Abstract
Abstract
To market a Class II medical device, a premarket notification must be filed with required technical information. While the Freedom of Information Act (FOIA) allows the public to request the Food and Drug Administration to disclose a premarket notification, the technical information in such premarket notification is exempt from public disclosure as long as such technical information falls within the definition of “trade secret” under the FOIA. TaiDoc Tech. Corp. v. OK Biotech Co., a state court decision in 2016, further demonstrates that technical information in a premarket notification is also protected under state trade secret law as long as the owner of the technical information has implemented a proper measure to protect secrecy. In addition, the protection extends to trade secrets of a company that manufactures products for the submitter of a premarket notification.
I. Introduction
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Under 21 U.S.C. § 360c, medical devices are divided into three classes: Class I, Class II, and Class III. 7 A Class I device is a low-risk device and requires general controls, such as those regarding adulteration, misbranding, registration, and banned devices. 8 A Class II device is a moderate-risk device. 9 In addition to general controls, it requires certain special controls, 10 such as “the promulgation of performance standards, postmarket surveillance, patient registries, development and dissemination of guidance documents (including guidance on the submission of clinical data in premarket notification submissions in accordance with section 510(k) of the act), recommendations, and other appropriate actions as the [authority] deems necessary to provide such assurance.” 11 A Class III device is a high-risk device and requires premarket approval. 12
A “blood glucose meter” is a Class II device. 13 A 510(k) premarket notification must be filed with the United States Food and Drug Administration (FDA). 14 Premarket notification is governed by 21 C.F.R. § 807, Subpart E. 15 Subpart E includes ten provisions. 16 21 C.F.R. § 807.100 provides that a 510(k) submission is cleared when FDA issues “an order declaring the device to be substantially equivalent to a legally marketed predicate device.” 17 The criteria for “substantial equivalency” include (1) whether the device under review “has the same intended use as the predicate device”; 18 (2) whether the device under review has “the same technological characteristics as the predicate device”; 19 and (3) whether such predicate device “has not been removed from the market at the initiative of the Commissioner of Food and Drugs or has not been determined to be misbranded or adulterated by a judicial order.” 20 In the second criterion, if the device under review has “different technological characteristics, such as a significant change in the materials, design, energy source, or other features of the device from those of the predicate device,” 21 FDA will consider whether “[t]he data submitted establishes that the device is substantially equivalent to the predicate device and contains information, including clinical data if deemed necessary by the Commissioner, that demonstrates that the device is as safe and as effective as a legally marketed device” 22 and “[d]oes not raise different questions of safety and effectiveness than the predicate device.” 23
21 C.F.R. § 807.87 has twelve requirements for a premarket notification submission. Among them, the technical information includes:
(1) Information supporting that “the device is similar to and/or different from other products of comparable type in commercial distribution, [such as] an identification of similar products, materials, design considerations, energy expected to be used or delivered by the device, and a description of the operational principles of the device.”
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(2) For “a device that has undergone a significant change or modification that could significantly affect the safety or effectiveness of the device, or [a device that] is to be marketed for a new or different indication for use,” “appropriate supporting data [which show] that the manufacturer has considered what consequences and effects the change or modification or new use might have on the safety and effectiveness of the device.”
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(3) “A 510(k) summary as described in [§] 807.92.”
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A 510(k) summary serves as “the basis for a determination of substantial equivalence.”
27
Under 21 C.F.R. § 807.92, the technical information in a 510(k) summary includes:
(1) A description used for “the labeling or promotional material for the device, including an explanation of how the device functions, the scientific concepts that form the basis for the device, and the significant physical and performance characteristics of the device, such as device design, material used, and physical properties.”
28
(2) A statement of the intended use of the device which includes: (a) “a general description of the diseases or conditions that the device will diagnose, treat, prevent, cure, or mitigate”;
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(b) “a description, where appropriate, of the patient population for which the device is intended”;
30
(c) if “the indication statements are different from those of the legally marketed device,” “an explanation as to why the differences are not critical to the intended therapeutic, diagnostic, prosthetic, or surgical use of the device, and why the differences do not affect the safety and effectiveness of the device when used as labeled.”
