on animals-is of vital and legitimate public concern and raises very serious questions about the methodology employed in testing drugs.

Without the Freedom of Information Act, this information would never have come to public light and certainly would never come to light if the provisions of S. 1247 are adopted.

Senator THURMOND. Mr. Vladeck, we understand that the health research group conducts a subscription service for $280 per year for lawyers who are suing manufacturers of certain medical device products.

Does the group charge subscribers for documents which it obtains for free under the fee-waiver provisions of the Freedom of Information Act?

Mr. VLADECK. No. The only costs that are charged to the subscribers are Xeroxing costs-just our costs of reproduction.

Senator THURMOND. Mr. Braverman posed an example of where disclosed information has no competitive value because it is a new invention and not yet marketed. How would you address this inadequacy in the National Parks standard?

Mr. VLADECK. My first question to Mr. Braverman would be how that information ended up in Government files.

You do not file that sort of information with the Government until you are ready to seek either marketing approval or testing approval from the Government. That sort of information has historically been protected under the common law trade secret laws.

Unless and until it has some potential commercial value, it would not end up in the files of the Federal Government.

Senator THURMOND. Senator Grassley, do you have any questions of any of these witnesses?

Senator GRASSLEY. I do not. I am sorry but I got here late, and I am not prepared to ask questions at this time.

If I have any, I will have to submit them in writing.

Senator THURMOND. We will give you a chance to ask them if you want to.

Senator GRASSLEY. Thank you very much, Mr. Chairman.

Senator THURMOND. Is there anything else either of you wish to say?

[No response.]

Thank you for your appearance.

Senator THURMOND. Our final panel today will represent many of the businesses and nonprofit institutions affected by FOIA's exemption 4.

Will you gentlemen please identify yourselves and tell us who you represent?

Mr. KEYES. My name is Joseph Keyes. I am the staff counsel to the Association of American Medical Colleges. I am accompanying Dr. Stuart Bondurant who is presenting the statement.

Dr. BONDURANT. I am Dr. Stuart Bondurant, dean of the University of North Carolina, School of Medicine. I am presenting a statement on behalf of the Association of American Medical Colleges.

Mr. VIRDEN. I am Prospere Virden. I am senior counsel at Honeywell, and I am presenting a statement on their behalf.

Mr. WHALE. I am Arthur R. Whale, general patent counsel and assistant secretary for Eli Lilly & Co., for whom I am presenting a statement.

Senator THURMOND. I believe the first witness on the panel is Mr. Whale, assistant secretary and general patent counsel for Eli Lilly & Co. since 1975.

Mr. Whale is a past president of the American Patent Law Association, past chairman of the National Council of Patent Law Associations, and past president of National Inventors Hall of Fame Foundation.

Mr. Whale, you may proceed.

STATEMENT OF ARTHUR R. WHALE, GENERAL PATENT COUNSEL AND ASSISTANT SECRETARY, ELI LILLY & CO., INDIANAPOLIS, IND.

Mr. WHALE. Thank you, Senator Thurmond.

Our main business is the high technology, research-intensive development of new drugs, electronic systems for hospital uses, agricultural products-mostly of a chemical nature-and cosmetics. In complying with the various Federal regulatory procedures, we deliver information consisting of trade secrets to the Food and Drug Administration, the EPA, and to a number of other agencies-to agencies implementing a number of Federal statutes.

In fact, some of these agencies implement a number of Federal statutes which result in a variety of rules and regulations and procedures and philosophies with which we must contend in dealing with the Freedom of Information Act.

We give a large number of different types of information to the various Federal agencies, as you can imagine, because we are indeed a highly regulated industry.

Of perhaps most concern is the information of a process nature which we provide to FDA, EPA, OSHA, and to other agencies. Taken together, this information reflects the techniques that have been developed in-house, the raw materials with which we work, the processes which we have evolved, the particular temperatures, pressures, research conditions, and purification procedures that combine to make our products ready for the regulatory agencies to approve.

We are very concerned at possible losses of information like this. We are constantly faced with demands, and properly so, for information concerning the effluents from our stacks and from our point-source discharges and the nature and disposition of hazardous wastes with which we must contend. But we are also concerned with what happens to this information in the hands of the Government agencies, because much of it can be reverse engineered to learn exactly what processes we use-for example, what solvents we might have found most suitable to give us the best process economics.

This information all comes from our research and development programs which in 1980 cost in excess of $200 million.

TRADE SECRETS ARE A NEEDED ADJUNCT TO PATENTING

The new products from our research and development programs tend to be sufficiently different from what is old to be patentable.

Indeed, this is necessarily so because recent industry statistics, for example, show the cost of the development of new drug entities to be $50 to $70 million and to consume from 7 to 10 years from development to ultimate marketing.

But the new products from our program must compete on the basis of cost, as well as effectiveness. Since costs are tied to processes, process patent protection is of interest to us, so we pursue patent protection on our processes as well as our products. However, patent protection on processes is uncertain at best, because process patents are relatively easy to invent around.

Also, both product and process patents are subject to varying interpretations under the patent statutes among our 11 judicial circuits. Their validity is often impaired by the disclosure of literature that escapted the attention of the inventor and the Patent Office. In fact, the technical literature in our field is more than doubling every 10 years.

So trade secrets remain an essential part of our competitive strength.

