Petition — Chevron Chemical Co. v. Gorsuch
Supreme Court brief1981
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Office -Supreme Court, U.S.
80-1689 | ee Ge Oe A
No. _ APR ®@ 1981
t ALE Ex . ¢ ' STEVAS,
In the Supreme Goda ae
OF THE
United States
OcToBER TERM 1980
CHEVRON CHEMICAL CoMPaNY, & corporation,
Petitioner,
vs.
Administrator,
United States Environmental Protection Agency,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
to the United States Court of Appeals
for the Third Circuit
Nose K. Grecory
COUNSEL OF RECORD
Brian D. BELLARDO
Kevin M. Fone
225 Bush Street
Mailing Address P.O. Box 7880
San Francisco, CA 94120
Telephone: (415) 983-1177
Cownsel for Petitioner
Pitussury, Mapison & Sutro
225 Bush Street
Mailing Address P.O. Box 7880
San Francisco, CA 94120
Of Counsel
BOWNE-PERNAU WALSH ¢ 1045 SANSOME ST. © S.F., CA 94111 © (415) 981-7882
QUESTIONS PRESENTED FOR REVIEW
1. Where the owner of trade secrets furnishes those
secrets to an agency of the Federal Government in confi-
dence, may that agency use those secrets, to their owner’s
competitive disadvantage, for the benefit of the owner’s
competitors even though the applicable state law of t~ade
secrets bars use for ihe benefit of the owner’s competitors?
2. Where the owner of trade secrets furnishes those
secrets to a Federal agency in confidence, are the owner’s
trade secret rights defined by the statute (18 U.S.C. 4 1905)
which imposes criminal penalties upon Federal Govern-
ment employees for disclosing trade secrets, rather than
the applicable state law of trade secrets which bars their
use for the benefit of competitors?
3. Is the ruling below—that, in 1975, Congress “im-
plicitly [rejected the] position that there is a common law
property right of exclusive use” of trade secret information
provided under the Federal Insecticide, Fungicide and Ro-
denticide Act—contrary to this Court’s holding that the
1975 amendments to that Act did “not at all address the
issues of the conditions under which pre-1970 data may be
used in considering another application” (Mobay Chemical
Corp. v. Costle (1979) 439 U.S. 320) ?
4. Absent any statutory authorization, is a Federal
agency to which trade secrets have been furnished in con-
fidence nonetheless empowered to use those secrets, to the
owner’s competitive disadvantage, for the benefit of the
owner’s competitors ?*
*The parties are set forth in the title. Chevron Chemical Com-
pany is a wholly owned subsidiary of Standard Oil Company of
California, a publicly owned corporation, Standard Oil Company
of California owns stock in the following publicly owned corpora-
tions: ‘
Huntington Beach Co.
AMAX, Inc.
Cetus Corp.
Standard Oil Company of California also owns stock in the
following corporations: American Overseas Petroleum Limited; Pars
Investment Corporation; Caltex Petroleum Companies; Irving Oil
Company, Limited; Irving Oil Limited; Trans Mountain Oil Pipe
Line Company; C-W Properties, Inc.; Glenwood Properties; Ara-
bian American Oil Company; Calpam B.V.; Caltex (CKalteks)
Petrol Amonim Sirketi; Caltex Mediterranean Limited; Caltex Oil,
Sociedad Anonima Espanola; Caltex Deutschland G.m.b.H.; Deut-
scher Kraftverkehr Ernst Grimmke; Chevron Transport Corpora-
tion; N.V. Rotterdam-Rijn Pijpleiding Maatschappij; Societa per
Azioni Raffineria Padana Olii Minerali SARPOM; The Associated
Octel Company Limited; Societe d’Etude et d’Exploitation de la
Raffinerie du Tchad; Chevron Oil Company of Portugal; Rimbey
Pipe Line Co., Ltd.; Sultran Ltd.; Chevron Transport Corporation;
First Colony Life Insurance Company; Iranian Oil Participants
Ltd.; Iranian Oil Services (Holdings) Ltd.; Oil Insurance Limited;
P.T. Caltex Pacific Indonesia; Refineria Petrolera de Guatemala-
California, Inc.
Chevron Chemical Company owns stock in the following corpora-
tions: Aditivos Mexicanos, S.A.; Cansulex Limited; BP-California
Limited; Coromandel Fertilisers Limited; Karonite Chemical Com-
pany, Limited; Nippon Petroleum Detergent Company, Limited;
Orobis Limited; Orogil, S.A.; Petrosynthese, $.A.; Societe Calgil.
iil
TABLE OF CONTENTS
SEI PUORIIUT sila oinsinacoctnschilinr Whicatniponnspaihnbphdnnenciseveccnpatiags
8 REE SOE AR BIO
Statutory provisions involved. ..............-.-..---ssecssseceeesecees
SOPOT OE SIN OI cae ainesiisnemapsisonopyndipecoervesbtibiiee
Reasons for granting certiorari -.........2.........--..-scseseeeeeoee
I.
Il.
ITI.
The ruling below that trade secret information
provided to a Federal agency in confidence is
not protected against use by that agency for
the benefit of competitors will have a devastat-
ing effect on the Federal Government’s ability
to encourage submission of trade secret infor-
mation and to encourage thorough testing of
products ....
In holding that a governmental agency may
use, for the benefit of petitioner’s competitors,
information provided by petitioner in confi-
dence, the Court of Appeals for the Third Cir-
cuit has created a conflict with a decision of the
Court of Appeals for the Second Circuit. More-
over, the court below erroneously held that pe-
titioner’s trade secret rights are defined by a
Federal criminal statute (the Trade Secrets
Act, 18 U.S.C. § 1905) rather than by state law
The ruling below that Congress has implicitly
authorized EPA’s Administrator to use peti-
tioner’s pre-1970 trade secret information in
support of applications filed by petitioner’s
competitors is contrary to the decisions of this
Court in Mobay Chemical Corp. v. Costle (1979)
439 U.S. 320 and Youngstown Co. v. Sawyer
(1952) 343 U.S. 579 ......... neces
EO TREES ie TRE PO NED . CEM aa
12
iv
TABLE OF AUTHORITIES CITED
Cases
Page
Board of Regents v. Roth, 408 U.S. 564 .... 10, 14
Chrysler Corp. v. Brown, 441 U.S. 281 22.22... teetee eee 14
Data Gen. Corp. v. Digital Computer Controls, Inc.
(Del.Ch.) 357 Atl.2d 105 .......0.......... 10
Fountain v. Hilson, Der kD eee ca we 12
Iselin v. United States, 270 U.S. 245 20 e eee eteeecceee eee 16
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 ............ 10-11
Kramer v. Secretary, U.S. Department of the Army
(2 Cir. 1980) ........ a: eosin one EB cir aD 7, 12, 13, 14
Larson v. Domestic & Foreign Corp., 337 U.S. 682 ........ 5, 14
Mobay Chemical Corp. v. Costle,
NN De ioscsrtatiesncanhtinieiiiladnitliesibanaeyees 4, 8, 14, 15, 16
Philadelphia Co. v. Stimson, 223 U.S. 605 ...........0........-.. 5, 14
Sinclair v. Aquarius Electronics, Inc., 42 Cal.App.3d
BE, AA I OO ccccckdabe ieee tics cbithcaiisinpsisipainssnncans 10
Webb’s Fab. Pharmacies, Inc. v. Beckwith, ........ US.
adie’ , 101 S.Ct. 446 .... 10
Youngstown Co. v. Sawyer, 343 U.S. 579 -2000... eee 14, 16
|
Constitution
United States Constitution 202.0... scccceceeceeseeeseee: 5, 10, 16
Statutes
Federal Insecticide, Fungicide and Rodenticide Act (7
UGS TBR Oe ea de a... passim
United States Code:
Title 7, § 136n(a) and (c) : 4+
Vv
Tas_e or AuTHorITiIEes CITED
STATUTES
Page
Title 15, $4 2601-2629 (Toxic Substances Control Act) 8
Title 18, § 1905 (Trade Secrets Act) -..................... 7, 12,14
Title 28, § 1254(1) dilaniisslaly Tecnico 1
ee I ist sdncenedthssetcrsivatheninansoriranisentttinitiastaia 6
Title 28, § 1292(a) (1) ............-..0..-0-+- 6
SI IID siicnnseesceihicebennsonisncitiinbsnce tiie 4
Title 28, § 1337 .... ovceceicaias 4
Title 28, § 1361 .................... 4
Title 28, § 1491 (Tucker Act) ..... : sancihdaeddialiindaasbaiallie 5
Fr REND Ga Th SIOI icv vescinentciensiitbidsttaattinaiaienintinraceen 15
Regulations
21 Code of Federal Regulations § 314.1(b) (1980) ........ 9
39 Federal Register 44,634 (1974) 22... eeeeecee eee 9
Other Authority
Restatement, Torts § 757, comment ¢ ~......-......---eeceeeseeee 11
Restatement, Torts § 757, comment e ~..............--.-..eceeeee 13
No.
In the Supreme Court
OF THE
United States
OctoBEerR Term 1980
Cuevron CHEMICAL CoMPany, & corporation,
Petitioner,
vs.
Administrator,
United States Environmental Protection Agency,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
to the United States Court of Appeals
for the Third Circuit
OPINIONS BELOW
The opinion of the Court of Appeals for the Third
Circuit, dated February 4, 1981, is printed in Appendix A.
The opinion of the district court ((D.Del. 1980) 499 F.Supp.
732) is printed in Appendix B.
JURISDICTION
The opinion and judgment of the Court of Appeals for
the Third Circuit were filed and entered on February 4,
1981 (Appx.A), and its order denying rehearing was filed
and entered March 3, 1981 (Appx.D). This Court has
jurisdiction pursuant to § 1254(1) of Title 28 of the United
States Code.
2
STATUTORY PROVISIONS INVOLVED
This case involves §3(c)(1)(D) of the Federal Insecti-
cide, Fungicide and Rodenticide Act, commonly known as
FIFRA, the pertinent provisions of which are set forth in
Appendix C.
STATEMENT OF THE CASE
Petitioner, CHzvron CHEmiIcaL Company (“Chevron”),
produces and sells pesticide products, including products
containing naled or paraquat, two compounds which
Chevron has tested extensively to determine their safety,
efficacy, and environmental impact (Appx.A, p. A-3).
The compilation of the naled and paraquat data by Chevron
cost several million doilars and required scientific and
technical know-how believed to be possessed only by Chev-
ron (Appx.B, p. A-39).
The Federal Insecticide, Fungicide and Rodenticide Act
(“FIFRA”) has required at all pertinent times that, in
order to sell pesticides in interstate commerce, a company
submit test data proving the safety of its pesticide prod-
ucts to the United States Department of Agriculture
(“USDA”) prior to 1970 and, after 1970, to EPA. To ob-
tain the legally required registrations to sell its naled and
paraquat pesticides, Chevron submitted test data on naled
and paraquat to USDA, prior to 1970, in confidence and
solely for the purpose of supporting Chevron’s own appli-
cations for pesticide registration. USDA’s policy (as dis-
tinguished from the policy of its successor, EPA, which is
referred to in the opinion of the Court of Appeals) was
that confidential data submitted by one applicant would
not be used to support applications of competitors without
3
the express authorization of the original applicant. Not-
withstanding the foregoing, EPA’s Administrator now pro-
poses to use Chevron’s test data submitted to USDA to
benefit Chevron’s competitors.
EPA has expressly conceded that Chevron’s pre-1970
test data includes trade secrets (Appx.B, p. A-39).? Chev-
ron’s possession and use of the data give it a substantial
competitive advantage over those who do not use or have
access to that data. Any use by EPA of that data to sup-
port the pesticide registrations of Chevron’s competitors
would substantially injure Chevron’s competitive position:
Since Chevron’s competitors would not have to incur the
immense cost necessary to produce the data, Chevron alone
would, in effect, be forced to bear the burden of developing
safety data on naled and paraquat for the entire industry.
Prior to 1972 FIFRA contained no reference to the use
of data submitted by one company to support registrations
of competing pesticide manufacturers. In 1972, Congress
amended FIFRA (Appx.C, pp. A-61—A-62) to provide a
procedure under which an applicant for a pesticide regis-
tration could request EPA to consider non-trade secret
data previously submitted by other applicants. The 1972
amendments contained a prohibition against EPA’s use of
1EPA’s counsel expressly conceded that
“e “* for purposes of the summary judgment motion we
can assume that everything that they have claimed to be a
trade secret is in fact a trade secret.
“e © © For purposes of their injunctive relief I think we
have to assume the same thing.”
4
trade secret data for the benefit of competing applicants
without permission of the original applicant.
In 1975, Congress again amended FIFRA (Appx.C, pp.
A-62—A-63). The 1975 amendments did not apply to the
use of pre-1970 data (Mobay Chemical Corp. v. Costle
(1979) 439 U.S. 320). As to post-1969 data, the 1975 amend-
ments retained the prohibition against the use of trade
secrets for the benefit of competing applicants but au-
thorized EPA to use non-trade secret data. In 1978, Con-
gress once more amended FIFRA (Appx.C, pp. A-63—A-
66). The 1978 amendments made no reference to pre-1970
data but authorized the use by EPA of post-1969 trade
secret data.
Chevron held a patent on naled and obtained licenses
from the patent holder of paraquat; both patents expired
in February 1978 (Appx.B., p. A-39). A number of Chev-
ron’s competitors, seeking to market naled and paraquat
products, have submitted registration applications to EPA
(ibid.). EPA’s Administrator intends to rely on Chevron’s
pre-1970 and post-1969 data in support of these applica-
tions and, if such reliance is permitted, will, on that basis,
issue registrations to one or more of Chevron’s competi-
tors (ibid.).
Chevron commenced this action in the district court
seeking injunctive and declaratory relief against EPA’s
Administrator. The jurisdiction of the district court was
invoked under 28 U.S.C. §§1331(a), 1337 and 1361, and
under 7 U.S.C. §§ 136n(a) and (ce). The complaint alleged
that EPA’s Administrator threatened to use, for the bene-
fit of Chevron’s competitors, two kinds of trade secret data:
5
(1) data submitted by Chevron to USDA prior to January
1, 1970 (“pre-1970 data”) and (2) data submitted by
Chevron after December 31, 1969 (“post-1969 data’’).
(1) As to the pre-1970 data, the complaint alleged that
there is no statutory authorization for EPA to use pre-
1970 trade secret data on behalf of Chevron’s competitors.”
(2) As to the post-1969 data, while FIFRA as amended
in 1978 (Appx.C., pp. A-63—A-66) does authorize such use
of Chevron’s data, Chevron alleged a violation of the Fifth
Amendment in that Chevron had no adequate remedy to
protect its interests in its post-1969 trade secret data. The
issue as to the post-1969 data is not involved in this
petition.
The district court denied a motion by Chevron for a
preliminary injunction and granted the Administrator’s
motion for summary judgment (Appx.B, p. A-60). The
district court ruled that EPA’s use of Chevron’s pre-1970
trade secret data was authorized by the 1978 amendments
to §3(c)(1)(D) of FIFRA (Appx.B, pp. A-41—A-48).*
*Chevron also alleged that, in any event, the use of such data
without compensation to Chevron would violate its rights under
the Fifth Amendment to the Constitution of the United States.
8As to the post-1969 data—which is not here involved—the
district court ruled that Chevron was not entitled to an injunction
on the ground that its remedy was in a claim for damages in the
Court of Claims under the Tucker Act (28 U.S.C. § 1491) and an
injunction was unavailable (Appx.B, pp. A-52—A-55). As to pre-
1970 trade secret data, however, it is undisputed that if, as Chevron
contends, the Administrator has no authority to use that data,
Chevron would be entitled to an injunction to restrain the Admin-
istrator from acting in excess of his statutory authority (Philadel-
phia Co. v. Stimson (1912) 223 U.S. 605, 620; Larson v. Domestic
& Foreign Corp. (1949) 337 U.S. 682, 690-691, 699-700).
6
A timely appeal was taken to the Court of Appeals for
the Third Circuit, which had jurisdiction pursuant to 28
U.S.C. §§1291 and 1292(a)(1). The Court of Appeals
granted an injunction pending appeal. Thereafter, the
Court of Appeals affirmed the district court’s order deny-
ing a preliminary injunction and granting a summary
judgment, on grounds different from those relied on by
the district court (Appx.A, p. A-22). The Court of Appeals
held that Chevron had no protectible right in confidential
information submitted to EPA and its predecessor agencies
(Appx.A, pp. A-22—A-26). It reasoned that, under Federal
statutory law, Chevron had no right to prevent EPA’s
Administrator from using Chevron’s trade secrets to bene-
fit Chevron’s competitors and that Chevron could not rely
on state law to prevent such use by a Federal agency
(Appx.A, pp. A-24—A-26). In view of its conclusion that
Chevron had no right to prevent a Federal agency from
using Chevron’s trade secrets to benefit its competitors, the
Court of Appeals considered it unnecessary to determine
the issues decided by the district court. On March 3, 1981,
the Court of Appeals denied Chevron’s petition for a re-
hearing (Appx.D).
REASONS FOR GRANTING CERTIORARI
This case has broad impact beyond the specific context
of pesticide regulation. It is of great importance to the Fed-
eral Government’s ability to encourage submission of trade
secret information and to encourage thorough testing of
products. The ruling below—that the owner of trade secret
information provided to the Federal Government in confi-
dence has no right to prevent a governmental official from
using it for the benefit of the owner’s competitors—will dis-
7
courage the development and submission to the Government
of trade secret information, including information essential
to public safety. Without assurance that Federal agencies
will not use information for the benefit of competitors, busi-
nesses will decline to expend the substantial time, effort
and money often necessary to develop and submit informa-
tion required by Federal regulations. Products essential
to the nation’s economy may be delayed, left untested, or
even not developed and marketed at all.
The ruling below that an agency of the Federal Govern-
ment may use, for the benefit of Chevron’s competitors,
information provided by Chevron in confidence directly
conflicts with a holding of the Court of Appeals for the
Second Circuit in Kramer v. Secretary, U.S. Department
of the Army (1980) ........ Pees... (Appx.E). Rather than
looking to state law when considering Chevron’s ex-
pectation of confidentiality and property interest, the court
below erroneously held that Chevron’s expectation of con-
fidentiality was limited to the rights defined by a Federal
criminal statute, the Trade Secrets Act, 18 U.S.C. § 1905
(Appx.A, pp. A-25, A-28).
Because of its constrictive view of Chevron’s trade
secret rights as against a governmental agency, the Court
of Appeals purported not to reach the principal issue pre-
sented to it—whether Congress has authorized EPA’s
Administrator to use, for the benefit of Chevron’s com-
petitors, pre-1970 trade secrets that Chevron had furnished
to support its own pesticide registrations. The opinion
concluded, however, that Congress in 1975 implicitly
authorized EPA to use Chevron’s pre-1970 trade secret
8
information in support of applications filed by Chevron’s
competitors (Appx.A, p. A-13). In this, the ruling below
conflicts with this Court’s decision in Mobay Chemical
Corp. v. Costle (1979) 489 U.S. 320 that the 1975 version
of FIFRA did not authorize EPA to use one company’s
pre-1970 trade secrets to register a competitor’s pesticides.
Clearly the issues presented are of utmost importance
not only to the adminisiration of FIFRA and similar
statutes but indeed to the Federal Government’s ability
to encourage submission of trade secret information in
confidence.
IL THE RULING BELOW THAT TRADE SEORET INFORMA-
TION PROVIDED TO A FEDERAL AGENCY IN OONFI-
DENCE IS NOT PROTECTED AGAINST USE BY THAT
AGENCY FOR THE BENEFIT OF COMPETITORS WILL
HAVE A DEVASTATING EFFECT ON THE FEDERAL GOV-
ERNMENT’S ABILITY TO ENCOURAGE SUBMISSION OF
TRADE SECRET INFORMATION AND TO ENCOURAGE
THOROUGH TESTING OF PRODUCTS.
In order to carry out their regulatory missions, Federal
agencies often require businesses to submit trade secret
information relating to the safety of products to be
marketed to the public. For example, the Food and Drug
Administration (“FDA”) receives trade secret information
in approving new drugs, antibiotics, and food and color
additives; EPA receives trade secret information in regu-
lating pesticides and chemicals. In some contexts, Con-
gressional legislation explicitly provides that trade secret
information submitted by one applicant may.be used by the
agency in support of other applications. The Toxic Sub-
stances Control Act, 15 U.S.C. $4 2601-2629, adopts this
approach and provides a compensation system whereby
9
the original submitter of data is reimbursed by subse-
quent applicants who rely on his data. In other contexts,
however, where no statutory provisions control agency use
of trade secret data, the Federal Government encourages
submission of trade secret information by maintaining a
policy of receiving the information in confidence. FDA, for
example, has taken the position that test data submitted
to support approval of a new drug is confidential; more-
over, an applicant may not rely on confidential, undisclosed
information submitted by a prior applicant (39 Fed.Reg.
44,634 (1974); 21 C.F.R. § 314.1(b) (1980)).
In discussing the trade secret data supporting drug
applications, FDA has expressly warned against the prac-
tical effect of not protecting the trade secrets submitted to
it:
“Such information costs hundreds of thousands, and
in some instances, millions of dollars to obtain. Re-
lease of such information would allow a competitor to
obtain approval from the Food and Drug Adminis-
tration for marketing the identical product, at a mere
fraction of the cost. * * *
«* * * Tf a manufacturer’s safety and effectiveness
data are to be released upon request, thus permitting
‘me-too’ drugs to be marketed immediately, it is en-
tirely possible that the incentive for private phar-
maceutical research will be adversely affected” (39
Fed.Reg. 44,634 (1974)).
This rationale is equally applicable to the case at bar, where
the ruling that trade secrets are not protected against com-
petitive use allows “me-too” producers to market their
products immediately, thus dampening the incentive for
research.
10
The ruling below—that, absent Federal statutory protec-
tion, trade secret information provided to the Federal Gov-
ernment in confidence is not a protected property right—
also runs contrary to well-established principles of Federal
constitutional law and state common law of traaz secrets.
This Court has often recognized that
“‘Tpjroperty interests ... are not created by the
Constitution. Rather, they are created and their
dimensions are defined by existing rules or under-
standings that stem from an independent source such
as state law... .’” (Webb’s Fab. Pharmacies, Inc. v.
Beckwith (1980) ........ A. Sennen’ [101 S.Ct. 446, 450],
quoting Board of Regents v. Roth (1972) 408 U.S. 564,
577).
Chevron’s property interest in the present case is de-
fined by the law of Chevron’s states of incorporation and
principal place of business; both states recognize that trade
secrets are property: In Chevron’s principal place of busi-
ness, California, the courts clearly recognize that “a trade
secret is private property” (Sinclair v. Aquarius Elec-
tronics, Inc. (1974) 42 Cal.App.3d 216, 223, 116 Cal.Rptr.
654). In Delaware, Chevron’s state of incorporation and the
forum state, a trade secret is a “property right” (Data Gen.
Corp. v. Digital Computer Controls, Inc. (Del.Ch. 1975) 357
Atl.2d 105, 110) and, in any event, “trade secrets are en-
titled to protection ‘* * * regardless of the supporting legal
label * * *’” (357 Atl.2d 112). In Kewanee Oil Co. v. Bicron
Corp. (1974) 416 U.S. 470, this Court pointed out that state
trade secret laws protect “intellectual property” (416 U.S.
478), and recognized that
11
“*fa] trade secret may consist of any formula, pat-
tern, device or compilation of information which is
used in one’s business, and which gives him an oppor-
tunity to obtain an advantage over competitors who do
not know or use it’’’ (416 U.S. 474-475).
Contrary to the approach taken by the Court of Appeals,
this Court pointed out, in Kewanee, that
“The protection accorded the trade secret holder ts
agamst the disclosure or wnauthorized use of the trade
secret by those to whom the secret has been confided
under the express or implied restriction of nondis-
closure or nonuse” (416 U.S. 475; emphasis added).
This is so because “[o]ne who has a trade secret may be
harmed * * * by the use of his secret in competition with
him. * * * The rule * * * protects the interest in a trade
secret against both disclosure and adverse use” (Rest. of
Torts § 757, comment c; emphasis added).
The Court of Appeals’ erroneous view of the pertinent
administrative practice contributed to its conclusion that
trade secret information provided to the Federal Govern-
ment is not property protected against use for the benefit
of competitors. EPA’s counsel expressly conceded in the
district court that Chevron’s data contained trade secrets.
Chevron showed that it had submitted its pre-1970 trade
secret data in confidence to USDA, EPA’s predecessor,
and USDA had a policy that data submitted by one appli-
cant would not be used to support registration application
by others without the consent of the original applicant.
The assumption to the contrary by the Court of Appeals
was based entirely upon its view of the post-1970 practices
12
of EPA. The pertinent practices, however, are those of
USDA, to which that data was submitted.‘
The issues presented require consideration by the Court,
in light of both the devastating effect the ruling below will
have on the Federal Government’s ability to encourage sub-
mission of trade secret information in confidence and the
ruling’s conflict with well-established legal principles.
Il. IN HOLDING THAT A GOVERNMENTAL AGENCY MAY
USE, FOR THE BENEFIT OF PETITIONER’S OCOMPETI-
TORS, INFORMATION PROVIDED BY PETITIONER IN
CONFIDENCE, THE COURT OF APPEALS FOR THE THIRD
CIRCUIT HAS CREATED A CONFLIOT WITH A DECISION
OF THE COURT OF APPEALS FOR THE SECOND OIRCUIT.
MOREOVER, THE COURT BELOW ERRONEOUSLY HELD
THAT PETITIONER’S TRADE SECRET RIGHTS ARE DE-
FINED BY A FEDERAL CRIMINAL STATUTE (THE TRADE
SECRETS AOT, 18 U.8.0. § 1905) RATHER THAN BY STATE
LAW.
The ruling below that an agency of the Federal Govern-
ment may use, for the benefit of Chevron’s competitors, in-
formation provided by Chevron in confidence is in direct
conflict with the decision of the Second Circuit Court of
Appeals in Kramer v. Secretary, U.S. Department of the
Army (2 Cir. July 16, 1980; rehearing denied October 2,
1980) No. 79-6163, ...... | (Appx.E). In Kramer, the
Second Circuit specifically held that, like a private citizen,
‘In the district court, EPA did not concede that this was USDA's
practice but did concede that agency practice prior to 1972 pre-
sented a disputed factual issue. The assumption by the Court of
Appeals as to agency practice, in any event, violated the principle
that a summary judgment may not be affirmed on the basis of ma-
terial facts which are in dispute (Fountain v. Filson (1949) 336
U.S. 681, 683).
13
an agency of the Federal Government may not make un-
authorized use of trade secrets which were submitted to
it in confidence. It held that if the appellant proved
“* * * simply that she provided [trade] secret infor-
mation to the Government in confidence, and that the
Government subsequently made unauthorized use of
that information * * *, this alone would establish the
Government’s liability” (Appx.E., p. A-74).
The facts underlying the Second Circuit’s Kramer hold-
ing parallel those in the case at bar. Appellant Kramer, like
Chevron, alleged that she had disclosed information to an
agency of the Federal Government only in reliance on the
Government’s commitment to treat that information in
confidence. In holding that the Secretary of the Army may
not use, for the benefit of Kramer’s competitors, trade
secret information provided in confidence, the Second Cir-
cuit ruled that the Government is bound by the applicable
state law that “ ‘One does not have a right to secure a trade
secret or invention by reason of a confidential relationship
and to use it without accounting to the source’” (Appx.E,
pp. A-74—A-75).
In Kramer, the governmental agency had already used
the trade secret in question; thus, the only remedy avail-
able was damages under the Federal Tort Claims Act
(Appx.E, p. A-73). In contrast, EPA has not yet used
Chevron’s trade secret data. Under the applicable state
common law of trade secrets, injunctive relief is always
available to prevent unauthorized use of trade secret in-
formation (Rest. of Torts § 757, comment e). Accordingly,
Chevron seeks to enjoin EPA’s Administrator from using,
14
for the benefit of Chevron’s competitors, trade secret infor-
mation provided by Chevron in confidence.’
The holding in Kramer is in sharp contrast to the hold-
ing that Chevron’s expectation of confidentiality was de-
fined solely by a Federal criminal statute, the Trade Secrets
Act (18 U.S.C. § 1905). Although the Court of Appeals pur-
ported to recognize that the Trade Secrets Act is a criminal
statute and does not confer a private, civil cause of action
(Appx.A, p. A-24; see Chrysler Corp. v. Brown (1979) 441
U.S. 281, 316-317), it nevertheless held that “[p]rior to
1972, * * * 18 U.S.C. §1905 and agency practice defined
the scope of [Chevron’s] expectation [of confidentiality]”
(Appx.A, p. A-25; see also p. A-28). This reliance upon the
Trade Secrets Act rather than the applicable state trade
secret law conflicts not only with the Second Circuit’s
Kramer ruling, but also with this Court’s prior decisions
defining property interests (see Board of Regents v. Roth
(1972) 408 U.S. 564, 574).
Ill. THE RULING BELOW THAT CONGRESS HAS IMPLICITLY
AUTHORIZED EPA’S ADMINISTRATOR TO USE PETI-
TIONER’S PRE-1970 TRADE SECRET INFORMATION IN
SUPPORT OF APPLICATIONS FILED BY PETITIONER’S
COMPETITORS IS CONTRARY TO THE DECISIONS OF
THIS COURT IN MOBAY CHEMICAL CORP. v. COSTLE
(1979) 439 U.S. 320 AND YOUNGSTOWN OO. v. SAWYER
(1952) 343 U.S. 579,
Because of its erroneous ruling that Chevron has no
right to prevent use of its trade secrets to benefit its com-
‘“[I]n case of an injury threatened by his illegal action, the
officer cannot claim immunity from injunction process. The prin-
ciple * * ° is equally applicable to a Federal officer acting in
excess of his authority or under an authority not validly conferred”
(Philadelphia Co. v. Stimson (1912) 223 U.S. 605, 620; Larson v.
Domestic & Foreign Corp. (1949) 337 U.S. 682, 690-691).
15
petitors, the Court of Appeals purported not to address the
issue of whether Congress has authorized such use of pre-
1970 trade secrets. However, in holding that Chevron has
no right to prevent EPA’s Administrator’s use of pre-1970
trade secrets to benefit Chevron’s competitors, the Court of
Appeals ruled that Congress in 1975 had implicitly autho-
rized such use. The Court of Appeals stated that Congress,
in the 1975 amendments, “dealt rather comprehensively
with the open question of retroactivity” and “at least im-
plicitly [rejected] Chevron’s position that there is a com-
mon law property right of exclusive use, absent compensa-
tion, for materials in the government’s files prior to
January 1, 1970” (Appx.A, pp. A-12—A-13). This directly
conflicts with this Court’s holding in Mobay Chemical Corp.
v. Costle (1979) 439 U.S. 320 that
“FIFRA, as amended [in 1975], does not at all ad-
dress the issues of the conditions under which pre-
1970 data may be used in considering another applica-
tion. It neither authorizes, forbids, nor requires the
existing agency practice with respect to pre-1970
data” (439 U.S. 320; emphasis added).°®
*In Mobay, the appellant had challenged the constitutionality of
the 1975 amendments on the theory that they authorized the use of
pre-1970 data in support of a competitor’s application. A three-
judge court had been convened under former 28 U.S.C. § 2282,
and this Court concluded that the three-judge court had been im-
properly convened since Congress had not addressed that issue.
The principal issue presented by the parties to the Court of
Appeals in the case at bar was whether the 1978 version ( Appx. C,
pp. A-63—A-66) had authorized such use of pre-1970 trade secrets.
This is the issue the Court of Appeals purported not to decide,
although it recognized that the 1978 amendments leave “pre-1970
data in exactly the same posture as when in Mobay * * * the Su-
preme Court considered the 1975 version” of FIFRA (Appx.A,
pp. A-20—A-21).
16
Instead, the court below erroneously stated that in Mobay
this Court found that “Congress chose not to prohibit” use
of 1970 trade secrets (Appx.A, p. A-14)."
In Y oungstown Co. v. Sawyer (1952) 343 U.S. 579, this
Court held that the power of the executive branch of
Government “must stem either from an act of Congress
or from the Constitution itself” (343 U.S. 585). There is no
provision of the Constitution which authorizes the action of
EPA’s Administrator. Thus, unless the applicable statute,
FIFRA, authorizes EPA’s Administrator to use pre-1970
trade secret data for the benefit of Chevron’s competitors,
that use is no more authorized than was the seizure of the
steel mills in the Youngstown case.
The ruling below allows administrative agencies untram-
meled discretion to use trade secret information for the
benefit of the owners’ competitors.
"In attempting to unearth in the 1975 FIFRA amendments a
Congressional intent when this Court found none, the court below
may have assumed that Congress intended to provide what it
omitted. But as this Court held in Iselin v. United States (1926)
270 U.S. 245:
“@ @ ® Tit] is not a construction of a statute, but, in effect, an
enlargement of it by the court [to construe it], so that what
was omitted, presumably by inadvertence, may be included
within its scope. To supply omissions transcends the judicial
function” (270 U.S. 251; emphasis added).
17
CONCLUSION
For the foregoing reasons, the petition for a writ of
certiorari should be granted.
Respectfully submitted,
Nose K. Grecory
COUNSEL OF RECORD
Brian D. BELLaRDo
Kevin M. Fone
Counsel for Petitioner
Pitispury, Mapison & SutTrRo
Of Counsel
(Appendices follow)
APPENDICES
A-l
Appendix A
United States Court of Appeals
For the Third Circuit
No. 80-2037
Chevron Chemical Company,
- Appellant
Vv.
Douglas M. Costle
(D.C. Civil No. 79-00532)
On Appeal From the United States District Court
for the District of Delaware
Argued: November 6, 1980
Before: Gibbons and Weis, Circuit Judges and
Whipple, District Judge*
Opinion Filed: February 4, 1981
Amended: February 19, 1981
GIBBONS, Circwit Judge.
Chevron Chemical Company (Chevron) appeals from an
order of the district court denying its motion for a pre-
liminary injunction and granting the motion of the de-
fendant, Douglas M. Costle, Administrator of the United
States Environmental Protection Agency (EPA). Chev-
ron’s amended complaint alleges that EPA possesses test
data submitted by it in order to obtain registration for
*Hon. Lawrence A. Whipple, United States District Judge for the
District of New Jersey, sitting by designation.
A-2
sale in interstate commerce of the pesticide naled and
fungicide paraquat, and seeks preliminary injunctions pro-
hibiting that agency from using such data submitted by
Chevron “before, on, or after January 1, 1970” in ruling
on applications for registrations for sale of chemically
identical pesticides made by other manufacturers. The dis-
trict court concluded that EPA was entitled to judgment
as a matter of law. We affirm, although on grounds some-
what different from those the district court relied on.
