On October 16, 2013, the Indiana Tax Court issued an order granting the request by Orbitz, LLC to prohibit public access to contracts that contained trade secrets.  The Court ruled:

Competition is the bedrock of our country’s economic system. The protection afforded to trade secrets under [the Access to Public Records Act or] APRA and Administrative Rule 9 helps to foster a healthy, competitive marketplace.  Here, Orbitz’s contracts contain trade secrets and therefore are protected from public disclosure under both APRA and Administrative Rule 9.

Slip op. at 8-9 (citations omitted).

Contracts govern net rates paid to hotels.  In Orbitz, LLC v. Indiana Department of State Revenue, Cause No. 49T10-0903-TA-10, the online travel company challenges the Department’s assessments of gross retail (sales) and county innkeeper taxes on the bookings at issue.  The Court explains:  “Through its website, . . . Orbitz provides travel related services enabling its customers to search for and make reservations for a broad array of travel products, including airline tickets, lodging, rental cars, cruises and vacation packages.”  Slip op. at 2 (internal quotes and brackets omitted).  The Court describes the company’s business arrangement with hotels and the assessment issue as follows:

Generally speaking, a hotel will contract with Orbitz to make its rooms available for reservation through Orbitz’s website. Pursuant to the contract, the hotel agrees to accept a certain amount for its rooms (“net rate”).  Nevertheless, a customer who books a room through the website sees – and ultimately pays – a different amount, as Orbitz has added a facilitation fee, a service charge, and a tax recovery charge to the net rate.  The tax recovery charge is equal to the amount of state and local taxes due on the room’s rental at the net rate.

After the customer has occupied the room, Orbitz forwards to the hotel the portion of the payment it collected from the customer that constitutes the room’s net rate and tax recovery charge.  The hotel is then responsible for remitting to the taxing authorities the appropriate state and local taxes due on the room’s rental.  Here, as a result of its audit, the Department determined that taxes should have been calculated and remitted based on the total amount Orbitz’s customers paid for the hotel rooms, not merely on the rooms’ net rates.

Slip op. at 2 n.1.

Orbitz sought to protect disclosure of its contracts.  Orbitz filed its original tax appeal on March 3, 2009, and it filed a summary judgment motion on August 2, 2013.  The company designated evidence in support of its motion.  Simultaneously, Orbitz requested an order from the Tax Court prohibiting public access to contracts with three Indiana hotels, claiming the contracts were “proprietary, competitively sensitive, and contain [Orbitz] trade secrets and financial information.”  Slip op. at 3 (citation to record omitted).  The Court conducted a public hearing on the request on September 17, 2013.

In its order, the Court first acknowledges that the “general rule in Indiana is that information submitted to state governmental entities, including the courts, is accessible by the public.”  Slip op. at 3-4 (citation omitted). The Access to Public Records Act, the Court observes, guarantees that “all persons are entitled to full and complete information regarding the affairs of [their] government.”  Slip op. at 4 (quoting Ind. Code § 5-14-3-1, brackets in original).  And Indiana Administrative Rule 9, adopted by the Indiana Supreme Court, “secure[s] the public’s access to court records.” Id.

Defining a “trade secret.  Trade secrets are an exception to Indiana’s general rule regarding public access.  Slip op. at 4 (citations omitted).  A trade secret is defined by statute as:

information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

  1. derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
  2. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Slip op. at 4-5 (quoting Ind. Code § 24-2-3-2).  The Court next identifies these four general characteristics of a trade secret:

  1. it is information;
  2. that derives independent economic value;
  3. that is not generally known, or readily ascertainable by proper means by others who can obtain economic value from its disclosure or use; and
  4. that is the subject of efforts, reasonable under the circumstances, to maintain its secrecy.

Slip op. at 5 (citation omitted).

Contracts contained protected trade secrets.  The contracts, which include details of the company’s negotiated room rates, met this standard.  They were “information.”  Slip op. at 6.  And Orbitz “derives independent economic value from this pricing information.”  Slip op. at 7.  The Court observed that the company’s competitors “could possibly gain a competitive advantage by negotiating better rates with hotels” if they possessed the information.  Id.  In addition, the pricing information in the contracts wasn’t “readily ascertainable” by the company’s competitors or the public.  Orbitz had made reasonable efforts to maintain the secrecy of its pricing information.  “Each contract contains its own confidentiality clause that precludes the hotels from disclosing to any third party any information relating to the contracts as well as any information provided by one party to the other in performing the contract.”  Slip op. at 7 (emphasis in original).  Because the contracts constituted trade secrets, they fell within the mandatory exceptions to Indiana’s general rule of public access.  Slip op. at 8.  Therefore, the Court concluded that it “need not determine whether Orbitz’s need for privacy outweighs the policy of providing public access.” Id.