Trade secrets: Partial declassification
The issue of trade secrets in Polish public procurement continues to generate doubts and objections. Recent actions by contracting authorities and rulings by the National Appeal Chamber show that less and less information can be classified as trade secrets. The chamber closely examines whether contractors have met all the prerequisites for treatment of classified information as a protected trade secret.
One recent case from the National Appeal Chamber (no. KIO 2547/24) involved a partial declassification of information reserved as confidential by a bidder for a public contract. In examining the bid, the contracting authority concluded that the explanation for the abnormally low price offered by the contractor should be partially disclosed, along with classified portions of the justification for treating the information as a protected trade secret.
The contractor must show that the classified information is a trade secret
A trade secret is defined in Polish law as technical, technological, organisational, or other information of economic value to the company, which the company has taken measures protect from disclosure (Art. 11(2) of the Unfair Competition Act).
In the justification for classifying a trade secret, the contractor must show that the prerequisites for classification set forth in Art. 18(3) of the Public Procurement Law in conjunction with Art. 11(2) of the Unfair Competition Act are met with respect to the particular category of information (e.g. a list of services or persons). The justification should be structured so that both the contracting authority and other contractors participating in the procedure can learn the means used by a contractor to protect the classified information, what its economic value is, and whether it constitutes technical, technological, organisational or other information.
These prerequisites must be demonstrated for each category of information. It is insufficient, for example, to show that all the information taken together has economic value, without distinguishing between specific items. For example, the method of calculating the price has different economic value to the contractor than information about customers, suppliers and associates, and the value is manifest in different ways. The means for protecting this information may also vary depending on the category of information.
Therefore, the justification must clearly indicate how the grounds in Art. 11(2) of the Unfair Competition Act are met with respect to information classified as a secret.
Deficiencies in the justification result in declassification of information
In case no. KIO 2547/24, the contracting authority took a negative view of the classification of asserted trade secrets. It ruled that part of the explanation of the abnormally low price, including annexes, could remain secret (among other things, excerpts from the price calculation and some subcontracted bids), while the rest should be declassified. In its reasoning, the contracting authority specified why it was declassifying part of explanations. The contractor whose information was to be disclosed challenged this action of the contracting authority.
In an earlier ruling in the same contract award procedure, the National Appeal Chamber held that the contracting authority had correctly assessed the contractor’s justification for the asserted trade secrets. The chamber pointed out numerous shortcomings by the contractor, including the vague and laconic wording of the justification, failure to provide adequate evidence, and failure to show the economic value of the information.
In accordance with the chamber’s ruling, the contracting authority declassified the explanation of the abnormally low price, and shared it with the other contractors, along with a portion of the calculations and a portion of the subcontractors’ offers, but left the remaining information confidential.
If the deficiencies affect all the information, it will all be revealed
The contracting authority limited its reassessment of the classification of the asserted trade secrets solely to the allegations in the first appeal. By partially declassifying some of the price calculations and subcontractor bids, it implicitly acknowledged that the contractor had met the prerequisites in Art. 11(2) of the Unfair Competition Act with respect to the other calculations or bids. However, the justification for asserting trade secrets was the same for all of these items. The contractor did not show in different ways that it had met the prerequisites for different subcontract bids or for the price calculation, but gave one justification for all calculations.
The first ruling by the chamber concerned only the part of the classified information disputed by the contractor, but applying the reasoning stated by the chamber, the contracting authority should then have revised its position also with regard to the other classified documents. In the subsequent appeal (case no. KIO 2547/24), a competitor challenged the failure to declassify the entirety of the explanation of the abnormally low price, including annexes.
The contracting authority disagreed with the appellant and moved to dismiss the appeal. The contracting authority’s position was inconsistent. It now claimed that the contractor’s showing of the prerequisites was effective, when it had previously taken the opposite view.
It is not the type of information that counts, but fulfilment of the prerequisites
In practice, contracting authorities’ actions are often dictated by their own beliefs about what constitutes a trade secret and what does not. For example, it is common to encounter the position that if a subcontractor’s bid contains a confidentiality clause, then the bid should not be declassified (because the subcontractor classified it, it should be protected). This is not a correct assessment. Such a clause should be included in the subcontractor’s offer, but in itself that is insufficient to show that the contractor (not the subcontractor) has met all the statutory grounds for protection as a trade secret.
We should add that in case no. KIO 2547/24, a subcontractor had submitted two identical bids to two contractors, where one bid was classified as a trade secret but the other was no longer classified. Thus the confidentiality clause itself did not really establish that the grounds for classifying a trade secret had been met.
Consequently, nothing relieves the contractor from proving the existence of all the legal prerequisites. If the contractor fails to meet this obligation in the justification for classifying a secret, it does not matter what the information relates to or whether it includes a notice of the obligation to keep it classified. This is because it is not the type of information that determines the need to keep it confidential, but effective demonstration that the information constitutes a trade secret. Failure to show the prerequisites of a trade secret means that information that may actually constitute a trade secret must be disclosed by the contracting authority.
Otherwise, a mere declaration that the information is confidential, and thus cannot be declassified, would be sufficient to justify protection of an asserted trade secret. But the law deliberately specifies what requirements must be met to effectively classify a trade secret, so that each contractor is evaluated on the basis of the same objective criteria. This is intended to avoid a situation where information is protected based on an arbitrary decision by the contracting authority, not supported by the wording of the law. As the National Appeal Chamber explained in case no. KIO 869/23, “The Public Procurement Law does not provide a basis for recognising the validity of reservations against third parties, where on this basis alone the contracting authority automatically considers the reservations valid.” In that case, the contractor was under an obligation to the manufacturer of certain equipment to keep certain reports confidential. Thus, according to the chamber, the contractor “should have taken special care to show fulfilment of the defined prerequisites.”
After receiving the ruling of the chamber finding the justification of the trade secrets in this case to be improper, the contracting authority should have also re-examined the remaining information it had so far treated as effectively classified. Defective justification is the contractor’s fault, and the contractor bears the responsibility for disclosure of information that might actually be confidential but was revealed as a result of the contractor’s failure. This risk is inherent in participation in public procurement, and every contractor must reckon with it.
Here the contracting authority did not go back and re-examine the information, but stood by its original decision. In the ruling in case no. KIO 2547/24, the chamber upheld the appellant’s claim and ordered declassification of the entire explanation and annexes. Indeed, the ruling reiterated the chamber’s position from its first ruling in the case, because the explanations provided by the contractor showed that the justification for all the information was the same, and inadequate. Therefore, the contracting authority had no grounds for believing that any portion of the explanation of the abnormally low price or the annexes—even the most sensitive data—could remain confidential.
In short, it is only possible—or even advisable—to classify information as a trade secret in specific fragments. The justification for the classification should be precise and address specific categories of information. And failure to effectively classify the information as a trade secret means it must be declassified, even if it is actually confidential.
Rafał Świerzbiński, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners
