The unbearable lightness of trade secrets and public tenders

Kat friend Gabriele Girardello once again reports on trade secrets, this time on an Italian case, Administrative Court of Latium (n. 9878, Div. III, 22/09/2021), which highlights the strategic use of trade secrets in connection with public tenders.

Trade secrets and disclosure would seem to be clearly demarcated opposites, but the reality is that the relationship between them is often more nuanced. In this case, the nuance is expressed in the context of the balance between the ‘right of information’ of the participants to a public tender and the possible presence of ‘trade secrets’ in the bidding documentation. A claim of trade secret protection is one of the objections to disclosure that may be raised by the bidder against a competitor who seeks to examine the tender documentation in order to evaluate his further legal steps.

Not for the first time in connection with a public procurement tender, an unsuccessful bidder then files with the contracting authority a request for examination of the documentation submitted by the successful bidder, this to evaluate the propriety of the award process, with an eye towards possibly challenging it through legal proceedings.

In this case, the successful bidder opposed the request for access, alleging the presence of trade secrets in the documentation that it had filed. Based on this, the request for access to the documentation was denied by the contracting authority. The challenging party then brought an action before the Administrative Court (having jurisdiction over public tender- related issues), seeking to require the court to lift the secrecy protection and order disclosure of the entire documentation.

The applicable rules are contained in paragraph 5, letter "a" and paragraph 6 of Article 53 of Legislative Decree No. 50/2016 on public tenders, stating:
5, let. a): '... the right of access and any form of disclosure shall be excluded in relation to: a) information provided as part of the tender or in justification thereof which constitutes, according to a reasoned and substantiated statement by the bidder, technical or commercial secrets".

6: "In relation to the provision referred to in paragraph 5, letter a), access shall be granted to the bidder for the purpose of defending its interests before the courts in relation to the procedure for the award of the contract.'
Given the above, which is frankly intuitive and crystal clear as to its legal basis and rationale, this author was surprised to read that the tender underlying this case before the TAR Latium concerned a contract for “care and maintenance service of green areas and plant heritage” of a public body. In such a context, it is challenging to imagine what could be the trade secrets in the tender documentation of the winning bidder.

Not only that, but a little bit of digging regarding the party opposing access showed that it had claimed secrecy in its documentation in vague terms. In fact, it had simply recited some rather general and obvious principles of the right to secrecy, pointing to mere ‘skills and experience’, which could have been derived from reading documentation submitted by any competitor. As well, however, the party requesting access had not been clear on the specific reasons in favor of lifting the secrecy protection.

The administrative Court took the view that the contracting authority should reexamine the matter and in particular should address whether —
“there is any information that constitutes proven technical and commercial secrets in the face of the opposition filed by the other party to the contract, with the consequent release of the requested documentation once the contracting authority will have ascertained the possible existence of any secrets…”
This case (among many others, including another recent decision of the State Council, i.e. the Supreme Court for administrative matters in Italy, n. 5620 of 30/07/2021 and which concerned a contract for cleaning services), well represents the current trend of Italian administrative courts in relation to trade secrets.

It is clear that: (a) the ‘trade secrets defence’ has in recent times (especially since the implementation of the Trade Secrets Directive in 2018) been used frequently, often as strategic measure in administrative proceedings in Italy; (b) the contracting authorities show a tendency to deny access when such a defence is raised and, therefore, force the party that requested access to ask the court to allow disclosure; and (c) the administrative courts, when addressing a request to lift the secrecy defence, tend not to enter into a detailed analysis of the facts of the cases, limiting themselves to high-level discussion and analysis, remanding the case back to the contracting authority and requesting further examination.

As such, an annoying back-and-forth between contracting authorities and courts takes place. In the context of public tenders, there is in fact no specific procedure/regulation/set of rules aimed at simplifying the evaluation of the presence of trade secrets and thereby avoid lengthy legal proceedings to assess the presence of proper secrets.

Also, it must be taken into consideration that once access is allowed, the party requesting access may then try to have the tender annulled on the basis of the disclosed documentation. This, due to the length of the administrative proceedings on the request for access, can carry on for months after the tender has been awarded, casting uncertainty on the tender awarding process.

In an ideal world (such as one where cats and dogs live in harmony and respect the rules of the house), any company that might be expected to share its confidential information as part of public tender should be required to declare (in advance) which specific parts of their documentation are considered confidential and so, to be protected. On the other side, any party that wants to access the documentation of a competitor will need to indicate in detail why information labeled as confidential, in whole or in part, is really necessary to protect its rights.

Picture on the top middle is bysudheerinfo99 and is licensed under a CCO license.

Picture on the lower middle is by Krista Mangulsone (Snapwire) and is licensed under a Creative Commons CC0 1.0 Universal Public Domain Dedication.

The unbearable lightness of trade secrets and public tenders The unbearable lightness of trade secrets and public tenders Reviewed by Neil Wilkof on Friday, October 29, 2021 Rating: 5

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