"competitive harm" test in which the agency was charged with the impossible task of determining whether disclosure would be likely "to cause substantial harm to the competitive position of the person from whom the information was obtained." This test literally destroyed any residue of reasonableness in implementing FOIA, for it required, if properly applied, the technical, financial and market analyses akin to complex determinations in an antitrust case prior to release of any information for which the submitter had claimed confidential

status.

Our problem now is to accord protection to trade secrets where disclosure would not serve the real purpose of FOIA and could endanger valuable technology considered confidential by a submitter. Clearly, the submitter is in the best position to assess the need for confidentiality in the total context of his operations. Just as clearly, the submitter may not be in the best position to judge the need for disclosure pursuant to a genuine public interest as envisioned by the Act. To meet the needs of the submitter, we should let him determine, subject to one exception, what should be kept from the eyes of his competitors by the receiving agency. To this end, the first and basic test should be whether the information delivered to the agency would "customarily be disclosed to the public" by the

submitter.

Standing alone, however, such a test could plausibly be said (a) to transform FOIA into a closure rather than a disclosure statute and (b) to result in such disparate standards of permissible disclosure as to make the statute, in this respect, essentially without dependable meaning. Accordingly, the statute should be worded to provide a safety valve against inordinate withholding so an agency could disclose information which should be disclosed to comport with the true purpose of the Act. The amendment should therefore also provide that information in the Exemption Four category would be disclosed if (but only if) the agency could show by clear and convincing evidence that failure to disclose would seriously injure some overriding public interest.

7. Solutions

Each of the needs alluded to are addressed in

S. 1247, introduced by Senator Dole, who was joined by Senator Hatch and others. It gives symmetry to the rights of both submitters and requesters by providing notice of a request; opportunity for objections by the submitter; a hearing by which the agency can learn from the submitter what it needs to know to render a decision; time for court action by the submitter in a de novo review of the claim of confidentiality, and a reasonable test for disclosability

with adequate safeguards for submitters and for the public Exemption Four would be made mandatory against

interest.

disclosure (instead of merely permitting nondisclosure,

as pronounced in Chrysler), except where a supervening

public interest can be clearly and convincingly demonstrated.

Conclusion

S. 1247 responds to a bad situation that is

worsening with time. As now constituted, FOIA has a builtin bias against the protection of trade secrets and, consequently and proportionately, against the investment in innovations that could become a competitor's free ride. The present bill discourages voluntary submission of information which otherwise would be submitted to government agencies, putting both the agency and the submitter in contentious relationships that are increasingly ending up in court.

The need for consistent application of FOIA among the agencies, dependable protection of trade secrets, reduction of litigation over agency disclosures and recognition that the patent system has inherent limitations as a means of protecting rights in important technology is adequately acknowledged in S. 1247.

Times have changed since the Freedom of Informa

tion Act was adopted in 1966. We are talking about a statute having as it purpose the opening of agency records for public review and for assessment of agency performance. But we are also talking about a law that is utilized for its proper and intended purpose by a distinct minority (3% in the case of FDA) of those utilizing it at all. It is no sacrifice of the public interest to preserve access for those whose purpose would meet the test of public interest, while at the same time alleviating the misdeeds visited on submitters and the unjustifiable burdens imposed on the agencies by the rest. We believe the approach adopted in S. 1247 would best serve the needs of all.

July 22, 1981

Arthur R. Whale

Mr. RADER. The next witness is Mr. Prospere Virden, senior counsel with Honeywell, Inc.

Mr. Virden is current chairman of the American Bar Association's Contract Committee and has published often on the subject of Federal contracts.

STATEMENT OF PROSPERE S. VIRDEN, JR., SENIOR COUNSEL, HONEYWELL, INC.

Mr. VIRDEN. Thank you.

Honeywell greatly appreciates the invitation of the Subcommittee on the Constitution to testify at these hearings.

Honeywell is a broadly based manufacturing company specializing in controls and computers with combined annual sales approaching $5 billion. Accordingly, we submit many types of documents to the Government which are required of all corporations with similar product lines.

Approximately one-quarter of our business is with the Federal Government, so that we furnish a great deal of additional information as an essential part of the acquisition process whereby the Government obtains its goods and services. As a submitter of substantial information to the Government, we are affected by and vitally interested in, the implementation of the Freedom of Information Act.

The Freedom of Information Act has served a very salutary purpose in permitting citizens to obtain information on how its Government operates. Honeywell endorses the basic principles and objectives of the Freedom of Information Act. However, there have been some abuses of the Freedom of Information Act which were never intended by the Congress.

Of greatest concern to those of us in industry is the employment of the act to obtain competitors' trade secrets and confidential business information.

My testimony will focus on documents submitted to the Government in the procurement process. It is this area that has caused Honeywell the greatest problems with the Freedom of Information Act.

The obtaining of trade secrets and confidential business information under the Freedom of Information Act has the following adverse consequences.

First, many of the documents submitted to the Government in the procurement process are done so with a legitimate expectation that they will not be released outside the Government, and especially not to our competitors.

Decisions by the courts have struck down this expectation and have held that agreements of confidentiality cannot be relied upon. Second, contractors are reluctant to describe in detail innovative approaches, for fear that competitors will obtain their novel ideas under the act.

As one court has stated, this will have a chilling effect on the willingness of potential bidders to submit proposals to the Government.

Third, the untoward amount of litigation and the duty of the agencies to comply with the extensive traffic in Freedom of Information Act requests for documents which contain trade secrets and