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December 11, 2000

Ms. Patricia Muniz-Chapa
Office of General Counsel
The University of Texas System
201 West 7th Street
Austin, Texas 78701-2902

OR2000-4624

Dear Ms. Muniz-Chapa:

You ask whether certain information is subject to required public disclosure under the Public Information Act (the "Act"), chapter 552 of the Government Code. Your request was assigned ID# 141899.

The University of Texas System (the "U.T. System") received two separate requests for information about certain bid proposals submitted by several companies to the U.T. System for the 2000 Pharmaceutical Benefit Management Contract. Although you assert no arguments on behalf of the U.T. System, you state that the requested information may contain proprietary information that is protected from disclosure under sections 552.104 and 552.110 of the Government Code. We have considered these exceptions and reviewed the submitted information.

Section 552.104 excepts from disclosure "information that, if released, would give advantage to a competitor or bidder." The purpose of section 552.104 is to protect a governmental body's interests in competitive bidding situations. Open Records Decision No. 592 (1991). Because you have not submitted written comments to this office explaining why the exception applies, the information may not be withheld under section 552.104. Id. (Gov't Code 552.104 may be waived by governmental body); see Gov't Code 552.301(e)(1)(A) (governmental body must submit to the attorney general written comments stating the reasons why the stated exceptions apply that would allow the information to be withheld).

Since the property and privacy rights of third parties may be implicated by the release of the requested information, you notified those companies whose information is responsive to the request. See Gov't Code 552.305 (permitting interested third party to submit to attorney general reasons why requested information should not be released); Open Records Decision No. 542 (1990) (determining that statutory predecessor to Gov't Code 552.305 permits governmental body to rely on interested third party to raise and explain applicability of exception in Public Information Act in certain circumstances).

Sixteen companies submitted bids to the U.T. System. In a letter to the requestor, dated September 25, 2000, you indicate that the requestor has given eight companies approval to withhold pages from their proposals which they consider to be confidential:

Prime Therapeutics, Managed Pharmacy Benefits (MPB), National Prescription Administrators (NPA), Caremark, Advance Paradigm, Unicare, ReStat, and PCS.

You inform us that the requested information in the bid proposals of each of these companies, except for those portions that the requestor has given you approval to withhold, has already been released to the requestor.

Six other companies, CL*Imspro, Eckerd Health Services, MIM Health Plans, Optimal Health Care, Ameri Plan USA, and Rx America, have not submitted written comments to this office explaining why information contained in their bid proposals should be withheld. See Gov't Code 552.305(b) (persons whose privacy or property interests may be involved may submit in writing to the attorney general the person's reasons why the information should be withheld). Because we have no basis on which to conclude that the bid proposals of these companies contain information that is excepted from disclosure, you must release the proposals in their entirety. See Gov't Code 552.110(b) (must show specific factual evidence that disclosure would cause substantial competitive harm); Open Records Decision Nos. 639 at 4 (1996) (to prevent disclosure of commercial or financial information, party must show by specific factual or evidentiary material, not conclusory or generalized allegations, that it actually faces competition and that substantial competitive injury would likely result from disclosure), 552 at 5 (1990) (party must establish prima facie case that information is trade secret), 542 at 3 (1990).

In an electronic mail message addressed to you, dated October 5, 2000, MedImpact Healthcare Systems, Inc. ("MedImpact"), asked the U.T. System that certain pages containing "proprietary information" be withheld from disclosure. MedImpact listed the specific pages it considered to be proprietary. You have provided those documents to this office for our review. However, MedImpact has not submitted written comments to this office explaining why information contained in its bid proposal should be withheld. See Gov't Code 552.305(b) (persons whose privacy or property interests may be involved may submit in writing to the attorney general the person's reasons why the information should be withheld). Because we have no basis on which to conclude that the bid proposal of MedImpact is information that is excepted from disclosure, you must release the proposal in its entirety. See Gov't Code 552.110(b) (must show specific factual evidence that disclosure would cause substantial competitive harm); Open Records Decision Nos. 639 at 4 (1996) (to prevent disclosure of commercial or financial information, party must show by specific factual or evidentiary material, not conclusory or generalized allegations, that it actually faces competition and that substantial competitive injury would likely result from disclosure), 552 at 5 (1990) (party must establish prima facie case that information is trade secret), 542 at 3 (1990).