31
(3) If “the device has the same technological characteristics (i.e., design, material, chemical composition, energy source) as the predicate device identified in [21 C.F.R. § 807.92(a)(3)], a summary of the technological characteristics of the new device in comparison to those of the predicate device.”
32
(4) If “the device has different technological characteristics from the predicate device, a summary of how the technological characteristics of the device compare to a legally marketed device identified in [21 C.F.R. § 807.92(a)(3)].”
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(5) For those premarket submissions requiring an assessment of performance data, information including: (a) a brief discussion of the nonclinical tests;
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(b) a brief discussion of the clinical tests including, “where applicable, a description of the subjects upon whom the device was tested, a discussion of the safety or effectiveness data obtained from the testing, with specific reference to adverse effects and complications, and any other information from the clinical testing relevant to a determination of substantial equivalence”;
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and (c) conclusions “that demonstrate that the device is as safe, as effective, and performs as well as or better than the legally marketed device identified in [21 C.F.R. § 807.92(a)(3)].”
36
In TaiDoc Tech., the confidential documents in dispute included three 510(k) premarket notifications submitted to FDA and supporting data. This article is intended to explore why the state court concluded that the information disclosed in a premarket notification does not lose its secrecy. The alleged trade secret in TaiDoc Tech. was technical information submitted to FDA which then became a governmental record. The defendant made one argument that such technical information is deemed to be publicly accessible under the Freedom of Information Act (FOIA). The state court disagreed because there was no evidence showing that the submitted information had been publicly disclosed. However, the state court did not discuss that information concerning trade secrets and commercial or financial information is actually exempt from public disclosure. This article is intended to fill the knowledge gap between TaiDoc Tech. and trade secret protection on technical information submitted for a premarket notification. TaiDoc Tech. is very important because it indicates that if technical information has confidential labeling, it will be protected as a trade secret within or outside FDA.
In this article, Part II describes the procedure(s) for confidentiality and public disclosure of the information submitted for a premarket notification. Part II also introduces Heeney v. Food & Drug Admin., 37 a court decision explaining why technical information is exempt from public disclosure under the FOIA. Then, Part III analyzes TaiDoc Tech. and provides comments on the decision.
II. Trade Secret Protection on Technical Information Submitted for a Premarket Notification
A. Confidentiality of submitted information
Under 21 C.F.R. § 807.93(a)(1), a premarket notification shall be attached with a “510(k) statement” which provides:
I certify that, in my capacity as (the position held in company by person required to submit the premarket notification, preferably the official correspondent in the firm), of (company name), I will make available all information included in this premarket notification on safety and effectiveness within 30 days of request by any person if the device described in the premarket notification submission is determined to be substantially equivalent. The information I agree to make available will be a duplicate of the premarket notification submission, including any adverse safety and effectiveness information, but excluding all patient identifiers, and trade secret and confidential commercial information, as defined in 21 CFR 20.61. 38
By signing a 510(k) statement, a premarket notification submitter agrees to deliver certain information to any third party after his device is determined to be substantially equivalent to a legally marketed predicate device.