I,
More than nineteen years ago Chevron obtained patents
on a pesticide, naled, and a fungicide, paraquat. Both are
chemical compounds effective in controlling fungus and
insect damage in agricultural products. Those patents ex-
pired in February, 1978, and thus the right to make, use
and sell naled and paraquat became a part of the public
domain. When the compounds were patented, however, the
issuance of patents did not confer on Chevron the right to
sell those compounds in interstate commerce for agricul-
tural use. Federal law has regulated the sale in interstate
commerce of agricultural fungicides and pesticides since
the passage of the Insecticide Act of April 26, 1910, C. 191,
36 Stat. 335. In 1947 more stringent regulations were
adopted, requiring registration of such compounds prior
to sale in interstate commerce, and requiring, as a condi-
tion to registration, that the applicant submit test data to
demonstrate to a federal regulatory agency the product’s
safety and efficacy. Federal Insecticide, Fungicide and
Rodenticide Act of June 25, 1947, C. 125 § § 2-13, 61 Stat.
163-72; 7 U.S.C. § 135 et seq., superceded by 7 U.S.C. § 136
A-3
et seq. Originally the registration function was housed in
the Department of Agriculture, and later in the Food and
Drug Administration, but in 1970 that function was trans-
ferred to EPA, 35 Fed. Reg. 15623 (1970).
Beginning in 1955 and continuing to 1979, Chevron sub-
mitted to EPA and its predecessor agencies test data sup-
porting its applications for registration of naled. Beginning
in 1966 and continuing through 1980, Chevron submitted
to those agencies test data supporting its application for
registration of paraquat. Both were approved as safe and
effective, and have been sold by Chevron and its licensees
in interstate commerce in substantial quantities.
The test data submitted to the federal agencies involv-
ing the results of metabolism, toxicity, efficency [sic], and
tolerance testing on plants and animals, required expendi-
tures by Chevron in excess of $1 million, and all of it,
except to the extent it was submitted to those agencies, has
been maintained in confidence. Indeed, according to Chev-
ron, development of the information required to demon-
strate safety and efficacy may be more costly than the
research leading to development of the patented chemical
compounds. Thus, as between it and its competitors,
Chevron takes steps to treat the test data as trade secrets.
Prior to October 21, 1972, the only federal statute
governing treatment of submissions of confidential infor-
mation to the federal government pursuant to federal
regulatory schemes was the Trade Secret Act, 18 U.S.C.
§ 1905, which provides:
Whoever, being an officer or employee of the United
States or of any department or agency thereof, pub-
lishes, divulges, discloses, or makes known in any
A-4
manner or to any extent not authorized by law any
information coming to him in the course of his em-
ployment or official duties or by reason of any exam-
ination or investigation made by, or return, report
or record made to or filed with, such department or
agency or officer or employee thereof, which informa-
tion concerns or relates to the trade secrets, processes,
operation, style of work, or apparatus, or to the iden-
tity, confidential statistical data, amount or source of
any income, profits, losses, or expenditures of any
person, firm, partnership, corporation, or association;
or permits any income return or copy thereof or any
book containing any abstract or particulars thereof
to be seen or examined by any person except as pro-
vided by law; shall be fined not more than $1,000, or
imprisoned not more than one year, or both; and shall
be removed from office or employment.
Thus it can fairly be said that when, prior to October 21,
1972 Chevron submitted data in support of its naled and
paraquat registrations, it did so in the expectation that
its trade secrets would not be published, divulged, or dis-
closed. Section 1905 does not, however, deal with agency
use of submitted data for its own purposes. The question
of agency use did not arise with respect to the naled and
paraquat data prior to 1972, however, because Chevron
held patents prohibiting others from making, using or sell-
ing the compounds as agricultural fungicides or pesticides.’
In 1972 Congress enacted the Federal Environmental
Pesticide Control Act of 1972. Pub. L. 92-516, 86 Stat. 973.
‘Conceivably there are registrations of common unpatentable
chemicals or chemical compounds whose registrations were sup-
ported by the submission of confidential test data, but this record
does not present such a case.
A-5
This legislation reenacted the registration requirements
of the 1947 law and its subsequent amendments, but in the
interest of environmental protection provided more strin-
gent test data submission requirements. The lobbying
battle over this legislation was intense, and among the
features which aroused perhaps the most serious contro-
versy was that embodied in section 3(c)(1)(D):
.. . If requested by the Administrator, a full de-
scription of the tests made and the results thereof
upon which the claims are based, except that data
submitted in support of an application shall not, with-
out permission of the applicant, be considered by the
Administrator in support of any other application
for registration unless such other applicant shall have
first offered to pay reasonable compensation for pro-
ducing the test data to be relied upon and such data
is not protected from disclosure by section 10(b). If
the parties cannot agree on the amount and method
of payment, the Administrator shall make such de-
termination and may fix such other terms and condi-
tions as may be reasonable under the circumstances.
The Administrator’s determination shall be made on
the record after notice and opportunity for hearing.
If the owner of the test data does not agree with said
determination, he may, within thirty days, take an
appeal to the federal district court for the district in
which he resides with respect to either the amount of
the payment or the terms of payment, or both. In
no event shall the amount of payment determined
by the court be less than that determined by the
Administrator;...
This section did not authorize disclosure of registrant
submissions, but for the first time required that if the
A-6
agency were to consider the contents of its own files in
support of another manufacturer’s application for regis-
tration, it must make the new applicant pay “reasonable
compensation” to the earlier applicant, whether or not
the compound in question was protected by a patent.
Section 3(c)(1)(D) of the 1972 Act must be read with
section 10(a) of the same act, which allows an applicant
to mark which part of the submitted data it considered
trade secrets, and with section 10(b) which prohibits EPA
from disclosing such trade secrets except as necessary to
earry out its statutory duties. See 7 U.S.C. $136h. The
1972 version of section 3(c)(1)(D) excludes from the use
and compensation provisions all section 10(b) data.
Section 3(c)(1)(D) of the 1972 Act represents a com-
promise of what was originally enacted by the House of
Representatives. As there proposed, the bill provided that
... if requested by the Administrator, a full descrip-
tion of the tests made and the results thereof [shall
be supplied.to the EPA], except that data submitted
in support of an application shall not, without the
permission of the applicant be considered by the Ad-
ministrator in support of any other application for
registration.
H.R. 10729 § 3(c)(1)(D). H. Rep. No. 92-511, 92d Cong.,
1st Sess. (1971) 17. The effect of the 1972 House Bill
was to permit an initial applicant to determine on its own
what it considered to be trade secrets, and to require that
the Administrator abide by that determination. Thus the
Administrator would have been obliged to ignore the
contents of the agency files establishing’ that a new en-
trant’s compound was both safe and efficacious unless
A-7
the new entrant duplicated those contents or obtained
consent from the old registrant. This would have been
true not only of compounds developed by the original ap-
plicant, but even of common chemicals in the public
domain.
The House provision received severe criticism by some
members of the House Agriculture Committee, who pointed
out that it would give initial applicants a quasi-patent of
indefinite duration, would present a substantial bar to
entry upon the expiration of patents, and was anticom-
petitive.? Efforts to delete the exclusive use provision by
amendment on the House floor were offered and defeated.
117 Cong. Rec. H. 10677-78 (Nov. 8, 1971); H. 10733-40
(Nov. 9, 1971).
In the Senate the Agriculture and Forestry Commit-
tee supported the House bill’s exclusive use provision,
while the Commerce Committee opposed it vigorously,
proposing an amendment to strike it. The latter Com-
mittee invited comments from the Department of Jus-
tice, and from academic antitrust scholars. Acting Attor-
*See remarks of Congressman Foley, H. Rep. No. 92-511, 92d
Cong. Ist Sess. (1971) at 69: remarks of Congressman Dow, id.
at 72.
8’ The amendment of the Committee on Commerce strikes
[the exclusive use] language, and allows the use of such data.
Without the proposed amendment, the committee feels that
barriers to entry in the pesticides industry would result which
go far beyond that envisioned by our patent system. In effect,
whether or not a pesticide has patent protection, a manufac-
turer wishing to register a pesticide previously registered
would have to duplicate the required test data. As patent pro-
tection is granted to a substantial number of pesticides, this
provision of the bill imposes requirements on subsequent
producers beyond the licensing fees that a patent holder may
A-8
ney General Kleindienst opposed the exclusive nse_
provision as anticompetitive,‘ as did a number of law
professors.’ EPA also criticized the exclusive use provi-
sion. Responding to the criticism from the Commerce
receive. In the extreme, a monopoly in the production of a
pesticide could ensue if competitors are unable to afford the
' sometimes costly safety and efficacy tests.
The prime reason stated for this provision in the Agriculture
Committee bill is that without it the pesticides industry will
lack incentives to develop new pesticides. Yet, by requiring
manufacturers to duplicate test results, portions of the money
now spent on developing new pesticides will undoubtedly be
diverted to perform such duplicate testing. Consequently, this
provision could stifle the very incentives it seeks to achieve.
S. Rep. No. 92-970, 92d Cong., 2d Sess. (1972), reprinted in 1972
U.S. Code Cong. & Ad. News 3993, 4096.
‘The Acting Attorney General wrote:
In economic terms, requiring the submittal of test data im-
poses an expense on the first applicant to enable him to enter
a given market. For others trying to enter the same market,
repetition of the same tests imposes a similar entry fee. Such
an entry fee, moreover, acts regressively for it is more of a
burden to the small manufacturer. Duplication of such tests is
a waste to the economy and a needless and undesirable burden
on any subsequent applicant.
S. Rep. No. 92-970, supra, 1972 U.S. Code Cong. & Ad. News at
4097,
‘See the criticisms on economic grounds of Professor John
Stedman, S. Rep. No. 92-970, supra, 1972 U.S. Code Cong. & Ad.
News at 4098-99, and Professor John J. Flynn, S. Rep. No. 92-970,
supra, 1972 U.S. Code Cong. & Ad. News at 4101.
®‘EPA noted:
The effect of this provision is to afford additional economic
protection, foster monopoly, and it may tend to restrict pesti-
cide business to large manufacturers. In addition, it would in-
crease not only federal administrative costs, but those of the
manufacturer as well, aside from unnecessarily increasing the
application time.
S. Rep. No. 92-970, supra, 1972 U.S. Code Cong. & Ad. News at
4043,
A-9
Cofmmittee and elsewhere, the Agriculture and Forestry
Committee, relying heavily on a statement by the Na-
tional Agricultural Chemical Association, defended the
exclusive use provision as an encouragement to research
toward the development of better and safer pesticides.’
Eventually the Senate Agriculture and Forestry and Sen-
ate Commerce Committees reached the compromise re-
flected in section 3(c)(1)(D) quoted above. As explained
in the Senate report, ,
. it was decided that fairness and equity required
a sharing of the governmentally required cost of
producing the test data used in support of an appli-
cation by an applicant other than the originator of
such data.°
This compromise version survived conference committee
action on the bill.’
The 1972 enactment did not define trade secrets. A
trade secret was under section 10(a) anything an appli-
cant wanted so to designate, unless the EPA could ob-
tain a judgment overturning the designation. Material so
designated was excepted from agency use pursuant to
section 3(c)(1)(D). But absent such a designation, EPA
was free to use the contents of its own files (without dis-
closure) in support of an application by another appli-
"Report of the Committee on Agriculture & Forestry respond-
ing to Commerce Committee’s proposed amendments to H.R. 10729,
S. Rep. No. 92-838, 92d Cong., 2d Sess. (1972), reprinted in 1972
U.S. Code Cong. & Ad. News 4023, 4024-25, 4040.
8S. Rep. No. 92-838, supra, 1972 U.S. Code Cong. & Ad. News at
4092.
*Conf. Rep. No. 92-1540, 92d Cong., 2d Sess. (1972), reprinted
in 1972 U.S. Code Cong. & Ad. News, 3993, 4132.
A-10
cant so long as it required that applicant to pay “reason-
able compensation.”
Prior to 1972, only 18 U.S.C. § 1905 afforded federal
statutory protection for the test data, and that protection
was against disclosure outside the agency. Moreover, prior
to 1972, the EPA was using the contents of its files, with-
out disclosure, in the approval of me-too applications
for registration.” In opposing enactment of section 3(c)
(1)(D) after the deletion of the exclusive use provision,
EPA took the position that it did not need an affirmative
grant of authority to continue that practice. Thus prior
to 1972, neither as a matter of federal statutory law nor
as a matter of agency practice was any proprietary right
recognized against the government in the contents of
agency files. The compromise in the 1972 Act was, there-
fore, a victory for the National Agricultural Chemical
Association, for its effect was to prohibit agency use in
approving registrations of anything designated as a trade
secret, and to require payment of compensation for test
data which was neither protected by a patent nor desig-
nated a trade secret. Moreover, the 1972 Act provided for
judicial review of the amount of compensation only at the
behest of the original submitter, not the new applicant.
The 1972 Act left major retroactivity questions un-
answered: (1) whether firms which had submitted data
prior to the effective date of the 1972 Act could retroac-
See the study by the EPA Office of Pesticide Programs,
FIFRA: Impact on the Industry, reprinted in S. Rep. 95-334, 95th
Cong., Ist Sess. 34 (1977).
1§, Rep. No. 92-838, supra, 1972 U.S. Code Cong. & Ad. News
at 4043,
A-11
tively designate that data as trade secrets; (2) whether
they were entitled to compensation for such previously
submitted data; and (3) whether section 3(c)(1)(D) ap-
plied to new applications filed before its effective date.”
Additionally, there was an ambiguity with respect to the
effective date.’* Nor did the 1972 Act specifically address
the contention that Chevron advances in this case, that it
always had a common law property right in the test data
in agency files no matter when submitted, which the gov-
ernment could make no use of without paying compensa-
tion. We consider that contention in Part II hereafter.
These ambiguities in the 1972 legislation prompted Con-
gress to revisit section 3(c)(1)(D) in 1975. As in 1972,
there were major differences of opinion among both legis-
lators and competing lobbyists. In section 12 of the Insecti-
cide, Fungicide, and Rodenticide Act of 1975, Pub. L.
94-140, 89 Stat. 751, the controversial section was amended
to read:
... that data submitted on or after January 1, 1970,
in support of an application shall not, without per-
mission of the applicant, be considered by the Admin-
istrator in support of any other application for regis-
The retroactivity issue not surprisingly spawned litigation. See,
e.g., Amchem Corp. v. GAF, 391 F. Supp. 124 (N.D. Ga. 1975)
(EPA may rely on test data submitted before 1972 in approving
competitor’s application for registration), vacated and remanded
for reconsideration in light of 1975 amendments, 529 F.2d 1297
(5th Cir. 1976), reinstated on rehearing, 422 F. Supp. 340 (N.D.
Ga. 1976), affd in part, rev'd in part on other grounds, 594 F.2d
470 (5th Cir. 1979).
EPA in an Interim Policy Statement took the position that
section 3(c)(1)(D) applied to applications submitted after
November 19, 1973, 38 Fed. Reg. 31862 (Nov. 19, 1973).
A-12
tration unless such other applicant shall have first
offered to pay reasonable compensation for producing
the test data to be relied upon and such data is not
protected from disclosure by section 10(b). This pro-
vision with regard to compensation for producing the
test data to be relied upon shall apply with respect to
all applications for registration or reregistration sub-
mitted on or after October 21, 1972. If the parties
cannot agree on the amount and method of payment,
the Administ~ator shall make such determination and
may fix such other terms and conditions as may be
reasonable under the circumstances. The Administra-
tor’s determination shall be made on the record after
notice and opportunity for hearing. If either party
does not agree with said determination, he may, within
thirty days, take an appeal to the Federal district
court of the district in which he resides with respect
to either the amount of the payment or the terms of
payment, or both. Registration shall not be delayed
pending the determination of reasonable compensation
between the applicants, by the Administrator or by
the court.
The conference committee report describes the intended
effect of the amended language to be (1) to reject a House
Committee’s intent that compensation be paid for data
regardless of when supplied to the agency; (2) to provide
for compensation only for data received after Janu-
ary 1, 1970, and (3) to require compensation only from
new applicants filing for registration after October 21,
1972.** The 1975 version thus dealt rather comprehensively
New section 12 added by the Senate amended section
3(c)(1)(D) of FIFRA which requires that an applicant
for registration of a pesticide pay reasonable compensation if
he relies on the test data submitted by another applicant.
A-13
with the open question of retroactivity, and made access
to judicial review of compensation determinations avail-
able to both sides. And while the 1975 version does not
say so explicitly, at least implicitly it rejects Chevron’s
position that there is a common law property right of
exclusive use, absent compensation, for materials in the
government’s files prior to January 1, 1970. That intention
is confirmed by the conference committee report quoted in
note 14.
The amendment provides that only data submitted on or
after October 21, 1972, is compensable; the data compensa-
tion provision applies to all applications for registration sub-
mitted on or after October 21, 1972; both parties to a dispute
on compensation of data are given the same rights in the
courts; and registration of a pesticide is not to be delayed
pending the determination of a dispute on reasonable com-
pensation.
The House bill had no specific language amending section
3(c)(1)(D). However, in the discussion of the bill on the
House Floor, it was stated that it was the Committee’s in-
tent that on new registrations, the reasonable compensation
data provision be applied regardless of when the data relied
on was originally received by EPA. If, however, a reregistra-
tion is made of a pesticide registered originally prior to Oc-
tober 21, 1972, and data to support the reregistration was in
the files of EPA prior to such date, no compensation would be
required at the time of reregistration.
