Opinion ID: 345442
Heading Depth: 1
Heading Rank: 2

Heading: the westinghouse challenge

Text: 14 Westinghouse makes three statutory and three constitutional arguments in support of its contention that § 2.790 in its present form is invalid. We will consider these arguments seriatim.(1) § 103(b)(3) of the Atomic Energy Act. 15 The first statutory argument is based upon the provisions of the Atomic Energy Act. Acknowledging that § 161(p) of the Act, quoted above, gives the NRC general rulemaking authority, Westinghouse argues that such authority is circumscribed by the general rule of administrative law that the regulation must be reasonably related to the purpose of the legislation. 27 Specifically, Westinghouse urges that even though NRC has general rulemaking power the promulgation of a rule providing for public disclosure of proprietary information is not reasonably related to the purposes of the Atomic Energy Act. Such an argument is specious in light of the necessity for the NRC to adopt some regulations for determining whether information obtained in its various proceedings is to become public information. In a closely analogous context the Supreme Court, interpreting § 4(j) of the Communications Act of 1934, 28 held valid a Federal Communications Commission procedural rule authorizing disclosure of proprietary information upon a balancing of the public and private interests involved. 29 Certainly then, the general subject matter is one appropriate for administrative agency rulemaking in the absence of some express statutory prohibition. 16 Westinghouse, however, urges that NRC's § 161(p) authority is limited by § 103(b)(3) of the Atomic Energy Act. 30 17 (b) The Commission shall issue such licenses on non-exclusive basis to persons applying therefor . . . 18 (3) who agree to make available to the Commission such technical information and data concerning activities under such licenses as the Commission may determine necessary to promote the common defense and security and to protect the health and safety of the public. All such information may be used by the Commission only for the purposes of the common defense and security and to protect the health and safety of the public. 19 Literally § 103(b)(3) applies only to licensing, not to rulemaking. But Westinghouse urges that the section should, in light of its legislative history, be construed as evidencing an across the board absolute protection of proprietary information except where it is used for the purposes of the common defense and security and to protect the health and safety of the public. It points out (1) that the test of § 2.790(a), a balancing of the interests of the person or agency urging nondisclosure and the public interest in disclosure appears to be broader than is authorized by § 103(b)(3) in licensing matters and (2) that the mandatory disclosure of any information which forms the basis of a final rule appears to be in contradiction of § 103(b)(3) assuming its applicability to rulemaking proceedings. 20 The Atomic Energy Act of 1954 is the successor to the Atomic Energy Act of 1946. 31 Under § 7(c) of the 1946 Act 32 the Atomic Energy Commission was authorized to issue licenses to parties who: 21 agree to make available to the Commission such technical information and data concerning their activities pursuant to such licenses as the Commission may determine necessary to encourage similar activities by as many licensees as possible. 22 Reference in the quoted provision to as many licenses as possible takes on added significance from § 11(c) of the 1946 Act, 33 which contains a compulsory licensing provision with respect to patents utilizing fissionable material or atomic energy. Under § 11(c) the Commission could grant its licensees the right to use inventions disclosed in any such patents, subject to a reasonable royalty rate. The Senate Committee Report on the 1946 Act says of § 7(c): 23 The Committee is desirous also that the provision of the bill relating to licensing of atomic energy devices shall not interfere with the development of free competition in the use of atomic energy. Thus the bill provides that licenses on an atomic energy device, once issued, must be made available to all applicants who can meet the safety and security standards of the Commission. Royalties to be paid the patent owners of such devices are provided for in section 11. 34 The same report says of § 11: 24 In order to make the peacetime benefits of atomic energy widely available, the bill provides that the grant of a license under section 7 carries with it the right to use any patented invention or discovery which the Commission has declared to be affected with the public interest. Any such use is subject to the payment of reasonable royalty fees to be determined by the Patent Compensation Board. 35 25 Thus the policy of the 1946 Act appears to have been one of maximum disclosure and maximum access by competitors to the disclosed information. 26 Westinghouse contends that the maximum disclosure policy of the 1946 Act was eliminated in the Atomic Energy Act of 1954 in favor of a policy protecting the proprietary information of private enterprises, except in limited instances involving use of such information for purposes of defense and to protect the health and safety of the public. In the 1954 Act the Commission's § 7(c) licensing jurisdiction became § 103, and the § 11 compulsory licensing provisions, in expanded form, became § 153. 