A government contractor learned the hard way that bid documents containing trade secrets are not protected from disclosure in Massachusetts. On September 21, 2018, a Massachusetts U.S. District Court judge ruled that the Defend Trade Secrets Act (DTSA) doesn’t bar requests under the public records law for bid proposals containing a contractor’s trade secrets.

In October 2016, Fast Enterprises, LLC, filed an action in U.S. District Court seeking an injunction to prevent Defendant Stephanie Pollack, in her capacity as Secretary and CEO of the Massachusetts Department of Transportation (MassDOT), from disclosing its trade secrets. The company submitted bid proposal documents containing trade secrets in response to a Request for Proposals issued by the MassDOT Registry of Motor Vehicles (RMV). The bid proposal was for the replacement of the RMV’s core computer system. Fast Enterprises alleged that its bid proposal contained confidential and proprietary information regarding the functionality and operation of the system that it proposed to install. After awarding Fast Enterprises with the contract, MassDOT received requests from Fast Enterprises’ competitors and a local news reporter for the bid documents under the Massachusetts public records law, Mass. Gen. Laws ch. 4, § 7. N. Under the public records law, documents must be disclosed unless they are “specifically or by necessary implication exempted from disclosure by statute,” Mass. Gen. Laws ch. 4, § 7(26)(a). Although the law exempts trade secrets from disclosure where they are “voluntarily provided to an agency for use in developing governmental policy and upon a promise of confidentiality,” there are no exemptions where the information is submitted “as a condition of receiving a governmental contract or other benefit.” Mass. Gen. Laws 4, § 7(26)(g).

Pollack ultimately moved to dismiss the action for lack of subject matter jurisdiction. In opposition to the motion, Fast Enterprises argued that the Court had subject matter jurisdiction over the case pursuant to the DTSA, which creates a federal cause of action for the misappropriation of trade secrets. Specifically, the DTSA authorizes the “owner of a trade secret that is misappropriated” to bring a civil action, and grants U.S. district courts original jurisdiction over such cases. However, the DTSA contains a limitation on that jurisdictional grant, as it “does not prohibit or create a private right of action” in regard to “any otherwise lawful activity conducted by a governmental entity of . . . a State.” 18 U.S.C. § 1833(a)(1). Pollack contended that the release of the records at issue was an “otherwise lawful activity,” and thus the Court had no jurisdiction. The Court agreed. In its decision, the Court reasoned that the “otherwise lawful” language applied only to the activities of governmental entities, not private parties, and “thus it appears that Congress specifically intended to circumscribe the DTSA so it would not interfere with the policy choices made by state governments in regard to their own operations.”

Despite its ruling, the Court acknowledged the problematic issue with the public records law, noting, “[a]lthough the Court fully sympathizes with Fast Enterprises, and cannot help but wonder why the state would require the disclosure of proprietary bid information given the impact that it could have on future bid solicitations, it is constrained by the applicable statutes. Ultimately, as the federal statute does not provide for a cause of action in these circumstances, this issue must be resolved by the state courts or the state legislature.”

Takeaway

This decision highlights just how critical it is for companies to understand applicable state public record laws when submitting confidential information for government bids. In light of the recent ruling, companies would be wise to consider alternative methods for government bid proposal submissions, such as redacting proprietary information or perhaps forgoing the bid altogether.