The Conference substitute adopts the Senate amendment
with a modification which (a) provides that all data sub-
mitted in support of an application on or after January 1,
1970 (in lieu of October 21, 1972, as provided in the Senate
amendment) is compensable, and (b) makes clear that the
provision with regard to compensation for producing test
data to be relied upon shall apply with respect to all appli-
cations for both registration and reregistration submitted on
or after October 21, 1972.
House Conf. Rep. No. 94-668, 94th Cong., 2d Sess. (1975), re-
printed in 1975 U.S. Code Cong. & Ad. News, 1359, 1380-81.
A-14
In Mobay Chemical Corp. v. Costle, 12 E.R.C. 1572
(W.D. Mo. 1978) (3-judge court), appeal dismissed for
lack of jurisdiction, 439 U.S. 320 (1979), Mobay, which
had submitted registration data prior to January 1, 1970,
challenged the statute on the ground that as amended in
1975, section 3(c)(1)(D) authorized use by the EPA of
such data without compensation, in violation of the tak-
ing clause of the fifth amendment. The three judge court
dismissed the complaint and Mobay appealed directly
to the Supreme Court pursuant to 28 U.S.C. $1253. That
Court dismissed the appeal, reasoning that since sec-
tion 3(c)(1)(D) did not expressly authorize use of pre-
1970 data, the challenge was to a longstanding agency
practice, which Congress chose not to prohibit, rather
than to the constitutionality of a statute. Thus, the Court
held, the matter was not one within the jurisdiction of a
three judge district court.” The Mobay case, therefore,
tells us no more than that, in the Supreme Court’s view,
Congress has neither endorsed nor rejected the EPA prac-
tice of making use of its pre-January 1, 1970 files in de-
ciding applications for new registrations.
The combination, in the 1975 version of section 3(c)
(1)(D), of the cross reference to section 10(b) trade
secrets, and of EPA determination of the amount of com-
pensation subject to judicial review, produced an admin-
istrative nightmare in which the process of registering
Justice Blackmun dissented, urging that a three judge court
question was presented because the 1975 version of section
3(c)(1)(D) ratified agency practice. 439 U.S. at 321.
A-15
new pesticides simply ground to a halt.** The result was,
for all practical purposes, as complete a bar to new mar-
ket entrants as if the old registrants held strong patents.
Neither EPA nor the Department of Justice was happy
with that situation. On the other hand, the National Ag-
ricultural Chemical Association still sought exclusive use
protection. As a result of mutual government-industry
dissatisfaction, in 1977 both the Senate and the House
began reconsideration of section 3(c)(1)(D). EPA’s prin-
cipal objection to the 1975 version was the cross reference
to section 10(b). Administrator Douglas M. Costle ex-
plained to the Senate Agriculture and Forestry Committee:
By enacting the section 3(c)(1)(D) compensation
mechanism, Congress wisely provided data developers
the ability to recover reasonable compensation from
subsequent data users. But the major pesticide de-
velopers have claimed they are also entitled to deter-
mine which applicants shall be allowed to use this data,
and thus to set their own price for its use or refuse
access to it altogether. Congress rejected the “exclu-
sive use of data” concept in 1972 but the major firms
have found that they can obtain “exclusive use” for
some period of time simply by making very broad
trade secrecy claims and engaging EPA in prolonged
litigation.
See Letter of Administrator Douglas M. Costle to Rep. Foley,
Chairman, House Agriculture Committee, reprinted in H.R. Rep.
No. 95-663, 95th Cong., Ist Sess. 53 (1977), reprinted in 1978
U.S. Code Cong. & Ad. News at 2026; Remarks of Rep. Fithian,
123 Cong. Rec. H. 11864 (Oct. 31, 1977); Remarks of Sen. Leahy,
Chairman, Senate Agriculture, Nutrition and Forestry Committee,
124 Cong. Rec. S. 15303 (Sept. 18, 1978).
A-10
If Congress desires EPA to implement a truly
mandatory data licensing program through the sec-
tion 3(¢c)(1)(D) mechanism, and desires to encourage
competition and access to the marketplace for regis-
trants who do not develop their own data, the refer-
ence to section 10 should be stricken from section
(3)(c)(1)(D). The result will be that all data can be
licensed whether or not it is trade secret.
Statement of April 27, 1977, in S. Rep. No. 95-334, ac-
companying S. 1678, 95th Cong., 1st Sess., at 70-71 (1977).
The Justice Department strongly supported the EPA evalu-
ation of the anti-competitive impacts of the cross reference
to section 10(b).** As spokesman for the pesticide manu-
facturers, the National Agricultural Chemical Manufac-
turers Association not only opposed the EPA proposal,
but sought an amendment granting, for all registration
data produced by a registrant, trade secret or otherwise,
1"§ee similarly, Statement of Hon. Douglas Costle before Senate
Subcommittee on Agricultural Research and Genera] Legislation,
Jan. 9, 1977 in S. Rep. No. 95-334, accompanying S. 1678, 95th
Cong., Ist Sess., at 80 (1977). For a more detailed explanation of
the EPA views, see EPA Study, Economic Impacts of Proposed
Amendments to FIFRA, in S. Rep. No. 95-334, supra, at 59-64.
18Assistant Attorney General Patricia Wald wrote:
The Department of Justice supports the EPA’s evaluation and
conclusions with respect to the direct and indirect anticom-
petitive effects of the trade secret provisions of Section 10 of
FIFRA. We concur with EPA that some expression of Con-
gressional intent would be desirable to support the Agency's
position on the issues relating to competition in the pesticide
industry.
It should be noted that the EPA raises two separate issues:
(1) the access to or reliance upon safety efficacy, and environ-
mental chemistry data (“test data”), without actual disclosure,
which has been furnished to EPA by developers, and (2) the
A-17
a ten year exclusive use protection.” The Senate passed
a version of an amended section 3(c)(1)(D) which for the
most part adopted the position of the government agencies.
That version omitted the trade secret reference, rejected
the exclusive use provision, and limited compensation to a
period of seven years after registration.” The seven year
period made it unlikely that protection of test data would
outlast patent protection, although it still conferred a boon
on registrants of unpatentable compounds.
In the House, the National Agricultural Chemical Manu-
facturers Association was more successful than EPA and
the Department of Justice. Despite EPA opposition, the
House Agriculture Committee proposed H.R. No. 8681,
which would have granted a five year exclusive right, fol-
lowed by a five year compensation right, with compensa-
public disclosure of such data. The Department believes that
the competitive issues hinge principally on the ability of appli-
cants to use such test data to satisfy registration requirements.
The Antitrust Division’s letter to Mr. Johnson delineates its
views concerning sections 3(c)(1)(D) and 10. The Division's
letter concludes that the scope of the trade secret provisions of
FIFRA may have been improperly extended in denying poten-
tial competitors access to test data prepared by developers. We
agree with the position of EPA that “trade secret status should
be routinely extended only to truly secret information concern-
ing manufacturing processes.” . . .
S. Rep. No. 95-334, supra, at 89-90.
19. Rep. No. 95-334, supra, at 95.
The text of the Senate version is in S. Rep. 95-334, supra, at
129-30. The EPA position was set forth not only in the EPA study
referred to in note 17, supra, but in a letter from Administrator
Costle to the Chairman of the House Agriculture Committee. See
H.R. Rep. No. 95-663, 95th Cong., Ist Sess. at 53-54 (1977), re-
printed in 1978 U.S. Code Cong. & Ad. News, 1966, 2026-27.
A-18
tion to be determined by binding arbitration." The House
passed H.R. No. 8681 in October 1977, 123 Cong. Ree. H.
11864 (Oct. 31, 1977), and the following September a com-
promise on the competing bills emerged from a Conference
Committee, which agreed on the current version of section
3(c)(1)(D), quoted in the margin.”
The conference report summarizes the substitute provi-
sion:
"See H. R. Rep. No. 95-663, supra, at 18-19, 1978 U.S. Code
Cong. & Ad. News at 1991.
*2As finally enacted, section 3(c)(1)(D) of 1978 provides:
(D) except as otherwise provided in subsection (c)(2)(D)
of this section, if requested by the Administrator, a full de-
scription of the tests made and the results thereof upon which
the claims are based, or alternatively a citation to data that
appear in the public literature or that previously had been
submitted to the Administrator and that the Administrator may
consider in accordance with the following provisions:
(1) With respect to pesticides containing active ingre-
dients that are initially registered under this Act after the
date of enactment of the Federal Pesticide Act of 1978,
data submitted to support the application for the original
registration of the pesticide, or an application for an amend-
ment adding any new use to the registration and that per-
tains solely to such new use, shall not, without the written
permission of the original data submitter, be considered by
the Administrator to support an application by another
person during a period of ten years following the date the
Administrator first registers the pesticide: Provided, That
such permission shall not be required in the case of de-
fensive data:
(ii) except as otherwise provided in subparagraph
(D)(i) of this paragraph, with respect to data submitted
after December 31, 1969, by an applicant or registrant to
support an application for registration, experimental use
permit, or amendment adding a new use to an existing reg-
istration, to support or maintain in effect an existing regis-
tration, or for reregistration, the Administrator may with-
A-19
(1) all test data submitted after December 31, 1969,
will be compensable for a period of 15 years from the
date the data are submitted:
(2) in the case of pesticides registered after the
date of enactment of this provision, there will be a
out the permission of the original data submitter, consider
any such item of data in support of an application by any
other person (hereinafter in this subparagraph referred to
as the ‘applicant’) within the fifteen-year period following
the date the data were originally submitted only if the ap-
plicant has made an offer to the Administrator accompa-
nied by evidence of delivery to the original data submitter
of the offer. The terms and amount of compensation may
be fixed by agreement between the original data submitter
and the applicant, or, failing such agreement, binding arbi-
tration under this subparagraph. If, at the end of ninety
days after the date of delivery to the original data submitter
of the offer to compensate, the original data submitter and
the applicant have neither agreed on the amount and terms
of compensation, nor on a procedure for reaching an agree-
ment on the amount and terms of compensation, either
person may initiate binding arbitration proceedings by re-
questing the Federal Mediation and Conciliation Service to
appoint an arbitrator from the roster of arbitrators main-
tained by such Service. The procedure and rules of the
Service shall be applicable to the selection of such arbitra-
tor and to such arbitration proceedings, and the findings
and determination of the arbitrator shall be final and con-
clusive, and no official or court of the United States shall
have power or jurisdiction to review any such findings and
determination, except for fraud, misrepresentation, or other
misconduct by one of the parties to the arbitration or the
arbitrator where there is a verified complaint with support-
ing affidavits attesting to specific instances of such fraud,
misrepresentation, or other misconduct. The parties to the
arbitration shall share equally in the payment of the fee
and expense of the arbitrator. If the Administrator deter-
mines that an original data submitter has failed to partici-
pate in a procedure for reaching an agreement or in an ar-
A-20
period of exclusive use for data submitted in support
of the registration of a product containing a new ac-
tive ingredient running for 10 years from the date
the product is registered, except that there will be no
exclusive use for defensive data; and
(3) there will be a period of exclusive use for data
submitted in support of the new use registration of a
product equal to the time of exclusivity remaining
under any 10-year exclusive use period of the product.
House Conf. Rep. No. 95-1560, 95th Cong., 2d Sess. 30
(1978). The 1978 version retained the Senate proposal for
the exclusive remedy of determination of compensation by
binding arbitration, as well as the Senate proposal to
eliminate the cross reference to section 10(b), which had
permitted the initial registrant to exclude materials from
agency use merely by calling them trade secrets. And in
the end, Congress retained the January 1, 1970 cut-off date
for statutory protection, leaving pre-1970 data in exactly
the same posture as when in Mobay Chemical Company v.
Costle, 439 U.S. 320 (1979), the Supreme Court considered
bitration proceeding as required by this subparagraph, or
failed to comply with the terms of an agreement or arbitra-
tion decision concerning compensation under this sub-
paragraph, the original data submitter shall forfeit the
right to compensation for the use of the data in support of
the application. Notwithstanding any other provision of
this Act, if the Administrator determines that an applicant
has failed to participate in a procedure for reaching an
agreement or in an arbitration proceeding as required by
this subparagraph, or failed to comply with the terms of an
agreement or arbitration decision concerning compensa-
tion under this subparagraph, the Administrator shal] deny
the application or cancel the registration of the pesticide in
A-21
the 1975 version of section 3(c)(1)(D); that is, subject to
the agency practice of consulting its files when passing on
new applications for registration. Moreover, as with the
1975 law, the refusal of Congress in 1978 to extend the
compensation provisions of section 3(¢)(1)(D) to pre-1970
file data is at least an implicit rejection of the industry’s
position that it has a proprietary interest in that data for
which compensation ought to be paid.
II.
Chevron challenges the constitutionality both of the
agency practice of making internal agency use of pre-
January 1, 1970 data and of the use and compensation
scheme set forth in the 1978 version of section
support of which the data were used without further hear-
ing. Before the Administrator takes action under either of
the preceding two sentences, the Administrator shall fur-
nish to the affected person, by certified mail, notice of in-
tent to take action and allow fifteen days from the date of
delivery of the notice for the affected person to respond. If
a registration is denied or canceled under this subpara-
graph, the Administrator may make such order as the Ad-
ministrator deems appropriate concerning the continued
sale and use of existing stocks of such pesticide. Registra-
tion action by the Administrator shall not be delayed pend-
ing the fixing of compensation:
(iii) After expiration of any period of exclusive use and
any period for which compensation is required for the use
of an item of data under subparagraphs (D)(i) and (D) (ii)
of this paragraph, the Administrator may consider such
item of data in support of an application by any other
applicant without the permission of the original data sub-
mitter and without an offer having been received to com-
pensate the original data submitter for the use of such item
of data; ...
7 US.C.A. §136a (c)(1)(D) (1978).
A-22
3(c)(1)(D).” It urges that agency use of its pre-1970 data
is an uncompensated taking in violation of the taking clause
of the fifth amendment. As to the post-1970 data, it con-
tends:
1. that agency use of the data in order to permit
registrations by third parties is a taking for pri-
vate rather than public purposes in violation of
due process. See Thompson v. Consolidated Gas &
Utilities Corp., 300 U.S. 55 (1937) ;
2. that even if the taking is authorized, the binding
arbitration provision in the 1978 version, an ex-
clusive remedy, deprives it of any opportunity for
a judicial determination of just compensation.
Appellant’s Brief at 24-33. The district court rejected these
contentions, and we reject them as well, although for rea-
sons differing somewhat from those relied upon by that
court.
A.
Fundamental to all of Chevron’s contentions is its
assertion of a property right in the contents of the EPA
files insofar as those files contain test data submitted by
Chevron in its applications for registration. Before we
undertake to explore the intriguing constitutional law is-
sues Chevron tenders, it is appropriate to examine the
threshold question whether there is such a property right.
In its absence there is no need for a constitutional inquiry.
Cf. Hagans v. Lavine, 415 U.S. 528, 543-5 (1974); Siler
28The complaint was filed after the effective date of section 7 ot
Pub. L. 94-381, amending 28 U.S.C. § 2284. Thus both the challenge
to EPA practice and the challenge to the constitutionality of sec-
tion 3(c)(1)(D) were properly heard by a single district judge.
A-23
v. Lowsville & Nashville R. Co., 213 U.S. 175, 193 (1909).
In several recent cases, the Supreme Court has said that
in determining whether federal due process protections
apply, we must first find an entitlement created by some
law.* Paul v. Davis, 424 U.S. 693 (1976); Meachum v. Fano,
427 U.S. 215 (1976); Montayne v. Haymes, 427 U.S. 236
(1976). Both here and in the district court Chevron has
assumed more than it has explained the source of the prop-
erty right it claims. It does rely on the “common law of
trade secrets,” but if we may borrow Justice Holmes’ often
misused aphorism, “[t]he common law is not a brooding
omnipresence in the sky but the articulable voice of some
sovereign or quasi-sovereign that can be identified. . . .””°
Federal protection of intellectual property is statutory,
although not necessarily preemptive of state law. See
Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S.
562 (1977) ; Kewanee Ou Co. v. Bicron, 416 U.S. 470 (1974) ;
Goldstein v. California, 412 U.S. 546 (1973). Those recent
authorities recognizing a common law of intellectual prop-
erty net preempted by federal statutes, all are consistent
with the Court’s analysis in Paw v. Davis, Meachum v.
Fano and Montayne v. Haymes, supra, in looking to the law
of some state for the property interest in question. Since
1972, section 3(c)(1)(D) has in one form or another con-
ferred a federal expectation—a property right— in some
**But see Meachum v. Fano, 427 U.S. 215, 229-35 (1976) (Ste-
vens, J., dissenting).
2°Southern Pacific Co. v. Jensen, 244 U.S. 205, 222 (1917),
(Holmes, J., dissenting). The aphorism is more appropriate to this
case than to that federal admiralty case. See Moragne v. States
Marine Lines, 398 U.S. 375 (1970).
A-24
data submitted to EPA. But prior to the enactment of Pub.
L. 92-516, the only federal statute to which we have been
referred that appears at all relevant is 18 U.S.C. $1905.
That statute does not confer a private cause of action, al-
though it may provide a standard by which to judge the
legality of proposed agency disclosures. Chrysler Corp. v.