36 The compulsory licensing principle was continued in § 153 but with the qualification that the applicant must first seek from and be refused a patent license by the patentee, and the further qualification that the Commission must afford the patentee a hearing and make specified findings before ordering compulsory licensing. The disclosure policy of § 7(c) was also substantially modified. The 1954 Act originated in the House of Representatives as H.R. 8862, and in the Senate as S. 3323. 37 In these versions the § 7(c) language to encourage similar activities by as many licensees as possible was deleted and language in the present form of the first sentence of § 103(b)(3) substituted. At hearings before the Joint Committee on Atomic Energy, industry representatives, who opposed the prior policy which favored disclosure of proprietary in formation, urged the while the change in the language of the 1946 Act, by deleting the words to encourage similar activities by as many licensees as possible was a step in the right direction, it was not a big enough step. 38 Following the Joint Committee hearing sessions the bills were redrafted. 39 That redraft added the following sentence to § 103(b)(3): 27 (A)ll such information may be used by the Commission only for the purposes of common defense and security and to protect the health and safety of the public and for no other purpose. (Emphasis added). 28 There is evidence in the legislative history which indicates that this language was added to express a strong congressional policy against disclosure of proprietary information. During hearings on the redrafted bills, Congressman W. Sterling Cole, Chairman of the Joint Committee on Atomic Energy, explained the purpose for the new language as follows: 29 It permits the Commission to use that data, that information, for purposes of the common defense and security but imposes on the Commission an obligation that they shall not pass that information on to outsiders in order to protect the property right, the commercial right, which a licensee as a developer of a new procedure, new idea, should properly have. 39a 30 Although the phrase and for no other purpose was subsequently deleted, that deletion does not appear to have been intended to alter the congressional policy against nondisclosure of such information. 39b An additional industry proposal, that the section also provide that licensees be compensated where technical information developed by them is used in a manner prejudicial to their competitive position, was not adopted. 40 31 Certainly Westinghouse is correct in contending that the change from § 7(c) of the 1946 Act to § 103(b)(3) of the 1954 Act indicates an intention on the part of Congress to place new restrictions on the Commission's use of information supplied by license applicants. There was clearly a fundamental change in the policy of using licensee information to encourage the entry of new applicants. We are not convinced, however, that § 103(b)(3) was intended to preclude the disclosure of proprietary information in all circumstances. 32 As we pointed out in Part I above, the Commission adopted a disclosure of information rule as early as February 4, 1956. 41 Although this regulation, the precursor of § 10 CFR 2.790, as amended, did not refer specifically to proprietary information, it did require the AEC to make available for public inspection all matters of official record unless the AEC determined that disclosure was not required in the public interest and would adversely affect the interest of a person concerned. 42 As a result, it appears to have permitted the disclosure of proprietary information by AEC in some situations. The 1956 language in the public interest appears to refer to the defense or health and safety exceptions in § 103(b)(3), and the language the interest of a person concerned to the proprietary interest of the license applicant. The 1972 version of the rule speaks of an effective balance between legitimate concerns for protection of competitive positions and the right of the public to be fully apprised of the basis for and effects of proposed licensing action. 43 This version, while it refers to disclosure of the basis for and effects of proposed actions, can be construed as limiting disclosure of proprietary information to defense and health and safety matters as contemplated by § 103(b)(3). Thus beginning one and one-half years after the enactment of the 1954 Act and for the past 21 years, federal regulations have apparently permitted the disclosure by the AEC or NRC of proprietary information, at least in some instances. 44 In addition, the test for disclosing information in both the 1956 and 1972 versions of § 2.790 are apparently facially consistent with the limiting language of § 103(b)(3). And it is noteworthy that Westinghouse has not suggested that the Commission in applying the 1956 or 1972 rules made disclosures of proprietary information obtained from license applications unrelated to defense and health and safety. 33 The 1976 revision, the rule under review, is in some respects more favorable to the protection of proprietary information than prior versions as there are more complete standards for determining what documents are entitled to protection. 45 The new test for disclosure is: 34 whether the right of the public to be fully apprised as to the bases for and effects of the proposed action outweighs the demonstrated concern for protection of a competitive position. 