Where the information we provide to an agency is confidential, we tell them so; but there are problems. Not only do we deal with several agencies operating under several statutes having different rules and regulations and policies and philosophies, but all the information we deliver is subject to the Freedom of Information Act. Under FOIA, it is the agency that makes the final determination of the entitlement of our information to trade secret status. We believe that each bit of it which we identify as truly confidential should be entitled to trade secret status under the Freedom of Information Act. The trouble is that, having determined that the information is indeed entitled to trade secret status under exemption 4 of FOIA, it follows from the Chrysler decision that this only means that the agency may withhold the information from requesters. It does not require that they must withhold it.

I am not here to complain about our regulatory agencies. Our experience, in fact, has been that in general they are very sympathetic to the importance of trade secrets. But FOIA lays a heavy hand on our trade secrets.

FOIA BIAS AGAINST TRADE SECRETS

The notable bias in FOIA against the rights of the submitter, as we have learned today, both substantive and procedural, makes it most difficult for us to rely with any dependability on the sanctity of our trade secrets, once they are delivered to the Government. Also, of course, the motivation of the Government, once they adopt the position that information is a trade secret, to defend its position and to protect our trade secrets, inevitably stems from a different level of concern than ours.

We believe that access to information through FOIA should be limited to the purposes for which FOIA was enacted-namely, the assessment and the monitoring of the operations of Government. However, this is not the case.

You have heard, and it is in your record, for example, that over 85 percent of the FOIA requests made of FDA originate with services who make blind requests for parties wishing to remain anonymous, with companies interested in obtaining information about other companies, and from private law firms who seek information on behalf of unnamed clients.

As a matter of fact, only 3 percent of the FDA requests in 1979 originated with identified public interest groups and with members of the press. The cost of administering all this to the Government was estimated at $47.8 million in 1979 and over $57 million in 1980, an increase of more than 20 percent.

This does not include the cost to industry of trying to protect against improvident disclosure or the value of trade secrets that are lost for no reasons affecting a public interest.

Because of the secrecy that surrounds many requests and the identification of the requesters, I am handicapped in not being able to satisfy Ms. Campbell and Mr. Vladeck concerning the name, rank, and serial number for each trade secret that we have lost. We simply do not know. We do not know where they go; we do not always know that they go anywhere. We do know that some have been lost, and we know that the potential is there, and that the potential is potentially devastating.

We know also that mistakes are made, as Mr. Pulley described. We also know that some of our information concerning products-the animal data, toxicological data, and so forth-ends up in the hands of foreign competitors, and that it is used to gain registrations in foreign companies to market products in competition with ours.

COLLATERAL USES OF FOIA

Maybe it is of interest to you to know how we use FOIA. We use it to get copies of an agency's record of a meeting with us to see how it accords with our own. The record is available to other people, and we want to make sure we know what they can learn. We use it to learn the results of an onsite inspection about which we are not otherwise very deeply informed.

We use it to learn of third-party reports on our products to FDA which may not reach us until there is accumulation to a disturbing level.

We use it to check on imminent infringement, because we can determine what facilities have been subjected to inspection for approval for manufacturing drug products and what products have been submitted for regulatory approval.

We use it to learn what other requesters are getting when we are able to spot a request for our information. Sometimes we use it to learn whether the releasing agency, with respect to particularly sensitive information, is honoring our markings of confidentiality.

BALANCING OF RIGHTS UNDER FOIA

It has been said before that there is sorely lacking in FOIA any semblance of symmetry-balancing the rights between the submitters and the requesters. I have been heartened to hear the panel before me allude to the desirability of increasing the balance.

In our view, the most pressing need is for legislative relief that would give dependability to our trade secret protection.

Ms. Campbell and Mr. Vladeck, in talking about the informal hearings, referred to the lack of necessity that they be ex parte hearings.

I would remind you that information is discussed at those hearings which is the very subject of the dispute as to entitlement to trade secret status. If the other party learns of the information at a hearing, it makes no difference whether confidentially is compromised by that route or by granting the request. I understand that when some of these cases get to court, the requesters withdraw their requests rather than destroy their anonymity-reflecting the competitive motivations at work.

I want to touch on one important aspect of S. 1247. Among the changes proposed in S. 1247 is a workable test that could define, as was the Congress intent in 1965, what information is entitled to trade secret status-that is, information customarily not released by its originator.

The test of customarily released has degenerated to whether release would cause substantial harm to the competitive position of the submitter. That is the test today.

I suggest that if this test is to be diligently and uniformly employed, there is going to be need for the same kind of market data, legal analysis, and economic studies normally reserved for antitrust cases. And the test applies to each bit of information for which trade secret status is claimed. This is simply impossible. We need to return to the test of whether the information is customarily released by the submitter.

But this is not enough. Reference was made by another speaker to a safety valve, and we are perhaps sliding over that concept too lightly.

There must be provision for obtaining information, even if it is in the trade secret category, where the requester makes a clear and convincing case that the failure to provide this information would impair some overriding public interest.

I think, while there are loose words in that definition, they do afford an adequate opportunity for demonstration of a need by consumer groups and others to gain access to this information for proper purposes under FOIA.

Senator GRASSLEY [acting chairman]. Mr. Whale, may I interrupt you for a minute?

Mr. WHALE. Yes.

Senator GRASSLEY. I only have 7 minutes left to vote. I am going to have to apologize and leave. I promised Senator Thurmond that I would stay here until 11:20, but by the time I go and vote, there will not be any coming back time.

I think Senator Thurmond will return.

In lieu of Senator Thurmond and myself, I am going to have staff chair the meeting and continue to take your testimony, so that we do not hold up valuable time of people who have yet to testify. I have four questions that will be asked by staff if I am not here. We would appreciate the whole panel responding to these ques

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