Brown, 441 U.S. 281, 316-17 (1979). At best it can be
construed to create a federal law right of nondisclosure, not
of non-use by the agency. Aside from section 3(c)(1)(D),
Chevron has shown us no federal statute preventing in-
ternal agency use of the contents of files compiled in the
performance of the agency’s statutory functions.”
Absent a federal law property interest, then, two ques-
tions remain. The first is whether the law of any state hav-
ing any interest in Chevron purports to confer on it a state
law property interest in materials Chevron has voluntarily
turned over to a federal regulatory agency in order to
obtain a license to sell a product in interstate commerce.
The second is whether, assuming a state law purports to do
so, such a law is valid when asserted against the federal
agency.
As to the first question, we note that neither in Chevron’s
initial brief nor in its reply brief is any state law referred
to. The initial brief does rely on Restatement, Torts (1939)
§ 757, which we may safely assume reflects the law of some
relevant state. But that statement of the law affords no
help since it deals with liability for disclosure of trade
*Cf, 21 C.F.R. § 314.1(b) (1980) prohibiting FDA use of agency
files to register new drug compounds without original registrant’s
permission.
A-25
secrets without a privilege to do so. EPA does not pro-
pose disclosure. Nor did EPA or its predecessor agencies
obtain the material in its files by any improper means, or
for the purpose of advancing the business of Chevron’s
competitors. Compare Restatement, Torts (1939) § 759.
It is true that the material was submitted to the federal
government with some expectation of confidentiality. Prior
to 1972, however, 18 U.S.C. § 1905 and agency practice de-
fined the scope of that expectation, and since 1972 the
several versions of section 3(c)(1)(D) have done so.”
None of those statutes could reasonably have been the
source of an expectation of general agency non-use. Cf.
Mobay Chemical Corp. v. Costle, 439 U.S. 320 (1979). Thus
we find nothing in the Restatement of Torts provisions on
trade secrets from which, against EPA’s internal use,
Chevron can take comfort. Moreover, our own researches
have produced no state law suggesting a continuing prop-
erty interest, beyond that provided by federal law, appli-
cable to material furnished to a federal agency as a pre-
condition to selling a product in interstate commerce.”
27Section 10 of the Act, 7 U.S.C.A. §136h(d) (1978) now au-
thorizes EPA disclosure in certain instances, and to that extent pro
tanto limits the applicability of 18 U.S.C. § 1905. Chevron does not
in this action directly challenge the authorized disclosure provi-
sions of section 10.
*8Indeed the only relevant decision our researches have uncov-
ered supports our analysis. In Earthline Corp. v. Mauzy, Acting
Director, Illinois Environmental Protection Agency, 68 Ill.App.3d
304, 385 N.E.2d 928 (1979), a unanimous Illinois appellate court
held state trade secret law did not prevent the state EPA Director
from disclosing to the state attorney general trade secrets volun-
tarily submitted under the state EPA’s licensing requirements, when
disclosure was necessary to enforce environmental protection laws.
A-26
That is not to say that Chevron’s test data, while it re-
mained exclusively in Chevrop’s hands, was not protected
by state law. Obviously it was, and obviously Chevron was
perfectly free to keep it in that state. But it could not do so
and at the same time market naled and paraquat in inter-
state commerce.
We think, moreover, that the recognition of a role for
state law in defining the degree of confidentiality in which
federal agencies must keep information submitted to them
in connection with the discharge of their federal regulatory
responsibilities presents the possibility of conflicting state
laws imposing conflicting agency responsibilities in dif-
ferent parts of the country. Thus even if there were any
state law purporting to protect the confidentiality of data
voluntarily submitted to a federal regulator, there is some
doubt that it would survive supremacy clause scrutiny.
This second question need not, however, be decided, be-
cause we find no such state law.
The Illinois court further observed that the Illinois Environmental
Protection Act, Ill. Rev. Stat. 1977 Ch. 111%, Par. 1007(B) (II),
“states that information submitted concerning persons subject to
certain Federal regulatory permit requirements ‘may be disclosed
or transmitted to other officers, employees or authorized representa-
tives of this state or of the United States concerned with or for the
purpose of carrying out this Act.” 69 IllApp.3d at 308, 385
N.E.2d at 930. The court found that because “the business in ques-
tion is, in effect, licensed and the documents sought to be disclosed
[to the attorney general] are permits containing information vol-
untarily given in order to obtain the permit,” 69 Ill.App.3d at 309,
385 N.E.2d at 931, and because the attorney general was acting at
the EPA’s behest, trade secret protection must yield to the effec-
tuation of environmental laws.
A-27
B.
The district court assumed, at least arguendo, that
Chevron had a property interest in its submitted data.
On that assumption the court went on to reject Chevron’s
constitutional challenges.
The court, noting that important benefits derive to
the public from me-too registrations, held that there was
no merit to the contention that use of the file data to
dispose of me-too registrations was a taking of private
property for private rather than public purposes. These
benefits include administrative cost savings, time saving
in the registration process, and competitive benefits in the
marketplace from the encouragement of entry by newer
and smaller producers. Those factual determinations are
not disputed. They, together with our legal conclusion in
Part II A. above, make it unnecessary for us to consider
whether, as EPA contends, the authority of Thompson v.
Consolidated Gas & Utilities Corp., 300 U.S. 55 (1937), has
been undermined by subsequent cases such as Railroad
Commission of Texas v. Rowan & Nichols Oil Co., 310 U.S.
573 (1940), and Cities Service Gas Co. v. Peerless Oil &
Gas Co., 340 U.S. 179 (1950).
The district court also rejected the contention that the
compulsory arbitration provision in section 3(c)(1)(D)
deprives Chevron of the opportunity for a judicial deter-
mination of just compensation. In support of this ruling
the court relied on the Regional Rail Reorganization Cases,
419 U.S. 102, 126 (1974), holding that for any taking, a
Tucker Act remedy remains available unless by legislation
Congress has explicitly withdrawn it. While we express no
A-28
disagreement with the court’s interpretation of the Re-
gional Rail Reorganization Cases, we need not decide
whether a Tucker Act remedy would in other circum-
stances be available for agency use of the contents of
agency files. In this instance, since we find no protected
property interest beyond that conferred in 18 U.S.C. § 1905
and in section 3(c)(1)(D) of the Pesticide Act, there has
been no taking for which such a remedy is needed.”
Il.
The order denying a preliminary injunction and dismiss-
ing the complaint will be affirmed.
*°Moreover, although Chevron has had, since 1975, a property
right in data submitted after December 31, 1969, our determination
that no property right subsisted before the 1972 and subsequent
amendments to the Pesticide Act, also leads us to conclude that
Congress, having conferred a property right to which the chemical
companies had no prior claim,:‘may condition that right to accom-
modate agency practice. Cf. Arnett v. Kennedy, 416 U.S. 134 (1974).
A-29
United States Court of Appeals
For the Third Circuit
No. 80-2037
Chevron Chemical Company, a corporation,
Appellant
vs.
Douglas M. Costle, Administrator,
United States Environmental Protection Agency
(D.C. Civil No. 79-00532)
On Appeal from the United States District Court
for the District of Delaware
Present: Gibbons and Weis, Circwt Judges and
Whipple, District Judge*
JUDGMENT
This cause came on to be heard on the record from the |
United States District Court for the District of Delaware
and was argued by counsel on November 6, 1980.
On consideration whereof, it is now here ordered and
adjudged by this Court that the judgment of the said Dis-
trict Court, entered June 5, 1980, be, and the same is
hereby affirmed. Costs taxed against appellant.
Attest:
/s/ SALLY MRVOS
Clerk
February 4, 1981
° Honorable Lawrence A. Whipple, United States District Judge
for the District of New Jersey, sitting by designation.
A-30
Appendix B
In the United States District Court
for the District of Delaware
Civil Action No. 79-532
Chevron Chemical Company,
a corporation,
Plaintiff,
Vv.
Douglas M. Costle, Administrator,
United States Environmental Protection
Agency,
Defendant. :
dn
Dated: June 5, 1980
Wilmington, Delaware
SCHWARTZ, District Judge
This dispute between plaintiff Chevron Chemical Com-
pany (“Chevron”) and defendant Douglas M. Costle, Ad-
ministrator of the United States Environmental Protection
Agency (“EPA”), arises out of EPA’s intended use of
Chevron’s test data to support pesticide registration appli-
cations of certain of Chevron’s competitors. Presently be-
fore the Court are Chevron’s application for a preliminary
injunction and EPA’s motion for summary judgment. The
factual and statutory background of this controversy
follows.
A-31
I
BACKGROUND
Federal regulation of the manufacture and sale of
pesticides began in 1947 with the enactment of the Federal
Insecticide, Fungicide and Rodenticide Act (“FIFRA”),
7 U.S.C. § 135 et seq. Administration of FIFRA was trans-
ferred in December, 1970 from the U.S. Department of
Agriculture to EPA. FIFRA mandated the registration of
every pesticide marketed in interstate, though not intra-
state, commerce. In order to obtain a registration, the
applicant was required to demonstrate the safety and
efficacy of the pesticide product through the submission,
inter alia, of research and test data. The obtaining of
this data often entailed considerable expense, and much
of it consisted of trade secret or otherwise confidential
information.
FIFRA was amended in 1972 by Section 2 of the Fed-
eral Environmental Pesticide Control Act (“FEPCA”),
Pub. L. 92-516, 92d Cong., 2d Sess. (Oct. 21, 1972), 86
Stat. 973. As relevant to this action, Section 3 of the 1972
Act, 7 U.S.C. § 136a, provided that data submitted in sup-
port of an application should not, without the permission
of the applicant, be considered by the EPA Administrator
in support of any other application for registration unless
the subsequent applicant had first offered to pay reason-
able compensation to the original applicant for producing
the test data to be relied upon and the data did not con-
tain or relate to trade secrets.’ Significantly, the 1972 Act
Section 3(c)(1)(D) of FIFRA of 1972 required the submission
of a statement which included:
A-32
did not expressly indicate whether the restrictions on the
Administrator’s use of the data and the required compen-
sation provisions applied to all test data ever submitted
in support of a registration application, or merely to
data submitted after the effective date of the 1972 Act,
and litigation on that issue ensued.
FIFRA was amended in 1975 in an effort to clarify this
issue. As amended, Section 3(c)(1)(D)* of FIFRA re-
stricted the use by the Administrator of non-trade secret
(D) if requested by the Administrator, a full description of
the tests made and the results thereof upon which the claims
are based, except that data submitted in support of an appli-
cation shall not, without permission of the applicant, be con-
sidered by the Administrator in support of any other appli-
cation for registration unless such other applicant shall have
first offered to pay reasonable compensation for producing the
test data to be relied upon and such data is not protected
from disclosure by section 10(b). If the parties cannot agree
on the amount and method of payment, the Administrator
shall make such determination and may fix such other terms
- and conditions as may be reasonable under the circum-
stances. The Administrator's determination shall be made on
the record after notice and opportunity for hearing. If the
owner of the test data does not agree with said determina-
tion, he may, within thirty days, take an appeal to the federal
district court for the district in which he resides with respect
to either the amount of the payment or the terms of payment,
or both. In no event shall the amount of payment determined
by the court be less than that determined by the Adminis-
trator;....
*Section 3(c)(1)(D) of FIFRA of 1975 required the submission
of a statement which included:
(D) if requesied by the Administrator, a full description of
the tests made and the results thereof upon which the claims
are based, except that data submitted on or after January 1,
1970, in support of an application shall not, without per-
A-33
test data originally submitted on or after January 1, 1970.
Such data could not be used without the permission of
the original data submitter to support a subsequent appli-
cation made on or after October 21, 1972 unless the sub-
sequent applicant offered to pay reasonable compensation
to the original data submitter. EPA considered itself free
to use, and did use, data submitted prior to 1970 without
the submitter’s consent and without an offer of compensa-
tion having been made. In light of this construction of the
statute, the constitutionality of the 1975 Act was chal-
lenged before a three-judge District Court under then
mission of the applicant, be considered by the Administrator
in support of any other application for registration unless such
other applicant shall have first offered to pay reasonable com-
pensation for producing the test data to be relied upon and
such data is not protected from disclosure by section 10(b).
This provision with regard to compensation for producing the
test data to be relied upon shall apply with respect to all ap-
plications for registration or reregistration submitted on or
after October 21, 1972. If the parties cannot agree on the
amount and method of payment, the Administrator shall make
such determination and may fix such other terms und con-
ditions as may be reasonable under the circumstances, The
Administrator's determination shall be made on the record
after notice and opportunity for hearing. If either party does
not agree with said determination, he may, within thirty days,
take an appeal to the Federal district court for the district
in which he resides with respect to either the amount of the
payment or the terms of payment, or both. Registration shall
not be delayed pending the determination of reasonable com-
pensation between the applicants, by the Administrator or by
the court.
A-34
28 U.S.C. § 2282. Mobay Chemical Corp. v. Costle, 12
E.R.C. 1572 (W.D. Mo. 1978). The three-judge court
adopted EPA’s construction of the statute, 12 E.R.C. at
1574, and upheld the constitutionality of the statute. On
appeal, the Supreme Court rejected the lower court’s in-
terpretation of the statute and dismissed the appeal for
want of jurisdiction.
[Whatever may be true with respect to data sub-
mitted after January 1, 1970, the FIFRA, as amended,
does not at all address the issues of the conditions
under which pre-1970 data may be used in considering
another application. It neither authorizes, forbids,
nor requires the existing agency practice with respect
to pre-1970 data. As a legal matter, then, appellant’s
attack is on agency practice, not on the statute. The
three-judge court was thus improperly convened .. .
and this Court does not have jurisdiction to entertain
a direct appeal from the judgment in such case.
Mobay Chemical Corp. v. Costle, 489 U.S. 320, 320-21
(1979) (citations omitted).
The Supreme Court’s opinion in Mobay, construing the
1975 amendments to FIFRA, was issued on January 8,
1979. Several months earlier, in September, 1978, Con-
gress once again had amended FIFRA by enacting the
provisions governing the instant litigation, Pub. L. 95-396,
95th Cong., 2d Sess. (Sept. 30, 1978), 92 Stat. 820. The
1978 amendments eliminated the prohibition against con-
sideration by EPA of any test daia classified as trade
secrets. By its terms the 1978 Act also established at least
A-35
two, and perhaps three, categories of test data available
for consideration by EPA under varying conditions.’ With
*Section 3(c)(1)(D) of FIFRA of 1978 requires the submission
of a statement which includes:
(D) except as otherwise provided in subsection (c)(2)(D)
of this section, if requested by the Administrator, a full de-
scription of the tests made and the results thereof upon which
the claims are based, or alternatively a citation to data that
appear in the public literature or that previously had been
submitted to the Administrator and that the Administrator
may consider in accordance with the following provisions:
(i) With respect to pesticides containing active ingre-
dients that are initially registered under this Act after the
date of enactment of the Federal Pesticide Act of 1978, data
submitted to support the application for the original regis-
tration of the pesticide, or an application for an amend-
ment adding any new use to the registration and that per-
tains solely to such new use, shall not, without the written
permission of the original data submitter, be considered by
the Administrator to support an application by another per-
son during a period of ten years following the date the
Administrator first registers the pesticide: Provided, That
such permission shall not be required in the case of defen-
sive data;
(ii) except as otherwise provided in subparagraph (D) (i)
of this paragraph, with respect to data submitted after De-
cember 31, 1969, by an applicant or registrant to support an
application for registration, experimental use permit, or
amendment adding a new use to an existing registration, to
support or maintain in effect an existing registration, or for
registration, the Administrator may, without the permission
of the original data submitter, consider any such item of
data in support of an application by any other person (here-
inafter in this subparagraph referred to as the ‘applicant’ )
within the fifteen-year period following the date the data
were originally submitted only if the applicant has made an
offer to compensate the original data submitter and sub-
mitted such offer to the Administrator accompanied by evi-
A-36
respect to data submitted to support a registration appli-
cation initially granted after September 30, 1978 (“post-
1978 data”), the Administrator may not consider such data
dence of delivery to the original data submitter of the offer.
The terms and amount of compensation may be fixed by
agreement between the original data submitter and the ap-
plicant, or, failing such agreement, binding arbitration under
this subparagraph. If, at the end of ninety days after the
date of delivery to the original data submitter of the offer
to compensate, the original data submitter and the applicant
have neither agreed on the amount and terms of compensa-
tion, nor on a procedure for reaching an agreement on the
amount and terms of compensation, either person may ini-
tiate binding arbitration proceedings by requesting the Fed-
eral Mediation and Conciliation Service to appoint an arbi-
trator from the roster of arbitrators maintained by such
Service. The procedure and rules of the Service shall be
applicable to the selection of such arbitrator and to such
arbitration proceedings, and the findings and determination
of the arbitrator shall be final and conclusive, and no official
or court of the United States shall have power or jurisdiction
to review any such findings and determination, except for
fraud, misrepresentation, or other misconduct by one of the
parties to the arbitration or the arbitrator where there is a
verified complaint with supporting affidavits attesting to spe-
cific instances of such fraud, misrepresentation, or other mis-
conduct. The parties to the arbitration shall share equally in
the payment of the fee and expense of the arbitrator. If the
Administrator determines that an original data submitter has
failed to participate in a procedure for reaching an ag;ce-
ment or in an arbitration proceeding as required by this
subparagraph, or failed to comply with the terms of an
agreement or arbitration decision concerning compensation
under this subparagraph, the original data submitter shall
forfeit the right to compensation for the use of the data in
support of the application. Notwithstanding any other pro-
vision of this Act, if the Administrator determines that an ap-
plicant has failed to participate in a procedure for reaching
an agreement or in an arbitration proceeding as required
A-37
to support an application by another person, without the
permission of the original data submitter, for a period of
ten years following the initial registration. Thus, data
submitters are entitled to a ten-year period of exclusive
use for post-1978 data. 7 U.S.C. § 1386(a)(1)(D)(i). With
respect to data submitted after December 31, 1969 (“post-
1969 data”), the Administrator may consider such data to
support an application by another person, without the per-
mission of the original data submitter, for a period of
fifteen years following submission of the data only if the
subsequent applicant has offered to compensate the orig-
inal data submitter. Disputes as to compensation are sub-
by this subparagraph, or failed to comply with the terms of
an agreement or arbitration decision concerning compensa-
tion under this subparagraph, the Administrator shall deny
the application or cancel the registration of the pesticide in
support of which the data were used without further hearing.