Under 21 C.F.R. § 807.95(d), FDA is authorized to “make a 510(k) summary of the safety and effectiveness data available to the public within 30 days of the issuance of a determination that the device is substantially equivalent to another device.” 39 Section 807.95(e) further mandates FDA to make available to the public “[d]ata or information submitted with, or incorporated by reference in, a premarket notification submission (other than safety and effectiveness data that have not been disclosed to the public)” when “the intent to market the device is no longer confidential.” 40
However, 21 C.F.R. § 20 sets forth a mechanism to keep certain information submitted to FDA confidential. 41 Under 21 C.F.R. § 20.100(a), “a record that is ordinarily available for public disclosure in accordance with this part or under other regulations is not available for such disclosure to the extent that it falls within an exemption contained in [§ 20.60 to § 20.67] except as provided by the limitations on exemptions specified in [§ 20.80 to §m20.91].” 42 Specifically, § 20.61(c) provides that “[d]ata and information submitted or divulged to the Food and Drug Administration which fall within the definitions of a trade secret or confidential commercial or financial information are not available for public disclosure.” 43 The § 20 mechanism complies with the exemption provision of the FOIA. 44 Under 5 U.S.C. § 552(b)(4), the procedure for providing administrative information to the public “does not apply to matters that are [] trade secrets and commercial or financial information obtained from a person and privileged or confidential.” 45 5 U.S.C. § 552(b)(4) is also known as “FOIA Exemption 4.” 46
21 C.F.R. § 20.61(a) defines protectable trade secrets as “any commercially valuable plan, formula, process, or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort.” 47 Section 20.61(a) further requires “a direct relationship between the trade secret and the productive process.” 48 On the other hand, § 20.61(b) defines “[c]ommercial or financial information that is privileged or confidential [as] valuable data or information which is used in one's business and is of a type customarily held in strict confidence or regarded as privileged and not disclosed to any member of the public by the person to whom it belongs.” 49
To enjoy a § 20.61 exemption, “[a] person who submits records to the [FDA] may designate part or all of the information in such records as exempt from disclosure under exemption 4 of the Freedom of Information Act.” 50 Designation may be made “either at the time the records are submitted to the [FDA] or within a reasonable time thereafter.” 51 In addition, designation must be in writing. 52 But, the period of designation only lasts 10 years from the submission. 53
B. Public disclosure of submitted information
A § 20.61 exemption is contestable. 21 C.F.R. § 20.61(e) establishes a procedure for resolving such dispute. 54 Section 20.61(e) also permits the FDA to initiate the same procedure for records that, however, were not designated as a § 20.61 exemption “when the [FDA] has substantial reason to believe that information in the records could reasonably be considered exempt under exemption 4 of the Freedom of Information Act.” 55
The § 20.61(e) procedure starts when FDA “receives a request for [records under the § 20.61 exemption] and determines that disclosure may be required.” 56 Then FDA “will make reasonable efforts to notify the submitter [of the records in dispute] about these facts.” 57 Such notice will include a copy of the request and “the procedures and time limits for submission and consideration of objections to disclosure.” 58 However, if a large number of submitters must be notified, FDA will post or publish “a notice in a place where the submitters are reasonably likely to become aware of it.” 59
After receiving FDA's notice, the submitter has a right “to object to disclosure of any part of the records and to state all bases for its objections.” 60 The objection must be filed in five working days from the receipt of the notice. 61
After receiving the submitter's objection, FDA “will give consideration to all bases that have been stated in a timely manner by the submitter.” 62 If FDA decides to disclose the records requested, FDA will give to the submitter a written notice that “briefly explain[s] why the agency did not sustain the submitter's objections” 63 and which includes “a copy of the records about which the submitter objected, as the agency proposes to disclose them.” 64 The notice will also include a statement that FDA “intends to disclose the records 5 working days after the submitter receives the notice unless a U.S. District Court orders the agency not to release them.” 65 Thus, the submitter may file a law suit in a federal district court to prevent the release of the requested records.
