In a shocking turn of events, the Supreme Court of Washington recently ruled in Lyft, Inc. v. City of Seattle, No. 94026-6, 2018 WL 2437513 (Wash. May 31, 2018), that trade secret protection yields to disclosures required under the Public Records Act (PRA).
This hotly debated dispute began after the City of Seattle passed an ordinance in 2014 that limited the number of active drivers for transportation networking companies, such as Lyft and Rasier (collectively “L/R”), at any given time. Afterwards, the City and L/R came to an agreement whereby L/R would submit quarterly standardized reports to the City that contained information about each ride, including the percentage of rides completed in each zip code and the pick-up and drop-off zip codes. In response to concerns about the confidentiality of the zip code data, the City agreed that it “[w]ill work to achieve the highest possible level of confidentiality for information provided within the confines of state law.”
The following year, a Texas resident submitted a PRA request to the City seeking L/R quarterly reports to research evidence of transportation discrimination. L/R responded by seeking an injunction under the PRA to prevent disclosure of the records. Applying the injunction standard under Civil Rule 65, the King County Superior Court issued a permanent injunction to prevent disclosure of the records—concluding that the zip code reports were trade secrets under the Uniform Trade Secrets Act (UTSA—codified at RCW 19.108) and therefore exempt from disclosure under the PRA. The City of Seattle and the Texas resident sought direct review of the decision by the Supreme Court of Washington, and the Supreme Court granted review.
PRA vs. UTSA
The central question before the Supreme Court was whether the UTSA and Civil Rule 65 together provide a sufficient basis for enjoining the release of public records that are also categorized as trade secrets.
Under the PRA, public records must be disclosed unless the records fall within a specific exemption or an “other statute,” such as the UTSA, prohibits disclosure. The Supreme Court found that the UTSA was an “other statute” and that there was enough evidence to support a finding that L/R zip code reports are trade secrets under the UTSA. But the Court noted that finding an exception to the PRA disclosure requirements does not inevitably support the issuance of an injunction.
Specifically, the Court explained that the injunction standard under the PRA must also be satisfied—and the PRA injunction standard is more stringent than the standard provided under Civil Rule 65 (with the PRA standard requiring a showing “that disclosure is clearly not in the public interest and in fact poses substantial and irreparable harm”). The Court explained that PRA exemptions under “other statutes” are recognized through operation of the PRA, not outside of it. Thus, the UTSA may not be used to circumvent procedural application of the PRA to trade secrets. Taken together, the Court ultimately found that this was a PRA case, not a trade secrets case. As a result, the Court reasoned that the trial court incorrectly applied the lesser Civil Rule 65 injunction standard instead of the PRA injunction standard, and remanded the case to determine whether L/R is entitled to injunctive relief under the PRA.
What is the impact of this decision?
Granted, zip code data is a matter of public interest because the results may provide potential evidence of redlining and discrimination. On the other hand, there are larger implications of this holding that create vulnerability for disclosure of trade secrets through the PRA. For example, it is well-understood that transportation networking companies use zip code data for marketing and other valuable competitive strategies. As opposed to paying for zip code data, now competitors can use the PRA to obtain these trade secrets.
The majority stated that the PRA and UTSA are not in conflict. Yet the ruling leaves one to wonder whether this signals an erosion of trade secret protection, and whether this decision will ultimately lead to additional crashes between the two statutes. Justice Gonzalez highlighted in his dissent that by elevating the PRA over the UTSA in this context, the majority has made it more difficult for businesses to protect their intellectual property and encourages forum shopping. Justice McCloud tackles in her concurring dissent whether the government’s acquisition of such protected private property triggers constitutional protections and the issue of just compensation. As it currently stands, this ruling may allow competitors access to trade secrets that are submitted to governmental bodies simply by asking for them.