Before the Administrator takes action under either of the
preceding two sentences, the Administrator shall furnish to
the affected person, by certified mail, notice of intert to
take action and allow fifteen days from the date of delivery
of the notice for the affected person to respond. If a regis-
tration is denied or canceled under this subparagraph, ,the
Administrator may make such order as the Administrator
deems appropriate concerning the continued sale and use
of existing stocks of such pesticide. Registration action by
the Administrator shall not be delayed pending the fixing of
compensation;
(iii) After expiration of any period of exclusive use and
any period for which compensation is required for the use
of an item of data under subparagraphs (D)(i) and (D) (ii)
of this paragraph, the Administrator may consider such
item of data in support of an application by any other appli-
cant without the permission of the original data submitter
and without an offer having been received to compensate the
original data submitter for the use of such item of data; .. . .-
A-38
mitted to binding arbitration, unreviewable by any court
absent fraud or misrepresentation. An original data sub-
mitter who refuses to participate in an arbitration pro-
ceeding forfeits the right to compensation. Thus, data
submitters are entitled to a fifteen-year period of compen-
sation for use of post-1969 data. 7 U.S.C. §136a(c) (1)
(D) (ii). Data submitted after 1978, for which ten years
of exclusive use is assured, also receives five years of com-
pensation upon expiration of the exclusive use period. The
section of the statute potentially creating a third category
of data reads:
(iii) after expiration of any period of exclusive use
and any period for which compensation is required for
the use of an item of data under subparagraphs
(D)(i) and (D)(ii) of this paragraph, the Adminis-
trator may consider such item of data in support of
an application by any other applicant without the per-
mission of the original data submitter and without an
offer having been received to compensate the original
data submitter for the use of such item of data;
7 U.S.C. § 136a(e¢)(1)(D) (iii). EPA contends that Con-
gress enacted a comprehensive scheme whereby the newest
data is afforded the greatest protection—exclusive use—
and the oldest data is afforded the least protection—unre-
stricted use by the Administrator of all data submitted
before January 1, 1970 (“pre-1970 data”). Chevron argues
that the quoted language merely authorizes unrestricted
use of data in the first two categories once the applicable
time period has expired, and does not authorize consider-
ation of pre-1970 data.
A-39
Within this complicated statutory framework, the facts
giving rise to this dispute are relatively simple. Beginning
in 1955, Chevron supplied EPA or its predecessor agen-
cies with test data to support its registration applications
for the pesticide “naled,” marketed by Chevron under the
trademark of DIBROM. This test data was otherwise kept
confidential by Chevron, and EPA concedes that it includes
trade secrets. Beginning in 1966, Chevron also supplied
EPA or its predecessor agencies with test data to support
its registration applications for a chemical compound
known as “paraquat.” This test data similarly was kept
confidential and includes trade secrets. Chevron contends,
and the Court accepts for purposes of these motions, that
compilation of the naled and paraquat data cost several
million dollars, and that duplication of the data by a com-
petitor “would require scientific and technical know-how
believed to be possessed only by Chevron.”
The patents on naled and paraquat expired in February,
1978. A number of Chevron’s competitors are seeking to
market naled and paraquat products and accordingly have
submitted registration applications to EPA. These firms
have offered to compensate Chevron for the use by EPA
of Chevron’s post-1969 data, but have offered no compen-
sation for pre-1970 data. EPA intends to rely on Chevron’s
pre-1970 and post-1969 data in support of these applica-
tions, and if such reliance is permitted, will issue registra-
tions to one or more of Chevron’s competitors.
The extent of the Administrator’s “use” of Chevron’s
data requires some explanation. EPA does not physically
deliver the data to Chevron’s competitors, does not make
A-40
the data available for inspection by them, and does not
disclose the contents of the data to them under the statu-
tory provisions challenged here. Rather, EPA reexamines
the data previously supplied to it by Chevron to assure
itself of the safety and efficacy of the competitor’s similar
or identical products.
In support of its motion for a preliminary injunction,
Chevron contends that the Administrator’s use of Chev-
ron’s data for the benefit of Chevron’s competitors consti-
tutes a “taking” of Chevron’s property under the fifth
amendment. This taking may be enjoined, it is argued,
because FIFRA, as amended, does not authorize the Ad-
ministrator’s use of pre-1970 data, the taking is for a pri-
vate rather than a public purpose, and the statutory
compensation provisions calling for binding arbitration
unconstitutionally preclude a judicial determination of
“just compensation.” In addition, the statute is said to
violate Chevron’s right to due process in that it acts retro-
actively to divest Chevron of its trade secret property.
In response to Chevron’s arguments and in support of
its own motion for summary judgment, EPA contends that
any taking involved here may not be enjoined because such
taking is authorized by the statute, is for a public purpose,
and a monetary remedy is available to Chevron in the
Court of Claims under the Tucker Act, 28 U.S.C. § 1491.
Alternatively, EPA argues that the Administrator’s mere
reliance on Chevron’s data does not constitute a taking
under the fifth amendment. Finally, EPA asserts the
statute’s application is not retroactive and does not other-
wise offend due process considerations.
A-41
Chevron is not before the Court seeking damages or
other monetary compensation from the United States or
EPA as a result of a taking of its property. If EPA’s use
of Chevron’s data is permitted to proceed, a result which
necessarily recognizes the availability of a Tucker Act
remedy, Chevron’s claim for such relief must be brought
in the Court of Claims. A ruling by this Court on the
issue of whether EPA’s use of the data does constitute a
taking under the fifth amendment would bar relitigation
of that question there. See Advertising Checking Bureau,
Inc. v. United States, 159 F. Supp. 330, 332-33 (Ct. Cl.
1958). Accord, Carney v. United States, 462 F.2d 1142,
1145 (Ct. Cl. 1972) ; Clement v. United States, 140 F. Supp.
573, 574 (Ct. Cl. 1956). In light of the disposition of the
issues, which follows, it is unnecessary for this Court to
reach the taking question. Accordingly, the Court follows
the example of the Supreme Court in Duke Power Co. v.
Carolina Environmental Study Group, Inc., 438 U.S. 59,
94 n.39 (1978), and offers no view on that issue. See also
Pennsylvania v. Interstate Commerce Commission, 535
F.2d 91, 97 (D.C. Cir.), cert. denied, 429 U.S. 834 (1976).
II
AUTHORIZATION FOR USE OF PRE-1970 DATA
The threshold issue facing the Court is whether the
statute does or does not authorize consideration of pre-
1970 data. In construing § 3(c)(1)(D) of FIFRA, the start-
ing point, of course, is the literal language of the statute,
although the inquiry need not end there.
A-42
Subparagraphs (i) and (ii) of §3(c)(1)(D) respectively
provide for a period of exclusive use for very recent (post-
1978) data and a period of compensation for less recent
(post-1969) data. Subparagraph (iii) then authorizes un-
restricted use of data by the Administrator “after expira-
tion of any period of exclusive use and any period for
which compensation is required for the use of an item of
data under subparagraphs (D)(i) and (D)(ii) of this
paragraph. .. .” Chevron urges that subparagraph (iii)
merely specifies the treatment to be accorded data from
subparagraphs (i) and (ii) once the period of statutory
protection has run out and, like the 1975 amendments to
FIFRA construed in Mobay, supra, is silent as to pre-
1970 data. EPA argues that since pre-1970 data is not sub-
ject to a period of exclusive use under subparagraph (i)
and is not subject to the compensation period specified in
subparagraph (ii), those periods must be considered to
have “expired” under subparagraph (iii) as to pre-1970
data.
Plainly, the literal language of the statute does not
expressly reference pre-1970 data, either by authorizing or
prohibiting use of it by the Administrator. Read in isola-
tion, subparagraph (iii) favors the interpretation ascribed
to it by Chevron. However, that interpretation appears to
be “at variance with the policy of the legislation as a
whole,” justifying and perhaps requiring reliance upon
aids to construction over the literal words of the legisla-
tion. See United States v. American Trucking Associations,
Inc., 310 U.S. 534, 543-44 (1940).
A-43
EPA has offered a number of items having questionable
value as legislative history, such as testimony and cor-
respondence by industry witnesses and post hoc Congres-
sional committee statements,‘ in an effort to demonstrate
Congress’ expressed intent to authorize unrestricted use of
pre-1970 data. In fact, the competent legi:!ative history of
the 1978 amendments offers no clear-cut, unambiguous
statement in a committee report, conference report, or by
an individual legislator specifically addressing the permis-
sible uses of pre-1970 data.
A rather straightforward argument, appealing in its
simplicity, can be made to support the view that pre-1970
data is not governed by the provisions of the 1978 amend-
ments: The Supreme Court’s ruling in Mobay established
that the 1975 Act neither authorized, forbade nor required
consideration of pre-1970 data. The 1978 amendments con-
tain no express reference to that issue. Therefore, the
status quo was maintained with respect to pre-1970 data.
Nevertheless, a more detailed examination of the legisla-
tive scheme militates against adoption of this view, al-
though the issue is hardly free from doubt.
4A January, 1979 “Committee Print,” prepared “for the use of
the [Senate] Committee on Agriculture, Nutrition, and Forestry,”
contains a section-by-section analysis of the 1978 amendments to
FIFRA. The discussion of §3(c)(1)(D) states at page 138:
Data submitted prior to December 31, \1969, may be considered
in support of subsequent applications to which they pertain
without applicants incurring any obligation to pay compensa-
tion or to seek the permission of the original data submitter.
This passage, while directly on point, appears in a document issued
four months after enactment of the legislation.
| A-44
Had Mobay issued prior to the enactment of these
amendments, the absence of any express reference to pre-
1970 data might well have proved fatal to EPA’s position.
Inasmuch as the 1978 amendments preceded the January 8,
1979 Opinion, however, the failure by Congress to discuss
and expressly resolve the issue created by that ruling be-
comes more understandable. Legislative intent must there-
fore be gleaned from an examination of the fault to be
corrected and the method employed to accomplish the Con-
gressional goal. See Warner v. Goltra, 293 U.S. 155, 158
(1934).
The report of the Senate Committee on Agriculture,
Nutrition, and Forestry accompanying S. 1678, the Senate
forerunner of the 1978 amendments, describes a registra-
tion process that had “ground to a virtual halt.” S.Rep.
No. 95-334, 95th Cong., Ist Sess. (1977) at 3.
Beyond the problems cited above, the most serious
problem in the current program is the logjam of litiga-
tion that resulted from controversies over data com-
pensation and trade secret protection.
The lack of clarity of sections 3(c)(1)(D) and 10(b)
of FIFRA has not only snagged the registration pro-
cess; it is impacting on the structure of the industry.
The Environmental Protection Agency has suggested
that these two provisions are resulting in a contraction
in the industry, and the Department of Justice has
indicated that the provisions in present law are “need-
lessly anti-competitive.”
A-45
Those concerns are detailed in the EPA study en-
titled “FIFRA: Impact on the Industry” and in the
Department of Justice views which are included in this
report.
Id. The EPA study, cited with seeming approval in the
Committee’s report, described the existing statutory provi-
sions as follows:
In 1975, § 3(c)(1)(D) was amended to provide that the
limitations it placed on the Administrator’s considera-
tion of data did not apply to data received by EPA (or
its predecessors) before 1970.
Id. at 39. Of course, EPA’s interpretation of the 1975 Act
subsequently was invalidated in Mobay. Nonetheless, at the
time the 1978 amendments were under consideration, Con-
gress may well have accepted EPA’s conclusion as accurate
and determined that there was no need to address further
the issue of pre-1970 data.
This view finds support elsewhere in the legislative his-
tory. Repeated references are made to the artificial exten-
sion of patent rights on chemicals that grew out of the 1972
and 1975 versions of FIFRA. Patents vest the patentee
with certain monopolistic rights for a period of 17 years in
exchange for public disclosure of the methods, processes
and ingredients used to produce the product. Ordinarily,
competitors are free to use this information upon expira-
tion of the 17-year period to produce and market the same
product. In the case of patented pesticides, registration
A-46
through proof of safety and efficacy is a prerequisite to
marketability. Mpon expiration of a pesticide patent, a
competitor who 1s unable to duplicate the test data sub-
mitted by the patentee and original registrant cannot
obtain a registration from EPA to market the pesticides,
and the monopoly power associated with patent rights
arguably is extended beyond the statutory 17-year period.
The 1975 amendments to FIFRA, as construed in Mobay,
did not authorize consideration of any test data without the
permission of or payment of compensation to the original
data submitter. The periods of exclusive use for trade
secrets and of mandatory compensation for other data sub-
mitted on or after January 1, 1970 extended in perpetuity.
The 1978 amendments effected a significant change in this
regard. Section 3(c)(1)(D) (iii) establishes that as to data
for which the periods of statutory protections have ex-
pired, including trade secret data, the Administrator’s
authority to consider the date is unfettered. Since no such
unfettered authority was permitted by the earlier statutes,
the inquiry must focus on the breadth of this grant of
authority.
The report of the Senate Agriculture Committee on S.
1678,° which called for a seven year period of mandatory
‘While the Senate bill’s deletion of the January 1, 1970 cutoff
date ultimately was rejected in conference, S. 1678 is significant
here because it, like the conference bill actually adopted, provided
that certain data was available for unrestricted consideration upon
expiration of a period of statutory protection.
A-47
compensation followed by unrestricted consideration by the
Administrator, spoke of the Commiitee’s desire to end ex-
tension of patent rights beyond the statutory period.
The amendments also avoid an extension of the patent
rights on chemicals. More importantly, these amend-
ments eliminate FIFRA’s most severe regulatory im-
pact on the industry—the anti-competitive effects of
de facto “exclusive use.”
S.Rep. No. 95-334, 95th Cong., lst Sess. (1977), at 31.
The House-Senate conference did not adopt S. 1678, but
chose instead to provide a ten-year period of exclusive use
for “new” data; «.e., data submitted to support registra-
tions granted after the effective date of the 1978 Act. That
the protection of exclusive use applies only to this new data
was made abundantly clear in the explanation of the con-
ference bill offered by Senator Leahy, the floor leader and
Chairman of the Subcommittee that had drafted S. 1678:
By limiting exclusive use to data pertaining to pes-
ticide ingredients not previously registered, and only
for a 10-year period, the conferees have largely con-
fined exclusive use coverage to chemicals that are
patentable and for a term generally shorter than the
patent life enjoyed by pesticides. The anticompetitive
aspects of exclusive use have therefore been essentially
neutralized.
124 Cong. Rec. S 25303 (Sept. 18, 1978 daily ed.) (emphasis
added). The interpretation urged here by Chevron, that the
1978 amendments do not authorize consideration of pre-
1970 data, would result in a perpetual period of “de facto
exclusive use” for pre-1970 data, contrary to the views
expressed by Senator Leahy.
A-48
Given the likelihood that Congress did not perceive a
need to address explicitly the permissible uses of pre-1970
data, Senator Leahy’s remarks appear to be the most
persuasive evidence of legislative intent. In light of the
perceived policy of the legislation as a whole, the preven-
tion of an artificial extension of pesticide patent rights, the
elimination of “anti-competitive” effects of the earlier
legislation, and the authorization of unfettered reliance by
EPA on certain classes of data, coupled with the likely
reliance by Congress on the EPA’s construction of the 1975
Act, I conclude that the 1978 amendments to FIFRA
authorize consideration by the Administrator of pre-1970
data without the permission of the original data submitter
and without an offer of compensation having been made.°
The Court recognizes that either interpretation of the statutorily
permissible uses of pre-1970 data produces a somewhat anomalous
result. For example, if the statute authorizes the use of pre-1970
data without compensation, then data submitted in December, 1969
generates no compensation, while data submitted only one month
later will continue to generate compensation until January, 1985.
Of course, many statutes establishing arbitrary deadlines, such as
the Internal Revenue Code, produce similar results.
A contrary interpretation of FIFRA, however, leads to an even
greater anomaly. If the use of pre-1970 data is not authorized, then
the newest data (post-1978) would receive exclusive use protection
that expires after ten year(s] [sic], older data (post-1969) would re-
ceive compensation protection that expires after 15 years, while the
oldest data (pre-1970) would receive the greatest protection of all,
exclusive use for an unlimited period. In my view, such a result
was not intended by Congress.
A-49
It
PUBLIC OR PRIVATE PURPOSE OF ANY TAKING
The next issue presented is Chevron’s contention that
the Administrator’s use of both its pre-1970 and post-1969
data may be enjoined as an unconstitutional taking of
Chevron’s property for a private rather than a public use.