On the other hand, if FDA decides not to disclose the records requested, the requester may file a law suit under the FOIA to obtain the records. 66 If a FOIA complaint is filed in a federal district court, FDA is obligated to “promptly notify the submitter.” 67
The § 20.61(e) procedure may be waived in five situations under 21 C.F.R. § 20.61(f). 68 Three of those five situations may cause a 510(k) submitter to be unable to prevent public disclosure of the records requested. The first situation is that a regulation requires public disclosure “that specifies narrow categories of records that are to be disclosed under the [FOIA].” 69 Such regulation is enforceable only if it has gone through “notice and opportunity for public comment.” 70 In this first situation, “a submitter may still designate records as [a § 20.61 exemption], and in exceptional cases, [FDA] may, at its discretion, follow the [§ 20.61(e) procedure].” 71
The second situation is that a submitter fails to designate the records requested as a § 20.61 exemption “when the submitter had an opportunity to do so at the time of submission of the information or within a reasonable time thereafter.” 72 But, if FDA “has substantial reason to believe that disclosure of the information would result in competitive harm,” 73 FDA may still initiate the § 20.61(e) procedure. 74
The last situation is that “[t]he designation [of the records requested] appears to be obviously frivolous.” 75 But, FDA will still give the submitter a written notice that states that the FDA intends to disclose the records requested five working days after the receipt of such notice unless a federal district court orders otherwise. 76
C. Judicial review of a § 20.61(e) request
If a § 20.61(e) request is denied or a requester is not satisfied with the scope of disclosure, the requester may file a FOIA law suit in a federal district court to get the wanted information. 77 In a FOIA law suit, the governmental agency bears “the burden of justifying nondisclosure.” 78 The district court will review the agency's decision of nondisclosure de novo. 79 To do so, “[t]he district court must determine whether all of the requested materials fall within an exemption to the FOIA and may not simply conclude that an entire file or body of information is protected without consideration of the component parts.” 80
To support its decision of nondisclosure, FDA will submit declarations or other evidence to demonstrate “that the documents are properly classified and thus clearly exempt from disclosure.” 81 Though, the explanation of the concealed records is not required, however, to be so detailed as to reveal the redacted information. 82 FDA is required to provide statements which are “sufficiently specific to permit a reasoned judgment as to whether the material is actually exempt under FOIA.” 83 If FDA meets the “sufficiently specific” standard, the court will give “substantial weight” to those declarations. 84 The court will disregard FDA's explanation “only if presented with contradictions in the record or evidence of bad faith on the part of the agency.” 85
FDA may move for summary judgment. 86 To do so, FDA will submit a Vaughn index, “which correlates each document withheld to a specific FOIA exemption, and allows the court to review whether exemptions have been validly claimed without having to inspect the documents physically.” 87 There are three primary functions of a Vaughn index. First, FDA is forced to “analyze carefully any material withheld.” 88 Second, the trial court can “fulfill its duty of ruling on the applicability of claimed exemptions.” 89 Third, a FOIA plaintiff can be given “as much information as possible to use in presenting his case to the trial court.” 90
In a Vaughn index, FDA must “(1) identify each document withheld; (2) state the statutory exemption claimed; and (3) explain how disclosure would damage the interests protected by the claimed exemption.” 91 To produce a Vaughn index, FDA is permitted to “employ category and coding systems in describing documents withheld under FOIA exemptions.” 92 However, FDA “must define its categories functionally[,] conduct a document-by-document review to assign documents to the proper category[, and] explain to the court how the release of documents in each category would fall within the purview of the claimed exemption.” 93 If those requirements are met when determining a motion for summary judgment, the court “may rely on the agency's representation of context as well as on the coded descriptions of the matter being deleted.” 94
For example, in Heeney, 95 the United States District Court for the Central District of California examined two Vaughn indexes provided by FDA and Boston Scientific Corp. (BSC). 96 The information requested for disclosure involved a type of BSC's electrode catheter. 97 The court found that both Vaughn indexes met all the standards of the case law. 98
