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mation on a showing of legitimate clear and convincing need, the problems of both groups would seem to be adequately served.

The need for addressing the problems of the submitters of information, I think, has been made clear by the imbalances that now exist and by the demonstration of the overwhelming use of FOIA by requester groups not associated with the consumer interests.

Mr. RADER. Mr. Virden, could you comment on whether the procedural changes alone would protect your vitally sensitive information?

Mr. VIRDEN. I agree—they would be very helpful. I certainly believe that the key provision that we are seeking is to change the substantial competitive harm test and get us into a commerical situation, especially where we are dealing with the Government in the procurement process. In effect, it is a business type of relationship and we should return to the understanding of what trade secrets are all about in the commercial context.

In that regard, I would like to cite a portion of a Supreme Court case, Kewanee Oil Co. v. Bicron Corp.:

Maintenance of standards of commercial ethics and the encouragement of invention are the broadly stated policies behind trade secret law. The necessity of good faith and honest fair dealing is the very life and spirit of the commercial world.

When we return to honoring expectations and when we have a test that keeps trade secrets in the Government, where they would customarily be kept in the commercial world, this is a very, very important substantive change and one which we really need in order to protect our trade secrets adequately. We do need that.

Mr. RADER. Thank you, Mr. Virden.

Finally, Mr. Vladeck mentioned that 18 U.S.C. 1905 provides a criminal penalty for disclosure of trade secrets. Are any of you aware of anyone being prosecuted thereunder for a Freedom of Information Act disclosure?

Mr. KEYES. Mr. Rader, it is my understanding that no one in history has ever been prosecuted for release of information under 1905. That may not be correct, but it is my understanding of the situation.

Furthermore, and more importantly, the improbability of that being a substantial disincentive at the present time is illustrated by the fact that the U.S. attorney's manual contains in it a provision which resulted from a Justice Department determination in 1979 which suspended the use of 1905 unless there has been a central Justice Department approval for the action.

Again, my information is that there has never been a Justice Department approval for such an action.

I think that the reality is that 1905 is no inhibition whatsoever to the release of information.

Mr. RADER. Mr. Whale, you had a comment.

Mr. WHALE. I would certainly agree. It is my independent understanding that there has been no action under that statute.

After all, when that statute is invoked, the secret is already out.

What you are doing by invoking the statute is lashing a Federal employee from whom any kind of retribution is in no sense recompense for what has been lost.

Mr. RADER. Do any of you gentlemen have any final comments here?

Mr. VIRDEN. I would like to comment on 18 U.S.C. 1905.

In submitting documents in the procurement process, where there are trade secrets and confidential business information, we put a stamp on the data.

We not only reference that it is not to be disclosed pursuant to exemption B(4) of the Freedom of Information Act, but we also in our legends indicate that it is not to be disclosed outside the Government pursuant to 18 U.S.C. 1905.

We find this helpful. We also find it brings attention to the importance of the document to our company.

We find it helpful when we are responding and working with the agency with respect to requests for data which includes our confidential business information that there is very good language in 18 U.S.C. 1905 as to what cannot be released: "trade secrets, processes, operations, style of work or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation or association.”

It is very helpful language. We tend to use that, as much of the information we are concerned about having released falls within the language of 18 U.S.C. 1905.

Mr. RADER. Gentlemen, we certainly appreciate the expertise you have brought to the subcommittee on the subject of business confidentiality.

Thank you all very much.

The subcommittee will be meeting again on July 31 to continue its hearings on the Freedom of Information Act.

Until then, we will stand adjourned.
Thank you.

(Whereupon, at 11:50 a.m., the subcommittee recessed, to reconvene on July 31, 1981.)


FRIDAY, JULY 31, 1981


Washington, D.C. The subcommittee met, pursuant to recess, at 9:40 a.m., in room 5110, Dirksen Senate Office Building, Senator Orrin G. Hatch (chairman of the subcommittee) presiding.

Present: Senators Hatch and DeConcini.

Staff present: Randall Rader, counsel; Steve Markman, general counsel; Peter Ormsby, professional staff assistant; Dickson Burton, law clerk; and Claire Greif, clerk.


Senator HATCH. The committee will come to order.

I apologize for being late, but I had one interview on top of another this morning and just could not get them completed.

Today we convene the third in a series of hearings on the Freedom of Information Act.

In the first two hearings, we have taken testimony that has reaffirmed my belief in the need for a strong Freedom of Information Act. A democratic society needs an informed public to hold Government accountable for its actions. However, we have not yet reached a proper balance between an open Government and performance of certain essential governmental functions.

Last week, we examined the fourth exemption of the Freedom of Information Act which Congress originally created to protect trade secrets and confidential business information.

The judicially created competitive harm standard leaves bureaucrats and judges to determine the market value of confidential information that might be of critical importance to a private businessman.

Moreover, the Freedom of Information Act does not require that notice be given to submitters of information before their information is released to third parties, leaving submitters with no procedural remedies to adequately protect their secrets.

Our foreign intelligence capabilities have been significantly impaired as a result of the Freedom of Information Act. Foreign sources are more reluctant to supply critical information to our intelligence officers because of a widespread belief that the U.S. Government cannot protect its secrets.

Additionally, the Central Intelligence Agency and other agencies are required to respond to requests from foreign nationals and governments, including the KGB, the same as they would respond to requests from American citizens.

On September 16, we will be hearing testimony from the Central Intelligence Agency and others regarding the national security implications of the Freedom of Information Act.

Today we will be focusing on another critical area that needs close scrutiny by the subcommittee.

In 1978 the Subcommittee on Criminal Laws and Procedures, of which I was a member, held hearings on the erosion of law enforcement intelligence. As a part of those hearings, we looked at the Freedom of Information Act.

In the report on the hearings, the subcommittee concluded the following:

The sponsors of FOIA wanted to reinforce the right to know. It can safely be said that none of them foresaw the host of difficulties the legislation would create for the law enforcement community, nor did they foresee the utilization that would be made of the act by organized crime and other criminal elements or the damage it would do to the personal security of individual citizens.

Among other things, certain law enforcement investigative and training manuals are subject to FOIA requests, as are some investigative personnel rosters.

The Freedom of Information Act has inhibited the sharing of law enforcement intelligence between State and local government agencies and Federal law enforcement agencies.

Informants are much more reluctant to cooperate with Government investigators, giving no small relief to organized crime.

According to the 1978 subcommittee report, the FBI had close to 1,100 informants in 1975 monitoring the activities of terrorists and extremist groups, both far left and far right. By July 1978, there were only 42 such informants nationwide. To drop from 1,100 to 42 in just a few years is startling to me.

As a result, in September 1978, Attorney General Griffin Bell suggested amending FOIA to exempt criminal investigative records from disclosure for a period of 10 years to correct the damage done to the informant program.

The FBI concluded the 10-year moratorium on investigative records in its proposals for amending FOIA which Director Webster submitted last year.

It is also a part of S. 587 which I introduced and which the subcommittee will examine during the course of these hearings.

Again, what I want to emphasize is that we need the Freedom of Information Act, and we need it to be strong and effective. Its very worthy and legitimate objectives--more openness in Government and more freedom to find out disclosures-must be carefully balanced with equally legitimate Government functions that protect the personal security of the citizens of this country.

Prof. Charles Rice of the Notre Dame Law School described the challenge before us:

What is necessary now is not a dismantling of these statutes but rather corrective surgery to bring them more into line with their original and laudable purpose.

Senator DeConcini, we are very happy to have you here. We would be happy to take your statement at this time.

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