Use of Chevron’s data is said to benefit only those com-
petitors of Chevron who have not invested similar time,
money and energy to develop their own test data, but now
seek a “free ride” toward marketability for their pesticide
products.
EPA, while contending that no taking is effected through
mere consideration of Chevron’s data, argues that even if a
fifth amendment taking were to be found, the legislative
history of FIFRA provides ample evidence of the public
purposes of fostering competition in the pesticide industry
and preventing extension of monopoly protection beyond
the 17-year patent period. EPA therefore contends that
Chevron is entitled at most to compensation for the taking
of its test data, rather than to the injunctive relief it seeks.
Chevron relies heavily on Thompson v. Consolidated Gas
Utilities Corp., 300 U.S. 55 (1937), which invalidated a gas
proration order issued by the Railroad Commission of
Texas because of its exclusively private purpose and effect.
The statute authorizing the Commission’s order was in-
tended to eliminate waste of natural gas and prohibited
“production of natural gas in excess of transportation or
market facilities. .. .” 300 U.S. at 63. The actual order at
issue reduced plaintiffs’ allowable production to a volume
far below their requirements to meet contractual obliga-
A-50
tions in various markets. The Court cited the lower court’s
finding that the purpose of the order was to force plaintiffs
and others similarly situated:
to buy gas from, and thus share their private market-
ing contracts and commitments and the use of their
pipe lines and other facilities fer transmitting their
gas to market with, the owners’ of wells not now con-
nected to pipe lines, who have not contributed in
money, services, negotiations, skill, forethought or
otherwise to the development of such markets and the
construction of such pipe lines and other facilities.
* * *
The use of the pipe line owner’s wells and reserves
is curtailed solely for the benefit of other private well
owners, ... There is here no taking for the public
benefit, nor aye payment of compensation provided.
300 U.S. av 77-78.
Thompson is not controlling in the instant case for a
number of reasons. First, the Court’s holding there hinged
on the complete absence of a public purpose for the taking.
Had the proration order served a public purpose, “the fact
that thereby other private persons would incidentally and
gratuitously obtain important benefits would present no
constitutional obstacle.” 300 U.S. at 77. Further, “when the
legislature has spoken, the public interest has been declared
in terms well-nigh conclusive. ... The role of the judiciary
in determining whether [the eminent domain] power is
being exercised for a public purpose is an extremely narrow
one.” Berman v. Parker, 348 U.S. 26, 32 (1954). This judi-
cial deference to legislative determinations is particularly
A-51
required when reviewing Federal as opposed to State
legislation. United States ex rel. Tennessee Valley Au-
thority v. Welch, 327 U.S. 546, 552 (1946).
As stated in Part II, supra, Congress had determined
that the provisions of the 1972 and 1975 amendments to
FIFRA were needlessly anti-competitive and were result-
ing to some extent in artificial extension of pesticide patent
rights. The unavailabil::y of previously submitted test data
to support subsequent registration applications hampered
the registration process and required subsequent applicants
to produce and submit essentially the same information.
Commenting on the counterproductivity of this process,
EPA reported to Congress, “Multiple citations or submis-
sions of the same data do nothing to enhance the determi-
nation of safety.” Easier access to data would result in
“an administrative cost saving to the Agency and to regis-
trants.” S.Rep.*No. 95-334, 95th Cong., Ist Sess. (1977) at
63. See also Id. at 27, 30, 33. Any such cost saving, of
course, inures eventually to the benefit of taxpayers and
consumers.
Chevron contends that any Congressional intent to foster
competition is not served in the instant case because there
has been no legislative or judicial finding that Chevron
enjoys monopoly power or has engaged in anti-competitive
conduct. A similar argument was rejected in Berman v.
Parker, supra, 348 U.S. at 34-35, where the Court declined
to focus on the applicability of a brocdly defined Congres-
sional concern to a particular litigant. Congress may prop-
erly determine, as it did here, that the anti-competitive
nature of the registration process affected the entire pesti-
A-52
cide industry. Its chosen method of alleviating this problem
serves a public interest of sufficient magnitude to withstand
a constitutional challenge.
IV
AVAILABILITY OF A TUCKER ACT REMEDY
Having concluded that the Administrator’s consideration
of Chevron’s data is authorized, and that use of the data
serves a public purpose, it remains to be determined
whether just compensation is available through a Tucker
Act’ remedy in the Court of Claims. Chevron asserts that
a Tucker Act remedy is unavailable for the use of pre-
1970 data because such use is unauthorized and principles
of sovereign immunity preclude recovery for an unautho-
rized taking. As to post-1969 data, for which compensation
is statutorily provided, Chevron argues that the compensa-
tion scheme of negotiation and binding arbitration was in-
tended by Congress to be the exclusive remedy available to
data submitters, thereby evincing a legislative intent to
withdraw the Tucker Act remedy.
EPA responds that there is no evidence indicating a
Congressional intent to withdraw the Tucker Act grant of
jurisdiction to the Court of Claims to hear a claim against
the United States arising under the Constitution. See
"The Tucker Act, 28 U.S.C. § 1491, reads in pertinent part:
The Court of Claims shall have jurisdiction to render judgment
upon any claim against the United States founded either upon
the Constitution, or any Act of Congress, or any regulation of
an executive department, or upon any express or implied con-
tract with the United States, or for liquidated or unliquidated
damages in cases not sounding in tort.
A-53
Regional Rail Reorganization Act Cases, 419 U.S. 102, 126
(1974). The FIFRA statute itself most certainly is silent
on the point, and the legislative history is said to demon-
strate no Congressional consideration of the issue. There-
fore, EPA argues, since a Tucker Act remedy remains avail-
able for any taking, EPA’s action may not be enjoined.
Regional Rail Cases, supra. See also Duke Power Co. v.
Carolina Environmental Study Group, Inc., supra, 438 U.S.
at 94 n.39; Larson v. Domestic & Foreign Commerce Corp.,
337 U.S. 682, 697 n.18 (1949).
In passing on this same question, the court in Amchem
Products, Inc. v. Costle, No. 76 Civ. 2913 (S.D.N.Y. July 5,
1979), stated:
I do not deem it at all clear, given the specific provi-
sions for payment and non-payment provided for in
the 1978 FIFRA amendment 7 U.S.C. § 136a(c)‘1)(D)
that relief under the Tucker Act is the simple answer
that the government claims. Not only does FIFRA
expressly provide as to certain data there shall be no
compensation at all, 7 U.S.C. § 136a(c)(1)(D) (iii),
thus raising the question of the withdrawal of Tucker
Act jurisdiction, see Regional Rail Reorganization Act
Cases, 419 U.S. 102, 126 (1974), but also, and more to
the point, plaintiffs here do not seek damages but
rather a declaratory judgment of unconstitutionality
prior to sustaining potentially uncompensable damages.
This they may properly do. Duke Power Co. v. Carolina
Environmental Study Group, Inc., 488 U.S. 59, 71 n.15
(1978).
Id. at 7. To the extent that the court in Amchem Products
recognized a possible withdrawal in FIFRA of Tucker Act
jurisdiction, I respectfully disagree.
A-54
Regional Rail Cases, supra, makes clear that Tucker Act
jurisdiction is not to be deemed withdrawn by implication.
419 U.S. at 133-34. The data compensation language in the
FIFRA statute, and the debate preceding it, relate to com-
pensation to be paid by a private entity, the subsequent
applicant, to the original data submitter. They do not
address, much less limit, the liability of the government
to pay just compensation if a taking occurs. This failure
to consider recourse against the government may reflect
nothing more than a Congressional belief, correct or other-
wise, that the authorized use of the data by EPA effects no
fifth amendment taking and hence does not give rise to
governmental liability.
Chevron’s argument that use of pre-1970 data is not au-
thorized has been rejected in Part II, supra. As to post-
1969 data, the binding arbitration provisions govern data
compensation disputes between private entities. The statute
prohibits judicial review of an arbitrator’s decision as to
how much compensation must be paid by a subsequent ap-
plicant to an original data submitter, thereby expediting
final disposition of those disputes. Such an arbitration
scheme between private parties cannot and does not pre-
clude resort to the Court of Claims if the arbitrator’s award
is constitutionally deficient. Cf. Pennsylvania v. Interstate
Commerce Commission, 535 F.2d 91, 97-98 & n.13 (D.C.
Cir.), cert. denied, 429 U.S. 834 (1976).
Duke Power Co. v. Carolina Environmental Study
Group, Inc., supra, does not require a contrary result. That
case held that 28 U.S.C. § 1331(a) provided jurisdiction to
hear a claim that an Act of Congress did not provide ad-
A-55
vance assurance of adequate compensation in the event of
a taking, and upon a finding to that effect, the Declaratory
Judgment Act, 28 U.S.C. § 2201, provided a remedy. 438
U.S. at 71 n.15. Once a determination of Tucker Act avail-
ability was made, however, a declaratory judgment or
other injunctive relief on the taking issue was unwar-
ranted. 438 U.S. at 94 n.39.
Accordingly, I conclude that the Administrator’s use of
Chevron’s data is authorized, serves a public purpose, and
that a remedy is available to Chevron under the Tucker
Act for any taking that is effected. EPA’s consideration of
Chevron’s data therefore may not be enjoined as an un-
constitutional taking without just compensation.*®
V
RETROACTIVE APPLICATION OF THE STATUTE
Chevron alleges finally that elimination of the prohibi-
tion against the use of trade secrets effected by the 1978
FIFRA amendments retroactively divests Chevron of its
property right of exclusive use without due process of law.
In support of this claim, Chevron asserts that it submitted °
its trade secret test data to EPA and its predecessor agen-
cies with the expectation that trade secrets would not be
made available to support registration applications by
competitors. This expectation grew out of state common
law protection for trade secrets, federal agency practice
and procedure, and the explicit prohibition against the Ad-
8As noted at pages [A-39 to A-41], supra, no view is expressed
as to whether EPA’s use of the data actually constitutes a fifth
amendment taking entitling Chevron to just compensation.
A-56
ministrator’s use of trade secrets embodied in the 1972
and 1975 versions of FIFRA. The 1978 Act, which au-
thorizes consideration of trade secret data, is said to apply
retrospectively to defeat this settled expectation.
EPA disputes the contention that the statute applies
retroactively, arguing that use of trade secret data is
authorized only to support registrations issued after the
effective date of the 1978 FIFRA amendment. EPA seeks
to distinguish on this basis the holding in Ettor v. Tacoma,
228 U.S. 148 (1913), which invalidated a legislative at-
tempt to immunize a municipality from liability for dam-
age caused to a private citizen’s property by street grading ©
operations. The statute authorizing a claim for damages
against the city was repealed after the plaintiff’s property
had been damaged, and therefore after his right to com-
pensation had vested. 228 U.S. at 155-58. EPA asserts in
the instant case that the 1978 FIFRA amendments do not
undermine Chevron’s claims under the earlier statutes to
prevent the issuance of registrations where Chevron’s
trade secret data was used prior to 1978, but govern only
the permissible use of that data after the effective date of
the 1978 Act.
It must be concluded, however, that the 1978 FIFRA
amendments do have a retroactive effect. Just as the plain-
tiff’s expectation of compensation in Ettor arose prior to
the statute in question, so too did Chevron’s expectation
of exclusive use for trade secrets arise before enactment
of the 1978 Act. The question before the Court is whether
Chevron’s expectations may be defeated in the manner
prescribed by Congress.
A-57
If, as Chevron contended earlier, the Administrator’s
use of Chevron’s data constitutes a “taking” of Chevron’s
property, its due process claim must necessarily fail, for
the mere exercise of eminent domain power does not offend
due process. Roberts v. New York City, 295 U.S. 264
(1935); Elterich v. City of Sea Isle City, 477 F.2d 289,
290 (3d Cir. 1973). In such case, Chevron’s available
remedy in the Court of Claims fully satisfies constitutional
requirements.
Alternatively, if use of the data is not a taking, the in-
quiry under due process analysis is whether the law is
rationally related to a legitimate state interest.
[T]he law need not be in every respect logically con-
sistent with its aims to be constitutional. It is enough
that there is an evil at hand for correction, and that
it might be thought that the particular legislative
measure was a rational way to correct it.
Williamson v. Lee Optical Co., 348 U.S. 483, 487-88 (1955).
The burden of demonstrating the statute’s irrationality is
on Chevron.
It is by now well established that legislative Acts ad-
justing the burdens and benefits of economic life come
to the Court with a presumption of constitutionality,
and that the burden is on one complaining of a due
process violation to establish that the legislature has
acted in an arbitrary and irrational way.
Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976).
Retroactive measures are subjected to a closer degree of
scrutiny than are purely prospective measures. Jd. at 16-
17; Daughters of Miriam Center for the Aged v. Mathews,
A-58
590 F.2d 1250, 1259 (3d Cir. 1978). Nevertheless, even
retroactive legislation retains at the outset its presumption
of constitutionality. Cf. Daughters of Miriam, supra, 590
F.2d at 1257. Further, the Constitution does not prohibit
“the creation of new rights, or the abolition of old ones
recognized by the common law, to attain a pérmissible leg-
islative object,” even though otherwise settled expectations
may be upset thereby. Duke Power Co. v. Carolina Envi-
ronmental Study Group, Inc., supra, 438 U.S. at 88, n.32,
quoting Silver v. Silver, 280 U.S. 117, 122 (1929); Usery
v. Turner Elkhorn Mining Co., supra, 428 U.S. at 16. This
principle is particularly evident in the context of zoning
or other land use restrictions which survive constitutional
challenge despite their effect of undermining property
owners’ settled expectations. See, e.g., Rogin v. Bensalem
Township, No. 79-1361, slip op. at 16-17 (3d Cir. Feb. 21,
1980) ; Haas v. City and County of San Francisco, 605 F.2d
1117, 1119-21 (9th Cir. 1979), cert. denied, 48 U.S.L.W.
3602 (U.S. March 17, 1980).
In the instant case, Congress determined that the pesti-
cide registration program was operating ineffectively
under the 1975 amendments to FIFRA. Restrictions on
the use of data were thought to contribute to artificial ex-
tension of pesticide patent rights and to stifle competition
in the industry..See Part II, supra. Since the enhancement
of competition in interstate commerce is certainly a per-
missible legislative objective, it remains only to determine
whether the legislative scheme chosen is a sufficiently rea-
sonable means of attaining the Congressional goal. Where
the legislation in question is retroactive, this determination
A-59
entails a balancing of the public interest in the retroactive
rule with the private interests that are upset by it. Daugh-
ters of Miriam, supra, 590 F.2d at 1260 & n.27.
As noted earlier, the statutory provisions challenged
here permit the use rather than the disclosure of a regis-
trant’s trade secret data to support a subsequent applica-
tion. If Chevron’s trade secret data contains information
beyond that which was necessary to obtain its own regis-
trations, such information will not fall into the hands of
Chevron’s competitors by operation of § 3(¢)(1)(D). If, on
the other hand, Chevron’s data contains only the minimal
amount of information necessary to secure its registra-
tions, no less “revealing” data could have been submitted
by Chevron if it hoped to market its product. In either
case, therefore, Chevron has suffered no prejudice by oper-
ation of §3(c)(1)(D) because of its reliance on the earlier
statutory provisions.
The 1978 FIFRA amendments to §3(c)(1)(D) simply
permit EPA to review data already in its files to assure
itself that a pesticide product previously shown to be safe
and efficacious remains so when marketed under another
brand name. When one considers the alternative means
available to foster competition by easing registration bar-
riers, such as release of all data by EPA to subsequent
applicants for resubmission by them, or, at the opposite
extreme, elimination altogether of the need for safety and
efficacy data submissions, it appears that Congress has
chosen a reasonable cure for the perceived problem. The
challenged legislation does not offend due process con-
siderations.
A-60
Having considered those few facts-that are disputed in
the light most favorable to Chevron, I conclude that de-
fendant Costle is entitled to judgment as a matter of law.
Accordingly, plaintiff’s application for a preliminary in-
junction will be denied, and defendant’s motion for sum-
mary judgment will be granted.
A-61
Appendix C
1972 amendments to § 3(c)(1)(D) of FIFRA, Pub. Law
92-516 (Oct. 21, 1972), 86 Stat. 979-980:
“(c) ProcepuRE FoR REGISTRATION.—
(1) SraremMenT REQUIRED.—Each applicant for regis-
tration of a pesticide shall file with the Administrator
a statement which includes—
“(A) the name and address of the applicant and
of any other person whose name will appear on the
labeling;
“(B) the name of the pesticide;
“(C) a complete copy of the labeling of the pes-
ticide, a statement of all claims to be made for it,
and any directions for its use;
“(D) if requested by the Administrator, a full
description of the tests made and the results thereof
upon which the claims are based, except that data
submitted in support of an application shall not,
without permission of the applicant, be considered
by the Administrator in support of any other ap-
plication for registration unless such other applicant
shall have first offered to pay reasonable compensa-
tion for producing the test data to be relied upon
and such data is not protected from disclosure by
section 10(b).’ If the parties cannot agree on the
11972 amendments to §10(b) of FIFRA, Pub. Law 92-516 (Oct.