FDA's Vaughn index was presented in an FDA officer's declaration. 99 The index listed, for each ready-for-disclosure document, “the page numbers where the redactions appear, a description of the document, a description of the redaction, and, as is required, the regulatory and statutory authority on which the FDA relies in withholding the information.” 100 One FDA officer's declaration was attached with a copy of each of the redacted documents. 101 Furthermore, FDA cited “as authority for the redactions FOIA Exemption 4 [as well as] its own regulations implementing FOIA as justification for the redactions.” 102
The court held that the FDA's Vaughn index was properly prepared because it “identifies the basis for each redaction as FOIA Exemption 4 and the agency's regulations defining and implementing FOIA.” 103 First, one officer's declaration provided “detailed information describing the purpose and need for each redaction,” as well as “copies of each page, showing the limited nature of the redactions, and the context in which they appear.” 104 Second, another officer's “detailed letter to [the plaintiff] explain[ed] the bases for the agency's conclusions.” 105
BSC's Vaughn index was presented in a declaration made by a BSC employee. 106 The index explained “the redactions it made to product records retained by the FDA.” 107 Specifically, the index stated “whether the redaction was partial or complete,” 108 and divided the redacted information into three categories: “trade secret” (category 1), “commercial information that is privileged or confidential” (category 2), and “financial information that is privileged or confidential” (category 3). 109 The court found that the index “provides coded explanations for the redactions it made to product records retained by the FDA” and that “[e]ach of the redactions is further explained in [its employee's] thirty-two page declaration.” 110
The court held that BSC's Vaughn index complied with the case law. 111 Although recognizing that the case law requires courts to reject “vague descriptions of documents' historical and investigative context,” 112 the court found that “[BSC's] submissions are not impermissibly vague.” 113 First, for each document requested for disclosure, BSC's Vaughn index and its employee's declaration identified the specific information that BSC considered as confidential or trade secret. 114 Second, the declaration had 213 paragraphs and was sufficient to “provide the necessary historical and investigative context.” 115
D. Technical information considered as FOIA Exemption 4
In Heeney, a requester filed a FOIA law suit against FDA's nondisclosure of a 510(k) submission. 116 There, the plaintiff sought information from the FDA regarding “Polaris LE,” an electrode catheter sold by BSC. 117 The plaintiff specifically requested: “(1) all medical device reports and safety and effectiveness data submitted to the FDA pertaining to the subject device; (2) all releasable materials in the file; (3) every cease and desist, detention, warning or other compliance order; and (4) all correspondence and summaries of oral conversations regarding the file.” 118
FDA informed BSC of the request, while BSC was given a chance to review the request and identify any information in its 510(k) file that may be exempt from disclosure. 119 After BSC replied to FDA, the agency sent BSC's redacted 510(k) file to the plaintiff. 120 Plaintiff then requested more information. 121
After several communications between the plaintiff and FDA and between FDA and BSC, FDA made a final decision of not disclosing the redacted information regarding “scale drawings; types of materials used in constructing the device; and mechanical, electrical and biological testing data.” 122 FDA considered such redacted information as trade secrets and confidential information. 123 Therefore, FDA refused to disclose the information under FOIA Exemption 4. 124
The case then went to the Central District of California that relied on two Vaughn indexes to decide two motions for summary judgment filed by FDA and BSC, respectively. 125 Regarding the technical information in these Vaughn indexes, the court held that the information was properly exempt. 126
Regarding FDA's Vaughn index, the redacted information included: (1) “product design and testing information”; (2) “the materials used in construction of the product”; (3) “the identity of the company that manufactures [BSC's] catheter”; (4) “the name of a catheter that was originally part of [BSC's] § 510(k) submission, but was subsequently withdrawn.” 127 The court held that the withdrawn information was properly exempted from disclosure. 128
Specifically regarding “product design and testing information” and “the materials used in construction of the product,” the court found that they “appear to fall squarely within Exemption 4's reference to ‘trade secrets.’” 129 First, the court pointed out that “[s]uch data are ‘commercially valuable plan[s] … [or] process[es] … used’ in ‘making, preparing, … or processing’ a product.” 130 Second, the court found that such data “reflect innovation and effort, [so that] there is a ‘direct relationship’ between such information ‘and the productive process.’” 131 The reasoning was based on 21 C.F.R. § 20.61(a) in effect at that time, which is the same as the current regulation. 132