46 35 There is no reason to believe that in applying this test NRC will disregard the longstanding congressional policy which disfavors disclosure of proprietary information or that NRC will disclose proprietary information obtained in a licensing proceeding other than such as bears on defense and health and safety. Westinghouse urges that the reference to defense and health and safety in § 103(b)(3) is not an authorization of public disclosure of proprietary information to achieve such goals, but only of its exclusive use by NRC for those purposes. The overriding Congressional purpose of the section, according to Westinghouse, is the absolute protection from public disclosure of all proprietary technical information and know-how developed by a private enterprise and useful to a competitor. We think this misstates the meaning of § 103(b)(3). Section 103(b)(3) expressly grants the Commission the authority to use information collected to promote the common defense and health and safety of the public. In specific instances the disclosure of proprietary information may be totally consistent with the attainment of such goals. The statute elsewhere provides for public participation in licensing proceedings 47 and for judicial review thereof. 48 Health and safety have been overriding concerns in such cases. 49 The provisions of the statute authorizing public participation are intended to help promote the health and safety of the public. Disclosure of proprietary information forming the bases of a decision on a licensing matter may facilitate both informed administrative action and intelligent judicial review. Such use was, we believe, intended by the draftsmen of § 103(b)(3). The section conditions the grant of a license upon an agreement by the applicant that the NRC may disclose its proprietary information to the extent that it bears upon issues of common defense and health and public safety. If NRC proposes to make disclosures which are in the applicant's view broader than § 103(b)(3) authorizes, it can withdraw the document in question or seek pre-disclosure judicial review. 36 Summarizing, we find no facial inconsistency between the present version of 10 CFR § 2.790 and § 103(b)(3) of the Atomic Energy Act. Applications of the rule in specific instances might violate the policy of § 103(b)(3), but there is no need to anticipate such violations, and ample opportunity for judicial intervention to prevent them. 37 As to rulemaking cases, we are not convinced that Congress intended § 103(b) (3) to be a limit upon the agency's rulemaking powers. The 1954 Act is organized into eighteen subchapters. Licensing is dealt with in subchapter 9 and § 103(b)(3) appears there. Subchapter 13 deals with the Commission's general authority, and the rulemaking authority granted in that chapter is part of a long list of general authorizations in § 161. The agency's authority under the Act ranges far beyond the licensing area, and the rulemaking authority contemplates rules necessary to carry out the purposes of this Act. 50 In this broad grant of rulemaking authority Congress must have intended that the agency be subject to the established general law applicable to administrative agencies, including the case law respecting the protection of proprietary information obtained by compulsory process. But there is no evidence to indicate that § 103(b)(3) is to serve, in any way, as a limit on the Commission's collection or disclosure of information in a rulemaking proceeding. 51 Thus, if NRC obtains proprietary information in a rulemaking proceeding by voluntary submission it is free to disclose that information when it forms the bases for the final rule. And, if the holder of the information declines to submit it voluntarily NRC will be forced to resort to the courts, which will review its balancing of the public and private interests involved. 38 (2) The Freedom of Information Act. 39 The second Westinghouse challenge to the NRC rule is based on the Freedom of Information Act. 52 The basic purpose of that statute is to make information in the possession of government agencies available to the public. 53 There are, however, nine statutory exemptions. 54 From one of these, the exemption from disclosure of trade secrets and commercial or financial information obtained from a person and privileged or confidential . . ., 55 Westinghouse argues that Congress intended a prohibition against all disclosure of such information as well as an exemption from the duty to disclose. In one case against a government agency Westinghouse has successfully asserted that a private party has an implied right of action to challenge the disclosure of information exempt from compulsory disclosure by the Freedom of Information Act. 56 Westinghouse did not urge here that federal principles of judgment preclusion estop the government from contending that the Fourth Circuit Freedom of Information Act case is dispositive of the issues in this case. 57 Probably had such a contention been advanced the Blonder-Tongue rule would not control, because the Fourth Circuit case did not actually hold that all information exempted from disclosure under the Freedom of Information Act is also absolutely barred from discretionary voluntary governmental disclosure. 58 Such a decision would, we think, have been foreclosed by FAA Administrator v. Robertson, 422 U.S. 255, 262, 269 n.1, 95 S.Ct. 2140, 45 L.Ed.2d 164 (1975), holding that the Freedom of Information Act was not intended to repeal by implication statutes which make disclosure a matter of agency discretion. We have held in Part III (1) above that the Atomic Energy Act gives NRC such discretion both in licensing and in rulemaking proceedings. Whether, absent statutory agency authority to release information, we would recognize a private cause of action to prevent disclosure of information covered by a Freedom of Information Act exemption, a question on which other circuits have expressed conflicting views, 59 we need not in this case decide. 