Section 47 – Trade Secrets Exemption

Overview

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Subsection 47(1) provides that a document is exempt if its disclosure would involve disclosure of a trade secret or any other information having a commercial value that would be, or could reasonably be expected to be, destroyed or diminished if the information were disclosed.^[1]

Subsection 47(2) qualifies that the exemption does not apply if the information in the document is:

• in respect of the applicant’s business or professional affairs;
• in respect of an undertaking and the applicant is the proprietor of the undertaking or a person acting on behalf of the proprietor of the undertaking; or
• in respect of an organisation and the applicant is the organisation or a person acting on behalf of the organisation.

Is the information a trade secret?

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Subsection 47(1)(a) sets out that if the information contained within the document is determined to be a trade secret, then would be exempt from disclosure.

The term ‘trade secret’ is not defined in the FOI Act, but caselaw provides guidance on the scope and application of the term for the purposes of section 47.

In Lansing Linde Ltd v Kerr,^[2] the Court of Appeal of England and Wales considered an interlocutory appeal in relation to restraint of trade. The plaintiff, Lansing Linde Ltd, appealed against an order refusing its application for an order that the defendant, Mr Kerr, be restrained until after the judgement in the action from divulging, either directly or indirectly, business information to persons outside Lansing Linde or its associated companies, from soliciting customers of Lansing Linde, or, subject to certain exceptions, from being engaged any executive, technical or advisory capacity in any business concern which was in competition with the business of Lansing Linde.

Relevantly, the Court considered what constitutes ‘trade secrets’. In his judgement, Lord Justice Staughton held:^[3] _‍

Mr Poulton suggested that a trade secret is information which, if disclosed to a competitor, would be liable to cause real (or significant) harm to the owner of the secret. I would add first, that is must be information used in a trade or business, and secondly that the owner must limit the dissemination of it or at least not encourage or permit widespread publication.

Staughton LJ’s remarks were cited by the Full Court of the Federal Court of Australia in Searle Australia Pty Ltd and Public Interest Advocacy Centre and Department of Community Services and Health^[4] and are reflected in the FOI Guidelines, which set out the following test to determine whether information is a trade secret for the purposes of section 47:

• the information is used in a trade or business;
• the owner of the information must limit its dissemination or at least not encourage or permit its widespread publication; and
• if disclosed to a competitor, the information would be liable to cause real or significant harm to the owner of the information.

The FOI Guidelines also refer to the case of Secretary, Dept of Workplace Relations & Small Business v The Staff Development & Training Centre Pty Ltd,^[5] in which the Federal Court of Australia construed a ‘trade secret’ as information possessed by one trader which gives that trader an advantage over its competitors while the information remains generally unknown.^[6]

Further, the FOI Guidelines helpfully set out a list of non-exhaustive factors which may indicate whether information constitutes a ‘trade secret’.^[7] These factors include the extent to which the information is known outside the business of the owner of that information^[8] and the ease or difficulty with which others might acquire or duplicate the secret.^[9]

Does the information have a commercial value?

Information may be exempt under s 47(1)(b) if the following criteria are met:

• the document must contain information that has a commercial value either to an agency or to another person or body; and
• the commercial value of the information would be, or could reasonably be expected to be, destroyed or diminished if it were disclosed.^[10]

Commercial value to agency, person or body

As a question of fact, the information must have commercial value to an agency, person or body. Information does not need to have an ‘exchange value’ to have commercial value.^[11] However, it may be insufficient to merely associated commercial value with the time and money invested in generating that information.^[12]

Other factors that decision-makers may consider when determining whether information has commercial value include whether:‍

• widespread knowledge would reduce the intrinsic commercial value;
• the information confers a competitive advantage;
• someone would be prepared to pay for the information;
• the information is current; and
• the value of the business operation would be reduced (for example, by a lower share price).^[13]

Diminished commercial value

If commercial value is determined, the value must be or be reasonably expected to be diminished or destroyed if known for the conditional exemptions to apply.^[14]

It would be inaccurate to presume confidential information loses its commercial value if it has been disclosed.^[15] Further, commercial value is not destroyed or diminished if an agency or person was merely negatively affected (for example, criticised or embarrassed).^[16]

Below we consider a decision by the Australian Information Commissioner which highlights the application of this exemption.

Australian Broadcasting Corporation and Australian Fisheries Management Authority [2016] AICmr 43

The facts

The ABC applied to the Australian Fisheries Management Authority (AFMA) under the FOI Act for certain documents relating to the Geelong Star (now called the Dirk-Dirk KW172), a gross tonnage super-trawler and factory ship. The scope of the ABC’s request, which was revised following discussions with the AFMA, captured documents that contained the business information of Seafish Tasmania Pty Ltd (Seafish), the operator of the Geelong Star, and Maritiem BV (Maritiem), a designer and manufacturer of fishing equipment that designed and supplied fishing nets for the Geelong Star.