The court also responded to the plaintiff's oral argument “that the test results submitted to the FDA are not part of the productive process because they reflect tests conducted on the finished product.” 133 The plaintiff's reasoning was based on the comparison between these tests and “other compliance testing such as that routinely used to measure automobile emissions.” 134 But, the court disagreed and stated that “[a] product is not “finished,” however, so long as there remains a risk that the FDA will fault the testing data and reject the manufacturer's request for marketing approval.” 135 Therefore, the court held that “[t]he compliance testing reflected in [BSC's] § 510(k) file is thus part of the productive process, and confidential as a result.” 136
Regarding BSC's Vaughn index, the redacted information covered:
the name of the catheter [BSC] withdr[awn] from the § 510(k) application[;] product diagrams, dimensions, designs and models; engineering information; materials used in constructing the product; manufacturing processes; the identity of the manufacturer of [BSC's] product; protocols for and equipment used in testing the product; test results; the identity of personnel conducting the studies; the identity of [BSC's] sponsor for certain of the tests; [BSC's] agreements and relationship with other entities presumably involved in the design, manufacture or testing of the catheter; the number of catheters sold during a three[-]year period; the dates of [BSC's] requests for extensions of time to provide information to the FDA and the length of extensions granted; and the former direct dial telephone number of the declarant. 137
While the court did not agree that all withheld information is properly exempt, the court did recognize the information concerning product design, testing, and manufacture as a trade secret under 21 C.F.R. § 20.61(c) in effect at that time, which is also the same as the current regulation. 138
Therefore, Heeney indicates that technical information submitted for premarket notification will not be disclosed under a § 20.61(e) request because it is considered as a trade secret under FOIA Exemption 4.
III. Trade Secret Protection Outside the Premarket Notification Proceeding—TaiDoc Tech. Corp. v. OK Biotech Co.
A. Background
In TaiDoc Tech., the plaintiff, TaiDoc Technology Corp. (TaiDoc), and the defendant, OK Biotech Co., Ltd. (OK Biotech), were Taiwanese manufacturers of blood glucose meters and test strips. 139 The dispute started with TaiDoc's commercial relationship with a U.S. company, Diagnostic Devices, Inc. (DDI). 140 In 2006, DDI and TaiDoc entered into a “Sales and Exclusive Agreement” (SEA) under which TaiDoc exclusively supplied blood glucose meters and test strips that would be sold in the United States under DDI's brand name “Prodigy.” 141 But, the relationship changed in 2007, because DDI started to look for a second supplier. 142 Finally, OK Biotech was chosen. 143 In 2008, DDI and OK Biotech signed a contract that required OK Biotech to manufacture blood glucose meters and test strips exclusively for DDI. 144
During the cooperation between DDI and OK Biotech, DDI sent to OK Biotech many documents that were produced originally by TaiDoc for regulatory review by FDA. 145 Those documents were recognized as confidential information under the SEA. 146 In 2011, TaiDoc learned that OK Biotech used those confidential documents to develop blood glucose meters and test strips. 147 On May 10, 2012, TaiDoc sued OK Biotech in a federal district court in Pennsylvania. The case then was transferred to a federal district court in North Carolina. 148 On November 16, 2012, the case was voluntarily withdrawn. 149 But, on the same day, TaiDoc filed a complaint against OK Biotech in a state court of North Carolina. 150 Among other things, TaiDoc accused OK Biotech of misappropriation of its trade secret. 151
During the litigation, OK Biotech moved for summary judgment to dismiss all claims made by TaiDoc. 152 On March 28, 2016, the state court issued a decision. Among other things, the state court denied OK Biotech's motion based on trade secret. 153 The state court looked into the evidence in favor of TaiDoc and concluded that the information in dispute did not lose its secrecy and was misappropriated by OK Biotech. 154
B. Governing law
Under Article 66–153 of the North Carolina Trade Secrets Protection Act (TSPA), “[t]he owner of a trade secret shall have remedy by civil action for misappropriation of his trade secret.” 155
Article 66–15(3) defines “trade secret” as “business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process.” 156 It further requires “business or technical information” to derive “independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use” 157 and to be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” 158
To determine whether the information in dispute was a trade secret, the TaiDoc court relied on Combs & Assocs. v. Kennedy,
159
which provides six factors:
(1) the extent to which the information is known outside the business; (2) the extent to which it is known to employees and others involved in the business; (3) the extent of measures taken to guard the secrecy of the information; (4) the value of the information to business and its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could properly be acquired or duplicated by others.