40 (3) 18 U.S.C. § 1905 41 Westinghouse's final statutory argument is that § 2.790 is invalid because it is inconsistent with 18 U.S.C. § 1905 (1970). That criminal statute prohibits the release by a government employee of information which  concerns or relates to the trade secrets, processes, operations, style of work or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses or expenditures of any person. The prohibition applies, however, only to the extent not authorized by law. Since we have found § 2.790 to be a validly enacted agency regulation it has the  force of law. 60 Thus any release pursuant to § 2.790 would be authorized by law. 42 (4) Vagueness 43 We turn now to Westinghouse's constitutional arguments. The first is that the standard in § 2.790(b)(5) for determining disclosure, whether the right of the public to be fully apprised as to the bases for and the effects of the proposed action outweighs the demonstrated concern for protection of a competitive position . . . , is unconstitutionally vague. This argument is meritless as the public interest standard has always been a constitutionally accepted standard within which administrative agencies may act. 61 Furthermore, in the context of a licensing proceeding that standard is further defined by § 103(b)(3) of the Act, limiting use of the information received from applicants to defense and public health and safety. Westinghouse does not contend that the statutory language is vague. Certainly the standard of § 2.790(b)(5), applied in the licensing context in compliance with § 103(b) (3), gives adequate notice to the applicant of the criteria which will be applied by NRC in ruling on a request for nondisclosure. 44 In the rulemaking context, in which we have held that § 103(b)(3) does not control, the public interest balancing test is supplemented by the provision in § 2.790(c) that the information may be withdrawn by the applicant unless its revelation is necessary to disclose to the public the basis for the final rule. We have no trouble understanding, and do not anticipate any difficulty in applying that test. A private enterprise owner of proprietary information making a voluntary submission in a rulemaking proceeding should have no more difficulty than we, since the most likely purpose of such a submission is that it form the basis for the contemplated rule. The owner knows, then, that disclosure may result. He can if he fears that result refrain from making a voluntary submission and let NRC seek judicial enforcement of a subpoena for any information which it desires. 45 (5) Unconstitutional Conditions 46 Relying on Lefkowitz v. Turley, 414 U.S. 70, 94 S.Ct. 316, 38 L.Ed.2d 274 (1973); Garrity v. New Jersey, 385 U.S. 493, 87 S.Ct. 616, 17 L.Ed.2d 562 (1967), and Sherbert v. Verner, 374 U.S. 398, 83 S.Ct. 1790, 10 L.Ed.2d 965 (1963), Westinghouse urges that § 2.790 has imposed an unconstitutional condition upon its right to participate in NRC rulemaking and licensing proceedings in a meaningful way. Oddly, it does not argue that § 103(b)(3), which directly imposes on all licensees the condition that they agree to the use of the information by the Commission for the common defense and health and safety of the public, is unconstitutional. Since the regulation does not in the licensing context enlarge the disclosures permitted by the statute, we fail to see why a challenge to the rule in that context should be entertained. 47 As to rulemaking, the major premise of the Westinghouse argument is that it has a due process right to participate in such a proceeding. To exercise its right to participate it may either submit proprietary information and risk disclosure, or elect not to submit it and run the risk that the agency rulemaking body will make a less informed decision. The suggested conclusion is that this is a Hobson's choice, prohibited by the unconstitutional condition caselaw. The syllogism has a surface appeal, but will not stand in depth scrutiny. It is true that due process requires an opportunity for interested parties to be heard in rulemaking proceedings in many circumstances. But it is not true that due process requires the opportunity to be heard in secret, thereby depriving other interested parties of the opportunity to know the basis of an administrative agency's decision. A proprietor of information who thinks that information will significantly affect the decision on a proposed rule is free to submit it, but not under conditions which will in effect deprive other interested parties of the opportunity to challenge it before the agency or upon judicial review. 62 48 (6) Uncompensated Taking 49 The final objection Westinghouse presses is that § 2.790 authorizes an uncompensated taking of its property in the form of its proprietary information without compensation in violation of the taking clause of the Fifth Amendment. In most situations in which § 2.790 applies this argument is fanciful. A voluntary submission of information by an applicant seeking the economic advantages of a license can hardly be called a taking. And a voluntary submission of information by a private enterprise in a rulemaking proceeding is not likely in the absence of hope of similar economic advantage. The only instance in which a taking of proprietary information might occur is the involuntary use of proprietary information in a rulemaking proceeding (or perhaps as a witness in a licensing or adjudicatory proceeding) pursuant to compulsory process. Since NRC lacks the power to issue self-enforcing compulsory process there is no way that its disclosure rules could run afoul of the Fifth Amendment taking clause. 63 IV. CONCLUSION 50 None of the six grounds upon which Westinghouse challenges the amendments to § 2.790 is meritorious. The petition for review will be denied.