21, 1972), 86 Stat. 989:
“(b) Disctosure.—Notwithstanding any other provision of
this Act, the Administrator shall not make public information
which in his judgment contains or relates to trade secrets or
commercial or financial information obtained from a person
and privileged or confidential, except that, when necessary to
carry out the provisions of this Act, information relating to
hi.
i, sha Pe de
A-62
amount and method of payment, the Administrator
shall make such determination and may fix such
other terms and conditions as may be reasonable
under the circumstances. The Administrator’s deter-
mination shall be made on the record after notice
and opportunity for hearing. If the owner of the test
data does not agree with said determination, he may,
within thirty days, take an appeal to the federal dis-
trict court for the district in which he resides with
respect to either the amount of the payment or the
terms of payment, or both. In no event shall the
amount of payment determined by the court be less
than that determined by the Administrator ;”
1975 amendments to §3(c)(1)(D) of FIFRA, Pub. Law
94-140 (Nov. 28, 1975), 89 Stat. 755:
Sec. 12. Section 3(c)(1)(D) of the Federal Insecticide,
Fungicide, and Rodenticide Act, as amended, is amended
to read as follows:
“(D) if requested by the Administrator, a full de-
scription of the tests made and the restlts thereof
upon which the claims are based, except that data sub-
mitted on or after January 1, 1970, in support of an
application shall not, without permission of the appli-
cant, be considered by the Administrator in support
of any other application for registration unless such
other applicant shall have first offered to pay reason-
able compensation for producing the test data to be
relied upon and such data is not protected from dis-
closure by section 10(b).* This provision with regard to
compensation for producing the test data to be relied
formulas of products acquired by authorization of this Act
may be revealed to any Federal agency consulted and may be
revealed at a public hearing or in findings of fact issued by
the Administrator.”
*See footnote 1, supra.
A-63
upon shall apply with respect to all applications for
registration or reregistration submitted on or after
October 21, 1972. If the parties cannot agree on the
amount and method of payment, the Administrator
shall make such determination and may fix such other
terms and conditions as may be reasonable under the
circumstances. The Administrator’s determination
shall be made on the record after notice and opportu-
nity for hearing. If either party does not agree with
said determination, he may, within thirty days, take an
appeal to the Federal district court for the district in
which he resides with respect to either the amount of
the payment or the terms of payment, or both. Regis-
tration shall not be delayed pending the determination
of reasonable compensation between the applicants, by
the Administrator or by the court.”.
1978 amendments to § 3(c)(1)(D) of FIFRA, Pub. Law
95-396 (Sept. 30, 1978), 92 Stat. 820-822:
Sec. 2. (a) Section 3 of the Federal Insecticide, Fun-
gicide, and Rodenticide Act is amended by— .
(1) amending subsection (c)(1)(D) to read as fol-
lows:
“(D) except as otherwise provided in subsection
(c)(2)(D) of this section, if requested by the Ad-
ministrator, a full description of the tests made and
the results thereof upon which the claims are based,
or alternatively a citation to data that appear in the
public literature or that previously had been sub-
mitted to the Administrator and that the Adminis-
trator may consider in accordance with the following
provisions:
“(i) With respect to pesticides containing
active ingredients that are initially registered
under this Act after the date of enactment of the
A-64
Federal Pesticide Act of 1978, data submitted to
support the application for the original registra-
tion of the pesticide, or an application for an
amendment adding any new use to the registration
and that pertains solely to such new use, shall not,
without the written permission of the original
data submitter, be considered by the Administra-
tor to support an application by another person
during a period of ten years following the date the
Administrator first registers the pesticide: Pro-
vided, That such permission shall not be required
in the case of defensive data;
“(ii) except as otherwise provided in subpara-
graph (D)(i) of this paragraph, with respect to
data submitted after December 31, 1969, by an
applicant or registrant to support an application
for registration, experimental use permit, or
amendment adding a new use to an existing regis-
tration, to support or maintain in effect an exist-
ing registration, or for reregistration, the Admin-
istrator may, without the permission of the
original data submitter, consider any such item of
data in support of an application by any other
person (hereinafter in this subparagraph referred
to as the ‘applicant’) within the fifteen-year period
following the date the data were originally sub-
mitted only if the applicant has made an offer to
compensate the original data submitter and sub-
mitted such offer to the Administrator accom-
panied by evidence of delivery to the original data
submitter of the offer. The terms and amount of
compensation may be fixed by agreement between
the original data submitter and the applicant, or,
a eo a ee eee ee a ee ee ee a a a ee ee
A-65
failing such agreement, binding arbitration under
this subparagraph. If, at the end of ninety days
after the date of delivery to the original data sub-
mitter of the offer to compensate, the original
data submitter and the applicant have neither
agreed on the amount and terms of compensation
nor on a procedure for reaching an agreement on
the. amount and terms of compensation, either
person may initiate binding arbitration proceed-
ings by requesting the Federal Mediation and
Conciliation Service to appoint an arbitrator from
the roster of arbitrators maintained by such
Service. The procedure and rules of the Service
shall be applicable to the selection of such arbitra-
tor and to such arbitration proceedings, and the
findings and determination of the arbitrator shall
be final and conclusive, and no official or court of
the United States shall have power or jurisdiction
to review any such findings and determination,
except for fraud, misrepresentation, or other mis-
conduct by one of the parties to the arbitration or
the arbitrator where there is a verified complaint
with supporting affidavits attesting to specific
instances of such fraud, misrepresentation, or
other misconduct. The parties to the arbitration
shall share equally in the payment of the fee and
expenses of the arbitrator. If the Administrator
determines that an original data submitter has ~
failed to participate in a procedure for reaching
an agreement or in an arbitration proceeding as
required by this subparagraph, or failed to comply
with the terms of an agreement or arbitration
decision concerning compensation under this sub-
paragraph, the original data submitter shall for-
feit the right to compensation for the use of the
A-66
data in support of the application. Notwithstand-
ing any other provision of this Act, if the Admin-
istrator determines that an applicant has failed to
participate in a procedure for reaching an agree-
ment or in an arbitration proceeding as required
by this subparagraph, or failed to comply with the
terms of an agreement or arbitration decision
concerning compensation under this subpara-
graph, the Administrator shall deny the applica-
tion or cancel the registration of the pesticide in
support of which the data were used without
further hearing. Before the Administrator takes
action under either of the preceding two sentences,
the Administrator shall furnish to the affected
person, by certified mail, notice of intent to take
action and allow fifteen days from the date of
delivery of the notice for the affected person to
respond. If a registration is denied or canceled
under this subparagraph, the Administrator may
make such order as the Administrator deems
appropriate concerning the continued sale and use
of existing stocks of such pesticide. Registration
action by the Administrator shall not be delayed
pending the fixing of compensation;
“(iii) after expiration of any period of exclu-
sive use and any period for which compensation is
requifed for the use of an item of data under sub-
paragraphs (D)(i) and (D) (ii) of this paragraph,
the Administrator may consider such item of data
in support of an application by any other appli-
cant without the permission of the original data
submitter and without an offer having been
received to compensate the original data submitter
for the use of such item of data;”
A-67
Appendix D
United States Court of Appeals
For the Third Circuit
No. 80-2037
Chevron Chemical Company,
Appellant
V.
Douglas M. Costle
(D.C. Civil No. 79-00532)
SUR PETITION FOR REHEARING
Present: Seitz, Chief Judge, Aldisert, Adams, Gibbons,
Hunter, Weis, Garth, Higginbotham and Sloviter,
Circuwt Judges
The petition for rehearing filed by
Appellant
in the above entitled case having been submitted to the
judges who participated in the decision of this court and
to all the other available circuit judges of the circuit in
regular active service, and no judge who concurred in the
decision having asked for rehearing, and a majority of the
circuit judges of the circuit in regular active service not
having voted for rehearing by the court in bane, the pe-
tition for rehearing is denied.
By the Court,
/3/ JOHN GIBBONS
"Judge
Dated: March 3, 1981
A-68
Appendix E
United States Court of Appeals
For the Second Circuit
No. 828—September Term 1979
(Argued March 21, 1980 Decided July 16, 1980)
Rehearing denied October 2, 1980
Rose L. Kramer, 100% Stockholder—
Finast Metal Products, Inc.,
Plaintiff-Appellant,
against
Secretary, United States Department of
the Army and Chief, Legal Department of
the Department of the Army,
Defendants-A ppellees.
Before: Kaufman, Timbers, Circuit Judges,
and Lasker, District Judge."
Appeal from an order of the United States District
Court for the Eastern District of New York, Costantino,
J. dismissing plaintiff’s pro se action under the Federal
Tort Claims Act for failure to state a claim upon which
relief can be granted.
Reversed and remanded.
*Hon. Morris E. Lasker of the United States District Court for
the Scuthera District of New York, sitting by designation.
A-69
Lasker, D.J.
Rose Kramer, appearing pro se, appeals from an order
dismissing her complaint for failure to state a claim upon
which relief can be granted. Because we conclude that
Kramer has stated a cause of action for wrongful misuse
of a trade secret under New York law that is within the
jurisdiction of the district court under the Federal Tort
Claims Act, 28 U.S.C. § 1346(b), we reverse the order of
the district court and remand the case for further pro-
ceedings.
In determining the sufficiency of Kramer’s complaint,
the district court properly looked beyondigye complaint
itself, which was prepared without the aid of counsel
and provides only an imperfect view of her claim. We,
too, have considered Kramer’s submissions in addition
to the formal pleadings in piecing together her factual
allegations and legal theories. We rely in particular on
Kramer’s memorandum of law and fact in opposition to
defendants’ motion to dismiss, dated J une, 1979.
As reported there, the circumstances that bred this law-
suit relate to a contract for the manufacture of 60 mm.
mortar projectiles let by the Army to Finast Metal Prod-
ucts, Inc., a corporation owned and managed by Kramer.
Because a multitude of difficulties arose in connection with
the contract almost from the moment Finast’s bid was
opened, on September 10, 1973, and determined to be the
lowest responsive bid submitted, the contract was not
awarded until June 18, 1974, following extensive surveys,
negotiations, and reviews. Of the intervening events, those
particularly relevant here relate to Kramer’s efforts to
ee ee ee er _
A-70
locate a foundry willing and able to supply 60 mm. forging
blanks for use in the production of 60 mm. projectiles.
When she submitted Finast’s bid to the Army, Kramer
expected to use blanks supplied by the National Extruded
Metal Products Company (“Nempco”), the only known
source of such blanks. However, in January, 1974, she
learned that Nempco was about to go out of business and
would not be able to supply forgings to Finast. The very
day she learned this, Kramer telephoned an acquaintance,
an engineer and entrepreneur who was in the process of
setting up a foundry. He informed her that his new com-
pany would be able to supply the forging blanks Finast
would require in order to fulfill the contract then being
worked out with the Government. That company, Canusa
Extrusion-Iingineering, Inc. (“Canusa’”), was established
shortly thereafter.
Kramer notified the Government that she had located
a new supplier of forging blanks, but declined to identify
the new source until the Government agreed to treat the
information in confidence. She asserts that the government.
did agree, and on May 14, 1974, she sent the Government
a mailgram identifying Canusa as the new supplier. Her
mailgram stated:
“Due to circumstances existing in the world market
and the fact that this supplier is presumably the only
known additional source and was developed by us for
the production of the subject items, we claim that the
name and address of this source is proprietary infor-
mation to our company and must not be divulged to
competitors or other sources of supply for 60mm
projectiles.”
A-71
Government inspectors then visited Canusa’s plant and
eventually approved Canusa as a subcontractor for 60
mm. forging blanks.
Having obtained the identity of her source, Kramer
charges, Government employees contrived to award Finast
a contract they knew was unworkable, to wrongfully termi-
nate that contract, and to put Finast out of business, so
that they could award the contract for the production of
60 mm. projectiles to a favored firm, to which they disclosed
Canusa’s identity.
Although Kramer’s pleadings and other papers contain
wide-ranging charges, and her detailed and lengthy allega-
tions of fact are broad enough to compass a variety of
causes of action, the gravamen of her complaint is the claim
that the Government wrongfully procured and disclosed the
identity of the new source of forgings that she had discov-
ered. Thus, the introductory paragraph of her memoran-
dum of law and fact in opposition to the defendants’ mo-
tion to dismiss complains of alleged
“wrongful acts of Government employees while acting
within the scope of their office and employment in order
to conspiratorilly [sic] gain control of plaintiff’s sole
source 60 MM forging subcontractor, the only inde-
pendent Government approved 60 MM forging source
in the United States then, so that these Government
employees could place contracts for 60 MM projectiles
with their favored prime contractors... .”
Kramer persists in mislabelling this claim as one for
“conversion.” On the Government’s motion to dismiss, the
district court properly looked beyond the label to the facts
alleged in reviewing Kramer’s complaint. The court dis-
A-72
missed the complaint “pursuant to reasons placed on the
record after argument” in a hand endorsement dated July
17, 1979. After Kramer moved for reargument, the
district court issued a memorandum of decision and order
dated August 17, 1979, reaffirming the prior dismissal.
There the court stated:
“Tt is clear that to the extent that plaintiff seeks
review of the administrative action below [in which
Kramer unsuccessfully appealed the termination of
Finast’s contract to the Armed Services Board of Con-
tract Appeals], the Court of Claims is the proper
forum because she seeks damages in excess of $10,000.
28 U.S.C. § 13846(a)(2). And while conversion does
state a cause of action under the Federal Tort Claims
[Act], the facts as alleged by plaintiff do not consti-
tute conversion but rather constitute a claim for in-
tentional interference with contract rights. Suits based
on such a claim may not be brought under the Federal
Tort Claims Act. 28 U.S.C. § 2680(h).”
To the extent that Kramer seeks damages for breach of
contract in excess of $10,000., or for tortious interference
“with her subcontract with Canusa, the district court’s deci-
sion is correct. However, we believe the court erred in con-
cluding that the claim that Kramer insists on labelling one
for conversion was in fact a claim for intentional inter-
ference with contract rights. If Kramer’s pro se complaint
is liberally construed, her putative “conversion” claim must
be viewed as a cause of action for misappropriation of a
trade secret recognized under New York law and conse-
quently within the district court’s jurisdiction under the
Federal Tort Claims Act.
A-73
Stripped to their essentials, Kramer’s factual allegations
reduce to this: the Government induced Kramer to disclose
the identity of her supplier in confidence, and then di-
vulged that information to others in breach of that con-
fidence. Kramer’s knowledge of Canusa’s willingness to
supply 60 mm. forging blanks constituted a trade secret
protected by New York law. “ ‘A trade secret, like any other
secret, is nothing more than private matter; something
known to only one or a few and kept from the general pub-
lic; and aot susceptible to general knowledge.’ ” Leo Silfen,
Inc. v. Cream, 29 N.Y.2d 387, 394-95, 328 N.Y.S.2d 423, 430
(1972) (quoting Abdallah v. Crandall, 273 App. Div. 131,
133, 76 N.Y.S.2d 403, 406 (3d Dept. 1948) ). Kramer alleges
that she was the only one who knew of Canusa’s willingness
to supply the forgings in question, and her documented re-
luctance to disclose the identity of her source to the Gov-
ernment for fear that it would divulge this information to
a competitor demonstrates that she regarded the informa-
tion as proprietary. Since she disclosed that information in
confidence, she did not, as a matter of law, make the sort
of “dissemination to the trade and public” that would de-
feat her claim of trade secret protection. Ewen v. Gerofsky,
86 Mise. 2d 913, 918, 382 N.Y.S.2d 651, 655 (Sup. Ct. N. Y.
Co. 1976) (Fein, J.).
Under New York law, then, Kramer’s complaint states
a cause of action sounding in tort. This brings her claim
within the purview of the Federal Tort Claims Act, which
creates exclusive jurisdiction in the district courts over
tort claims against the United States “under circumstances
where the United States, if a private person, would be
liable to the claimant in accordance with the law of the
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place where the act or omission occurred.” 28 U.S.C.
§ 1346(b). There remains only the question whether her
action can be maintained despite the provisions of 28 U.S.C.
§ 2680(h), which bars any claim under the Federal Tort
Claims Act
“arising out of assault, battery, false imprisonment,
false arrest, malicious prosecution, abuse of process,
libel, slander, misrepresentation, deceit, or interference
with contract rights.”
At oral argument the Government suggested that even if
Kramer’s complaint is construed as stating a claim for
misappropriation of a trade secret, her claim is barred be-
cause she charges that the Government accomplished its
tortious object through fraud and deceit, which, the Gov-
ernment argues, brings her claim within the scope of sec-
tion 2680(h). However, the essence of the tort of misappro-
priation of a trade secret is the unauthorized use or dis-
closure of secret information obtained through improper
means, including theft, espionage, bribery, and coercion as
well as trickery, or in breach of confidence, including
breach of a good faith representation that a confidence
would be protected as well as a fraudulent misrepresenta-
tion to the same effect. Although Kramer’s papers are
replete with charges of deceit leveled at Government em-
ployees, those charges form no necessary element of her
claim, which is simply that she provided secret informa-
tion to the Government in confidence, and that the Govern-
ment subsequently made unauthorized use of that informa-
tion. If proven, this alone would establish the Govern-
ment’s liability. “One does not have a right to secure a
trade secret or invention by reason of a confidential
w
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relationship and to use it without accounting to the
source.” Ewen v. Gerofsky, supra, 86 Misc. 2d at 918, 382
N.Y.S.2d at 655.
The dissent argues that Kramer will not- be able to
establish that Canusa’s identity qualifies as a trade secret
under New York law. Of course, if she cannot, her claim
must fail. But the record establishes that she clearly con-
sidered it a secret, and treated it as a secret. The question
whether it was actually a secret is one of fact that must be
determined by the trier. The dissent also argues that
Kramer was required to disclose the identity of her sub-
contractor as part of the government’s pre-award survey
procedure, and that she did so “freely and voluntarily.”
However, Kramer’s allegations are quite clear that
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