160
The first and third factors were the center of the dispute. 161
Article 66-152(1) defines “misappropriation” as “acquisition, disclosure, or use of a trade secret of another without express or implied authority or consent, unless such trade secret was arrived at by independent development, reverse engineering, or was obtained from another person with a right to disclose the trade secret.” 162 To establish a prima facie case of misappropriation, Article 66-155 requires a plaintiff to prove by substantial evidence that the defendant “[k]nows or should have known of the trade secret” and “[h]as had a specific opportunity to acquire it for disclosure or use or has acquired, disclosed, or used it without the express or implied consent or authority of the owner.” 163 But, the defendant may rebut by substantial evidence that he “acquired the information comprising the trade secret by independent development, reverse engineering, or it was obtained from another person with a right to disclose the trade secret.” 164
C. Issue 1: Secrecy
OK Biotech made four arguments regarding why the information in dispute lost its secrecy, but the state court disagreed with all of them. 165 The first argument was that TaiDoc did not use the “Master File” process to submit the 510(k) filings in DDI's name. 166 OK Biotech characterized the “Master File” process as a process where FDA will review a 510(k) submission without providing the 510(k) submitter (like DDI) access to the confidential information submitted by a third party (like TaiDoc). 167 The second argument was that the 510(k) filings will be available to the public through the [FOIA]. 168
The state court rejected the first and second arguments as a whole. But, the confidentiality issue related to the “Master File” process was not addressed. Rather, the state court focused on whether the “Master File” process or any agreements between DDI and TaiDoc have caused TaiDoc to lose its ownership or secrecy of the information in dispute. 169
Regarding the first issue, the state court found that the federal law does not address the issue of ownership of the confidential information in a 510(k) submission and that the 510(k) process solely focuses on “whether a medical device is ‘substantially equivalent’ to a prior device and thus whether further information must be disclosed to protect the health and safety of consumers.” 170 Therefore, the state court rejected the argument that the confidential information in the 510(k) filings “submitted under DDI's name is not owned by TaiDoc.” 171
Regarding the second issue, the state court found that OK Biotech failed to identify any evidence in the agreements between DDI and TaiDoc that may suggest both parties agree to transfer the ownership of the confidential information to DDI. 172 On the other hand, the state court found that TaiDoc successfully pointed out several statements from DDI's people to show that TaiDoc kept the ownership of the information in dispute and that no transfer of the ownership had ever occurred. 173 The state court further found that TaiDoc had used confidentiality agreements or confidential labeling to protect the information in dispute. 174
The third argument was that TaiDoc delivered documents to DDI before entering into any confidentiality agreement. 175 But, the state court disagreed because TaiDoc's evidence showed that TaiDoc and DDI discussed the secrecy of TaiDoc's information, that both parties had oral agreements of confidentiality on TaiDoc's information, and that those 510(k) submissions prior to the SEA required DDI to sign a form recognizing that the contents in the 510(k) submission are confidential. 176
The last argument was that TaiDoc permitted the information in dispute to be exposed to third parties without any restrictions. 177 OK Biotech showed that TaiDoc was required by DDI to provide a two-page document covered by the information in dispute to DDI's customer. 178 But, the state court found that the document was marked “confidential” and was delivered to a potential customer. 179 Because recognizing that “[c]ourts do not require absolute secrecy at all times and in all circumstances to maintain trade secret protection,” 180 the state court concluded that the delivery of such two-page document did not result in TaiDoc's failure to take reasonable efforts to maintain the secrecy of the information in dispute. 181
D. Issue 2: Misappropriation
