It is our concern that innovation and entrepreneurship in the U.S. economy will be discouraged by the inability of private firms to guard against the disclosure of CRBI by government agencies. As the time lag between innovation and imitation becomes shorter, the opportunity on the part of the innovating firm to capture sufficient investment returns to cover R&D costs is likewise reduced.

The long-term effect on the entrepreneurial spirit and performance

of the U.S. economy may be just as damaging as if government released

with regularity the secret formulas or product blueprints of high technology firms.

The U.S. (Innovator) Trade Position in the Product Life Cycle Model

Figure 2*

Source: US Patent & Trademark Office, Office of Technology Assessment, and PMA Fact Book, 1980 edition.

*Reproduced from W. Casey, J. Marthinsen and L. Moss, "Productivity, Research and the Freedom of Information Act," paper presented at the Philadelphia meeting of the Eastern Economic Association in April 1981.

Footnotes

1. Babson College Catalogue, 1979-81, p. 8.

2. William Casey, J. Marthinsen and L. Moss, "Productivity, Research and the Freedom of Information Act," paper presented to the Eastern Economic Association, Philadelphia, PA, April 1981.

3. William Casey, J. Marthinsen and L. Moss, "Trade Secrecy and Patents: Complementary or Substitutable Activities?", paper presented to the Atlantic Economic Society, Washington, D.C., October 1979.

4. See for example, "Long Life to Patents," The Wall Street Journal, 28 May 1981 and Arthur H. Seidel and Ronald L. Panitch, What The General Practitioner Should Know About Trade Secrets and Employment Agreements (Philadelphia: American Law Institute, 1972), p. 119.

5. The Department of Defense's motive here was to protect itself against buying from a sole source. The company itself had to weigh the risk of losing a lucrative contract against substantial losses of expected future revenues due to disclosure of its trade secrets.

6. 5 U.S.C. § 551.

7. Chrysler v. Brown 99, Sct. 1750 (2d Cir. 1979).

9.

10.

11.

See W. Casey, J. Marthinsen and L. Moss, "History of FOIA (manuscript 1980); James T. O'Reilly, Federal Information Disclosure: Procedures, Forms and the Law (Shepard's/McGraw-Hill Co. 1980).

See, L. Moss, Critical Review of Corporations and Information: Secrecy, Access and Disclosure by Russell B. Stevenson, Jr. Journal of Economic Literature, Vol. XIX, No. 2, June 1981, p. 605.

In a previous paper entitled "Productivity, Research and the Freedom of Information Act" we defined a broad class of information vital to entrepreneurship called "entrepreneurially relevant business information" (ERBI). ERBI contains information that is broader than the commonly used definition of trade secrets, but narrower than the set of information which, if revealed to competitors, would cause competitive harm. CRBI is a subset of ERBI.