Trade Secrets in Bid Documents Subject to Disclosure

Client Alerts · October 22, 2018

Public bidders beware, trade secrets that you submit along with your bid for a Massachusetts public project are not protected by the Defense of Trade Secrets Act (DTSA) and therefore, they are subject to disclosure under Massachusetts public records law, a Massachusetts federal court has decided.  The court’s decision in Fast Enterprise, LLC v. Pollack  (Fast Enterprises, LLC v. Pollack, No. 16-CV-12149-ADB, 2018 WL 4539685, at *3 (D. Mass. Sept. 21, 2018) established that federal courts do not have the requisite subject matter jurisdiction to apply the DTSA to confidential or proprietary information submitted as part of a bid proposal for a state transportation project.

The plaintiff, Fast Enterprises, submitted a bid in response to MassDOT’s Request for Proposals to replace the Registry of Motor Vehicles computer system.  According to Fast, the submitted documents contained confidential information and trade secrets relating to its products.  One of Fast’s competitors submitted a Freedom of Information Act public records request to MassDOT seeking to obtain copies of Fast’s documents.  Fast sought injunctive relief under the DTSA, prohibiting MassDOT’s release of the documents.  United States District Court Judge Allison Borroughs determined that the DTSA does not apply as a result of a statutory exception for “otherwise lawful activity conducted by a governmental entity,” such as compliance with state public records requests.

While the disclosure of confidential proprietary information is exactly the type of action that the DTSA prohibits, the court found that the “otherwise lawful” exception implies a Congressional intent to make the Act secondary to state policy decisions.  Interestingly, Massachusetts law provides that voluntary disclosure of trade secrets to a governmental entity may carry an enforceable promise of confidentiality, but information offered for the purpose of bidding on and being awarded a governmental/public contract is subject to public records disclosure (Mass. Gen. Laws 4, § 7(26)(g).

Although she ultimately sided with MassDOT based on the statute and denied Fast’s request for an injunction, Judge Borroughs questioned the prudence of the state’s position given the potential impact (a possible chilling effect) disclosure is likely to have on future bidders.  The Fast Enterprises decision essentially renders the DTSA meaningless in the context of state contract proposals and bids.  As a result, potential bidders must now weigh the long-term risks of disclosing their proprietary information in the public bidding arena against the benefit of being awarded a government contract.

If you have any questions about the information in this alert, or would like to learn more about how Prince Lobel can assist you with government contracts and other types of bids, please contact the author of this alert, Hugh Gorman, at 617.456.8093 or hgorman@princelobel.com.

Thanks and appreciation to law clerk Lauren Koslowsky (Northeastern School of Law, 2019), for her assistance with this alert.