Notably, the ABC’s request included:

• documents containing information about the technical performance of the seal excluder device (SED) and net design from Maritiem
• photos and videos of sea mammals that were caught and had died; and
• documents relating to the effectiveness of e-monitoring systems from Maritiem.^[18]

During a third-party consultation process under the FOI Act, Maritiem contended that:

• releasing documents regarding the performance of the SED, e-monitoring systems and net design developed by Maritiem would diminish the commercial value and the designs were a trade secret;
• they guarded the information with secrecy; and
• if released it could be used by competitors to duplicate the device.

In its original decision and upon internal review, the AFMA ultimately gave the ABC access to three documents in full, 21 documents in part and refused access to the remaining 11 documents. In making its decision, the AFMA relied on the trade secrets or commercially valuable information exemption (s 47(1)), the personal privacy exemption (s 47F) and the business affairs exemption (s 47G) of the FOI Act. The ABC sought Information Commissioner review (IC review) of the AFMA’s decision under s 54L of the FOI Act.

At IC review, there were 25 documents remaining at issue, which were broadly categorised as:

• AFMA observer reports, wildlife interaction report and emails;
• a marine mammal bycatch evaluation report;
• photographs of marine mammal mortalities; and
• underwater video footage of marine mammal mortalities.

Relevantly, one of the issues to be decided in the IC review was whether the documents that AFMA found to be exempt under s 47(1) were exempt under this provision.

The Australian Information Commissioner’s findings in relation to s 47(1)

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Trade Secret

Ultimately, the Commissioner found that the releasing the relevant documents would not disclose a trade secret. The Commissioner applied the Federal Court of Australia’s definition of ‘trade secrets’ in Secretary, Dept of Workplace Relations & Small Business v The Staff Development & Training Centre Pty Ltd,^[19] as set out above.

The Commissioner was satisfied that the details of the net/SED design was information used in Maritiem’s business as they were commercially available and supplied as part of the business. However, to meet the requirements of s 47(1), Maritiem needed to at least discourage widespread dissemination and publication of the net/SED design.

In this case, the Commissioner reached the view that:

• the design features of the net, including the types of materials used in the net’s construction, are observable outside of the documents in issue;^[20]‍
• the design of the Geelong Star’s net/SED design is well known to staff at Maritiem;^[21]‍
• the design of the net/SED design is also known outside of Maritiem’s business, particularly to Seafish and its employees;^[22]
• Maritiem did not sufficiently limit the spreading of its trade secrets, including within its organisation;^[23] and
• therefore, it was apparent that the design of the net/SED design is known outside of Maritiem’s business.^[24]

The Commissioner accepted that disclosing technical design information to a competitor could affect Maritiem’s competitive advantage but determined that disclosure would not cause Maritiem the real or significant harm contemplated by the Federal Court.^[25]

Diminished Commercial Value 

The Commissioner held:

• The disclosure of certain documents that contained Maritiem’s “crucial” commercial information, which has commercial value to Maritiem such that a competitor would be willing to pay to obtain the information, would erode Maritiem’s competitive advantage.^[26] This information was exempt from release pursuant to s 47(1)(b).
• Certain documents that related to the technical specifications and operational performance of the net and SED was commercially valuable information whose value could reasonably be expected to be diminished by disclosure.^[27] This information was exempt from release pursuant to s 47(1)(b).
• Documents and video footage that merely contained general comment and opinion and not detailed technical information or information relating to the operational performance of the net or the SED were not exempt under s 47(1)(b).^[28]
  

[1] FOI Act, s 47(1).

[2] [1991] 1 All ER, 418.

[3] Ibid, 425.

[4] (1992) 108 ALR 163.

[5] Ibid, 5.200.

[6] [2001] FCA 1375, 28.

[7] Officeof the Australian Information Commissioner, Freedom of information, FOI Guidelines, 5.199 (FOI Guidelines).

[8] Ibid, 5.201.

[9] Ibid.

[10] Ibid.

[11]  FOI Guidelines, 5.204 and McKinnon v Department of Immigration and Citizenship and Serco Australia Pty Ltd [2012] AICmr 34.

[12] FOI Guidelines, 5.205 and Re Cannon and Australian Quality Egg Farms (1994) 1 QAR491 and Re Hassell and Department of Health of Western Australia [1994] WAICmr 25.

[13] FOI Guidelines, 5.205.

[14] Ibid, 5.205.

[15] Ibid,5.207;

[16] Ibid, 5.207.

[17]Ibid, 5.207.

[18] Australian Broadcasting Corporation and Australian Fisheries Management Authority [2016] AICmr 43 (‘ABC vAFMA’), 5.

[19] [2001] FCA 1375, 28.

[20] ABC v AFMA, 30.

[21] Ibid.

[22] Ibid.

[23] Cf. ‘HN’ and Department of the Environment [2015] AICmr 76.

[24] ABC v AFMA, 30.

[25] Ibid, 31.

[26] Ibid, 38.

[27] Ibid, 39.

[28] Ibid.

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