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A delicate balance: The First Amendment vs. ‘Trade Secrets’

Kim TroutThe efforts of Idaho news organizations to intervene in the pending antitrust suit against St. Luke’s Health System brings into sharp focus the unique conflict between “trade secrets” and the First Amendment.

“Without a free press there can be no free society. Freedom of the press, however is not an end in itself, but a means to the end of a free society,” wrote Justice Reed of the U.S. Supreme Court. In addition to protecting freedom of speech and the press, the Supreme Court has also found that the First Amendment must likewise provide some protection for seeking out the news, without which freedom of the press could be eviscerated.

Yet the Supreme Court has held repeatedly that the First Amendment right of access to information is a qualified right and subject to limitations.

“There are few restrictions on action which could not be clothed by ingenious argument in the garb of decreased data flow. For example, the prohibition of unauthorized entry into the White House diminishes the citizen’s opportunities to gather information he might find relevant to his opinion of the way the country is being run, but that doesn’t make entry into the White House a First Amendment right.” (Zemel v. Rusk, 381 U.S. 1, 17 (1965).

The Supreme Court has further held that the press, in its news gathering purposes, is not entitled to any greater protection of this right than is the general public. Therefore, the First Amendment does not guarantee the press a constitutional right of special access to information not available to all.

The St. Luke’s case may bring a special spotlight to the issue of whether the information sought by the press is truly a “trade secret” or of such “proprietary” nature that the general public has no right to know.

This initial determination may be the most critical. The court’s recent ruling in light of the recent efforts of the press is particularly enlightening. According to news reports, the court ordered the attorneys for the hospitals, the Federal Trade Commission and the attorney general to demonstrate to the court why they believe each sealed document or witness statement merits “trade secret” status.

The court’s stated purpose seeks to ensure that the hospitals are neither misusing nor abusing their “trade secret” status. The court also invited counsel for the press to engage in a similar, but confidential review. The Associated Press news report characterized the court’s order as a ruling against the media; however, the order might be characterized as a reasoned first step in the determination of the balance between the interests of the press and public, and those of the litigants.

The inevitable argument the court may have to address is one in which the litigants may argue that “the public has no right to know a company’s trade secrets!”

This kind of argument may not stand as a categorical proposition. The recent crash of the U.S. economy exposed business entities that adopted secret practices that threatened not only their survival, but also the welfare of an entire industry and the stability of the U.S. economy. Simply labeling such secret practices as “confidential” and “proprietary” does not, nor can it, empty them of compelling public interest. Appropriate and timely disclosure of such secret practices might just avert untold damage on the public consumers of health care services and serve the highest tradition of a free press.

Likewise, protection of true “trade secrets” helps facilitate the legislative judgment that providing legal protections for commercial secrets provides a net benefit to the public and the enhancement of entrepreneurial creativity that is a backbone of a free-market society.

When these competing interests collide, as they do in the intervention sought by the media in the St. Luke’s case, a balancing of the interests must be sought, and the first step is a careful examination of the reasons why a company seeks to protect information. The court’s recent ruling as to the media’s request appears to be the reasoned balancing process required by the Constitution in this unique situation.

Whether the information is more like a secret code for a new product or more like a secret plan for the introduction of that product into the industry may be the deciding question upon review. The code may be subject to proprietary protection, whereas the plan may not. Either way, the media’s efforts to intervene and the court’s ultimate decision as to disclosure, or not, will highlight the reasoned balance that must occur when the First Amendment and trade secrets collide.

Kim J. Trout is managing member of Trout Law, PLLC. Kim specializes in business, real estate, and litigation-related matters. He can be reached at ktrout@trout-law.com.

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