not even clear what Congress intended in making the change from “may” to “shall” in 202(c)(5). Was the intent to make all information in invention use supports secret? Or just to remove the appearance of agency discretion regarding what information in invention use reports was commercial or confidential?
Report information “shall be treated” … even when it is not. Or is it “shall be treated” … and thus become? What’s the difference? In the first instance, information is privileged or confidential already when it is received by the federal agency; (b)(4) applies. Done. In the second, the information is not necessarily privileged or confidential until it is received, and then Bayh-Dole makes it privileged and confidential–that is, Bayh-Dole imposes this condition on the federal agency’s handling of the information without actually following the requirements of (b)(3) and without meeting the requirements of (b)(4).
Consider by contrast how the National Technology Transfer Act of 1995 handles the issue, in the context of granting the government a non-exclusive license to inventions made under a Cooperative Research and Development Agreement (CRADA):
(A) A nonexclusive, nontransferable, irrevocable, paid-up license from the collaborating party to the laboratory to practice the invention or have the invention practiced throughout the world by or on behalf of the Government. In the exercise of such license, the Government shall not publicly disclose trade secrets or commercial or financial information that is privileged or confidential within the meaning of section 552(b)(4) of title 5, United States Code, or which would be considered as such if it had been obtained from a non-Federal party.
The statute references the FOIA exemption at (b)(4) (including “trade secrets”–which Bayh-Dole omits) and extends the exemption to information that might be developed in the cooperative work (and which, therefore, might otherwise be construed as in the government’s possession directly and not obtained “from a person” outside government). The provision here is perfectly clear. The first bit makes clear that gaining a license to non-technology does not pre-empt FOIA’s exemptions. That’s what the original Bayh-Dole 202(c)(5) provision did, however awkwardly, with “may.” The next bit clarifies that just because information is provided to the federal government does not mean that a non-federal source gives up any claims to information that it considers “privileged” or “confidential” with regard to any other recipient. Bayh-Dole’s 202(c)(5), using “shall,” does not make a similar distinction.
Instead, 202(c)(5) requires agencies to treat report information as exempt. This bends the mind. Why use “treat”? Treat: “to behave toward or deal with in a certain way.” As “commercial” information. Even if not. As “financial” information. Even if not. As “privileged and confidential” even if not.
Bayh-Dole does not require information in utilization reports to be kept secret–fails FOIA (b)(3). It could have, but doesn’t. And Bayh-Dole does not say to contract to agree not to disclose information that FOIA (b)(4) exempts from disclsoure. It could have, but doesn’t. Instead, Bayh-Dole makes up something different–that federal agencies must treat (assume or pretend) that the information is exempt from FOIA and then contract not to disclose it. You see, it’s backwards. Information comes in. It’s exempt from FOIA because it is commercial or financial information and the contractor has made it clear that it’s privileged or confidential. Then the federal agency’s contractual promise not to disclose becomes effective. Just because something is exempt from a FOIA obligation to disclosue does not mean an agency cannot choose to disclose that information anyway. So the agency promises not to disclose in a federal agreement and is bound by that agreement, since FOIA doesn’t apply. But not here. Information comes in. The agency promises not to disclose it as though FOIA doesn’t apply. The agency has been made to promise not to disclose without statutory authority and without meeting the conditions of FOIA. It’s a federal agreement, constructed by statute, that fails to comply with federal statute. Simple, and convoluted, as that. It doesn’t matter, though it should.
This is a study in ten parts. Here are the links.
1 1984 amendment from “may” to “shall”; roots of reporting in IPA
2 Bayh-Dole’s focus on use; regulations on reporting
3 1984 amendment in detail; connection between reporting and march-in
4 FOIA 552(b) and Bayh-Dole 202(c)(5)
5 37 CFR 401.8; Bayh-Dole circumvents FOIA
6 FOIA 552(b)(4); Public Citizen v NIH
7 18 USC 1905; Kennedy patent policy march-in; Bayh-Dole march-in
8 Comptroller General reporting; federal agency licensing 209(d) and secrecy
9 Open access records case; distinguishing sensitive info; royalty reporting
10 Public enterprise or scam? public reporting essential; puffery