Only one company, Merck-Medco, submitted a brief to this office explaining why the information in its bid proposal is excepted from disclosure. Merck-Medco claims that much of the information contained in its bid proposal is excepted by section 552.110 of the Government Code because it is either a trade secret or commercial or financial information the disclosure of which would cause it substantial competitive harm.

Section 552.110 protects the property interests of private persons by excepting from disclosure two types of information: (1) trade secrets obtained from a person and privileged or confidential by statute or judicial decision and (2) commercial or financial information for which it is demonstrated based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained. The interested third party raising this exception must provide a specific factual or evidentiary showing, not conclusory or generalized allegations, that substantial competitive injury would likely result from disclosure. Gov't Code 552.110(b); see also National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974).

The Texas Supreme Court has adopted the definition of a trade secret under section 757 of the Restatement of Torts. Hyde Corp. v. Huffines, 314 S.W.2d 763 (Tex.), cert. denied, 358 U.S. 898 (1958); see also Open Records Decision No. 552 at 2 (1990). Section 757 provides that a trade secret is

any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. It differs from other secret information in a business . . . in that it is not simply information as to single or ephemeral events in the conduct of the business . . . . A trade secret is a process or device for continuous use in the operation of the business. . . . [It may] relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.

Restatement of Torts 757 cmt. b (1939). In determining whether particular information constitutes a trade secret, this office considers the Restatement's definition of trade secret as well as the Restatement's list of six trade secret factors.(1) Restatement of Torts 757 cmt. b (1939). This office has held that if a governmental body takes no position with regard to the application of the trade secret branch of section 552.110 to requested information, we must accept a private person's claim for exception as valid under that branch if that person establishes a prima facie case for exception and no argument is submitted that rebuts the claim as a matter of law. Open Records Decision No. 552 at 5-6 (1990).

Section 552.110 also protects certain "commercial or financial information" from disclosure. Subsection (b) of section 552.110 provides:

(b) Commercial or financial information for which it is demonstrated based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained is excepted from the requirements of Section 552.021.

This exception to disclosure requires a specific factual or evidentiary showing, not conclusory or generalized allegations, that substantial competitive injury likely would result from release of the information at issue. See Open Records Decision No. 661 at 5-6; see also National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974).

Merck-Medco argues that the information it has identified as a trade secret goes to the heart of its proprietary methods for determining prices, controlling costs, approving drugs, and evaluating claims. It also includes customer and supplier lists, as well as detailed descriptions of the design, operation and specification of its proprietary software programs. Merck-Medco claims that it has spent many years and millions of dollars developing this information, and that the information is distributed only to select individuals at the company and which would be of great value to its competitors. Merck-Medco also claims that the release of the information it has identified would cause it substantial competitive harm.

Merck-Medco's bid proposal contains an Executive Summary and two parts: Part A - Technical Proposal (with Exhibits Section), and Part B - Financial Proposal (with Exhibits Section and Supplemental Exhibits Section). Within each part, the proposal is divided into different sections. Within each section are Merck-Medco's answers to specific questions posed by the U.T. System in its request for proposal.

After reviewing the information and Merck-Medco's arguments, we conclude that Merck-Medco has established the applicability of section 552.110 of the Government Code to the following information in its bid proposal:

Section 3.2 - Responses to Questions 1, 2, 6, 8,(2) 10

Section 3.3 - Responses to Questions 7, 9, 10

Section 3.4 - Responses to Questions 9, 11, 13, 18, 21

Section 3.6 - Response to Questions 1

Section 3.7 - Responses to Question 2, 3

Section 4.0 - Response to Questions 3

Section 5.0 - Entire Section

Standard Plus Reporting Series Exhibit

Point of Sale Edits Exhibit

Sample Prescription Drug Program Administrative Agreement Exhibit

Part B - Financial Proposal (Entire Part)

The information contained in this list must be withheld under section 552.110 because it is either a trade secret or commercial or financial information the disclosure of which would cause substantial competitive harm to Merck-Medco.