OK Biotech made two arguments against TaiDoc's claim of misappropriation of the information in dispute. First, OK Biotech contended that it did not know the information in dispute acquired from DDI was TaiDoc's trade secret, but the state court disagreed. 182 The state court found that the initial document sent from DDI to OK Biotech actually contained the label: “This document was prepared by TaiDoc Technology Corporation and contains CONFIDENTIAL and PROPRIETARY information.” 183 In addition, relying on TaiDoc's allegation that OK Biotech also treated its data for 510(k) submissions as trade secret, the state court inferred that OK Biotech knew or should have known that the information in dispute was treated by TaiDoc as confidential. 184
In the second argument, OK Biotech asserted that it did not use the information in dispute. 185 But the court disagreed. 186 The state court relied on BSN Med., Inc. v. Parker Med. Assocs. LLC, 187 which applied North Carolina law, 188 and quoted a proposition: “[D]efendants need not be using the same exact process as plaintiff in order to be found liable for misappropriating plaintiff's trade secrets. Rather, courts have found misappropriation where the substance of the new process is derived from another's secret.” 189 Accordingly, the state court held that “TaiDoc is not required to show that OK Biotech's meters and strips were identical to its own; rather, TaiDoc need only show at this stage that there is a question of material fact as to whether OK Biotech acquired or used its alleged trade secret information.” 190 Moreover, the state court found evidence supporting that OK Biotech acquired or used TaiDoc's 510(k) submissions and information derived from TaiDoc's lab, and that DDI sent TaiDoc's test strips and material to OK Biotech and required OK Biotech to develop the same chemistry as TaiDoc's chemistry. 191 Therefore, the state court held that the jury would reasonably conclude that OK Biotech acquired or used the information in dispute. 192
E. Comments
The state court did not mention the Heeney decision, but it was right about the fact that TaiDoc's 510(k) submissions would not make TaiDoc lose secrecy of the technical information related to TaiDoc's blood glucose meters and test strips. Although any third party may file a § 20.61(e) request to demand public disclosure of TaiDoc's 510(k) submissions, FDA will not give the information that constitutes a trade secret. Under Heeney, the information of device designs, materials used in the meters or test strips, and safety or effectiveness data will be exempt from public disclosure under the FOIA. Therefore, TaiDoc's technical information related to its blood glucose meters and test strips is still a trade secret, although the information has been submitted to FDA.
The TaiDoc Tech. decision also teaches that “confidential” labeling on every technical document may guarantee trade secret protection, as does signing a confidentiality agreement or requesting confidentiality orally in every encounter. 193 If the secrecy of technical information is preserved, misappropriation of trade secret may be established. “Confidential” labeling can be used to demonstrate that the defendant knew or should have known that the technical document is a trade secret.
Last, the TaiDoc Tech. decision indicates that direct use of trade secret information is not required for misappropriation. 194 The ultimate question is whether a defendant has accessed such trade secret information. Therefore, even by holding a trade secret document, the defendant may be found liable for misappropriation of trade secret.
IV. Conclusion
Technical information submitted for a premarket notification of a medical device is well protected as a trade secret after TaiDoc Tech. On one hand, the FDA will implement FOIA Exemption 4 to prevent technical information from public disclosure. Even a court will respect the FDA's decision of withholding technical information as long as the FDA presents a well-prepared Vaughn index. However, to utilize trade secret protection, the owner of technical information has to label relevant documents as “confidential.” The owner also has to enter into a confidentiality agreement, written or oral, with entities that can access the technical information. Then, the owner may establish misappropriation of his trade secret against any unauthorized users of the technical information. Furthermore, the protection extends to a company which manufactures devices for the submitter of a premarket notification.