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John Cornyn

February 9, 1999

Ms. Sharon Alexander
Office of General Counsel
Texas Department of Health
1100 West 49th Street
Austin, Texas 78756-3199


Dear Ms. Alexander:

You ask whether certain information is subject to required public disclosure under the Texas Open Records Act, chapter 552 of the Government Code. Your request was assigned ID# 122165.

The Texas Department of Health (the "department") received two requests for information relating to the department's Fiscal Intermediary Contract with National Heritage Insurance Company ("NHIC"). Although you make no arguments for withholding the information at issue from disclosure, you raise section 552.305 of the Government Code and ask that we consider NHIC's contention that the information is proprietary and should be excepted from disclosure.(1)

We notified NHIC about the request for information. 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 Open Records Act in certain circumstances). NHIC responded by claiming that the submitted information is excepted from disclosure pursuant to sections 552.104 and 552.110 of the Government Code. The submitted information consists of certain portions of NHIC's bid proposal, which are incorporated into NHIC's contract with the department (Section 6.0 of its Technical Proposal and Section 4.0 of its Business Proposal).

NHIC contends that section 552.104 of the Government Code excepts the submitted information from disclosure. We note, however, that section 552.104 protects the interests of governmental bodies, not third parties. Open Records Decision No. 592 (1991). Since the department has not raised section 552.104, section 552.104 is not applicable to the information at issue. Id. (governmental body may waive its section 552.104 interest).

NHIC also raises section 552.110 of the Government Code. Section 552.110 protects the property interests of private parties by excepting from disclosure two types of information: (1) trade secrets, and (2) commercial or financial information obtained from a person and privileged or confidential by statute or judicial decision.

The Texas Supreme Court has adopted the definition of "trade secret" from the Restatement of Torts, section 757, which holds a "trade secret" to be

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 a single or ephemeral event 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); see Hyde Corp. v. Huffines, 314 S.W.2d 763, 776 (Tex.), cert. denied, 358 U.S. 898 (1958). If a governmental body takes no position with regard to the application of the "trade secrets" branch of section 552.110 to requested information, we accept a private party's claim for exception as valid under that branch if that person establishes a prima facie case for exception and no one submits an argument that rebuts the claim as a matter of law. Open Records Decision No. 552 at 5 (1990).(2)

In Open Records Decision No. 639 (1996), this office announced that it would follow the federal courts' interpretation of exemption 4 to the federal Freedom of Information Act when applying the second prong of section 552.110 for commercial and financial information. In National Parks & Conservation Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974), the court concluded that for information to be excepted under exemption 4 to the Freedom of Information Act, disclosure of the requested information must be likely either to (1) impair the Government's ability to obtain necessary information in the future, or (2) cause substantial harm to the competitive position of the person from whom the information was obtained. National Parks & Conservation Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974). A business enterprise cannot succeed in a National Parks claim by a mere conclusory assertion of a possibility of commercial harm. Open Records Decision No. 639 at 4 (1996). To prove substantial competitive harm, the party seeking to prevent disclosure 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. Id.

NHIC generally alleges that it will suffer harm if the submitted information is released, but NHIC has not provided us with specific facts to support this general allegation. We conclude, therefore, that NHIC has not met its burden under either the trade secret prong or the commercial or financial information prong of section 552.110. Accordingly, the department must release the submitted information.

We are resolving this matter with an informal letter ruling rather than with a published open records decision. This ruling is limited to the particular records at issue under the facts presented to us in this request and should not be relied upon as a previous determination regarding any other records. If you have questions about this ruling, please contact our office.

Yours very truly,

Karen E. Hattaway
Assistant Attorney General
Open Records Division


Ref: ID# 122165

Enclosures: Submitted documents

cc: Ms. Deborah C. Hiser
Hilgers & Watkins
98 San Jacinto Boulevard, Suite 1300
Austin, Texas 78701
(w/o enclosures)

Ms. Diana C. Johnson
General Counsel
Fort Bend Family Health Center, Inc.
400 Austin Street
Richmond, Texas 77469
(w/o enclosures)

Ms. Allison Davidson
National Heritage Insurance Company
11044 Research Boulevard
Austin, Texas 78759
(w/o enclosures)



1. You initially claimed that the information at issue was excepted from disclosure under section 552.111 of the Government Code, but you have since withdrawn that claim.

2. 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 other 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 (1982) at 2, 306 (1982) at 2, 255 (1980) at 2.

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