However, Merck-Medco has not established the applicability of section 552.110 to the following information:

Section 3.1 - Responses to Questions 5, 8, 9

Section 3.2 - Responses to Questions 3, 5, 7, 9

Section 3.3 - Responses to Questions 1, 8, 12, 13

Section 3.4 - Responses to Questions 16, 19, 22

Section 3.5 - Responses to Questions 10, 11

Section 3.6 - Responses to Questions 4, 6, 7, 8

Section 3.10 - Responses to Questions 2, 3

Section 4.0 - Responses to Questions 1, 2, 4, 5, 6, 7

Listing of Retail Pharmacies Exhibit

The information contained in this list must be released because it is either not a trade secret or is not commercial or financial information the disclosure of which would cause substantial competitive harm to Merck-Medco. See Open Records Decision Nos. 319 (1982) (information relating to organization and personnel, market studies, professional references, qualifications and experience, and pricing are not ordinarily excepted from disclosure under section 552.110), 306 (1982) (resumes listing the education and experience of employees cannot reasonably be said to fall within the 'trade secret' or any other exception to the Public Information Act), 175 (1977).

This letter ruling is limited to the particular records at issue in this request and limited to the facts as presented to us; therefore, this ruling must not be relied upon as a previous determination regarding any other records or any other circumstances.

This ruling triggers important deadlines regarding the rights and responsibilities of the governmental body and of the requestor. For example, governmental bodies are prohibited from asking the attorney general to reconsider this ruling. Gov't Code 552.301(f). If the governmental body wants to challenge this ruling, the governmental body must appeal by filing suit in Travis County within 30 calendar days. Id. 552.324(b). In order to get the full benefit of such an appeal, the governmental body must file suit within 10 calendar days. Id. 552.353(b)(3), (c). If the governmental body does not appeal this ruling and the governmental body does not comply with it, then both the requestor and the attorney general have the right to file suit against the governmental body to enforce this ruling. Id. 552.321(a).

If this ruling requires the governmental body to release all or part of the requested information, the governmental body is responsible for taking the next step. Based on the statute, the attorney general expects that, within 10 calendar days of this ruling, the governmental body will do one of the following three things: 1) release the public records; 2) notify the requestor of the exact day, time, and place that copies of the records will be provided or that the records can be inspected; or 3) notify the requestor of the governmental body's intent to challenge this letter ruling in court. If the governmental body fails to do one of these three things within 10 calendar days of this ruling, then the requestor should report that failure to the attorney general's Open Government Hotline, toll free, at 877/673-6839. The requestor may also file a complaint with the district or county attorney. Id. 552.3215(e).

If this ruling requires or permits the governmental body to withhold all or some of the requested information, the requestor can appeal that decision by suing the governmental body. Id. 552.321(a); Texas Department of Public Safety v. Gilbreath, 842 S.W.2d 408,411 (Tex. App.--Austin 1992, no writ).

Please remember that under the Act the release of information triggers certain procedures for costs and charges to the requestor. If records are released in compliance with this ruling, be sure that all charges for the information are at or below the legal amounts. Questions or complaints about over-charging must be directed to Hadassah Schloss at the General Services Commission at 512/475-2497.

If the governmental body, the requestor, or any other person has questions or comments about this ruling, they may contact our office. Although there is no statutory deadline for contacting us, the attorney general prefers to receive any comments within 10 calendar days of the date of this ruling.

Sincerely,

Stephen P. Agan
Assistant Attorney General
Open Records Division
SPA/seg
Ref: ID# 141899
Encl. Submitted documents

Ms. Lani Walters
Director FOIA Services
FOIA Group, Inc.
101 South Whiting Street, Suite 1600
Alexandria, Virginia 22304
(w/o enclosures)

Mr. Richard L. Josephson
Baker & Botts, L.L.P.
One Shell Plaza, 910 Louisiana
Houston, Texas 77002-4995
(w/o enclosures)

Ms. Elizabeth Esparza
Manager of Business Development
MedImpact Healthcare Systems, Inc.
6708 Westbury Court
Fort Worth, Texas 76132
(w/o enclosures)


 

Footnotes

1. The six factors that the Restatement gives as indicia of whether information constitutes a trade secret are:

(1) the extent to which the information is known outside of [the company]; (2) the extent to which it is known by employees and others involved in [the company's] business; (3) the extent of measures taken by [the company] to guard the secrecy of the information; (4) the value of the information to [the company] and [its] competitors; (5) the amount of effort or money expended by [the company] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Restatement of Torts 757 cmt. b (1939); see also Open Records Decision Nos. 319 at 2 (1982), 306 at 2 (1982), 255 at 2 (1980).

2. Merck-Medco informs us that the U.T. System's request for proposal had two Question 8's under Section 3.2. Merck-Medco claims that only its answer to the second Question 8 is excepted from disclosure.
 

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