Course No. 9200-704 (& 804)-801
ID No. 85737 & 85736
Time: W 6:30 - 9:30 p.m.
Room Across from 231D (IP Alcove)
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Ruckelshaus v. Monsanto Co.467 U.S. 986, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984)
Blackmun, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Marshall, Powell, Rehnquist, and Stevens, JJ., joined, and in which O'Connor, J., joined, except for Part IV-B and a statement on p. 1013. O'Connor, J., filed an opinion concurring in part and dissenting in part, post, p. 1021. White, J., took no part in the consideration or decision of the case.
[*990] Justice Blackmun delivered the opinion of the Court.
In this case, we are asked to review a United States District Court's determination that several provisions of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 61 Stat. 163, as amended, 7 U. S. C. § 136 et seq., are unconstitutional. The provisions at issue authorize the Environmental Protection Agency (EPA) to use data submitted by an applicant for registration of a pesticide(1) in evaluating the application of a subsequent applicant, and to disclose publicly some of the submitted data.
Appellee Monsanto Company (Monsanto) is an inventor, developer, and producer of various kinds of chemical products, including pesticides. Monsanto, headquartered in St. Louis County, Mo., sells in both domestic and foreign markets. It is one of a relatively small group of companies that invent and develop new active ingredients for pesticides and conduct most of the research and testing with respect to those ingredients.(2)
These active ingredients are sometimes referred to as "manufacturing-use products" because they are not generally sold directly to users of pesticides. Rather, they must first be combined with "inert ingredients"chemicals that dissolve, dilute, or stabilize the active components. The results of this process are sometimes called "end-use products," and the firms that produce end-use products are called "formulators." A firm that produces an active ingredient may [*998] use it for incorporation into its own end-use products, may sell it to formulators, or may do both. Monsanto produces both active ingredients and end-use products.
The District Court found that development of a potential commercial pesticide candidate typically requires the expenditure of $ 5 million to $ 15 million annually for several years. The development process may take between 14 and 22 years, and it is usually that long before a company can expect any return on its investment. For every manufacturing-use pesticide the average company finally markets, it will have screened and tested 20,000 others. Monsanto has a significantly better-than-average success rate; it successfully markets 1 out of every 10,000 chemicals tested.
Monsanto, like any other applicant for registration of a pesticide, must present research and test data supporting its application. The District Court found that Monsanto had incurred costs in excess of $ 23.6 million in developing the health, safety, and environmental data submitted by it under FIFRA. The information submitted with an application usually has value to Monsanto beyond its instrumentality in gaining that particular application. Monsanto uses this information to develop additional end-use products and to expand the uses of its registered products. The information would also be valuable to Monsanto's competitors. For that reason, Monsanto has instituted stringent security measures to ensure the secrecy of the data.
It is this health, safety, and environmental data that Monsanto sought to protect by bringing this suit. The District Court found that much of these data "[contain] or [relate] to trade secrets as defined by the Restatement of Torts and Confidential, commercial information."
Monsanto brought suit in District Court, seeking injunctive and declaratory relief from the operation of the data-consideration provisions of FIFRA's § 3(c)(1)(D), and the data-disclosure provisions of FIFRA's § 10 and the related § 3(c)(2)(A). Monsanto alleged that all of the challenged provisions [*999] effected a "taking" of property without just compensation, in violation of the Fifth Amendment. In addition, Monsanto alleged that the data-consideration provisions violated the Amendment because they effected a taking of property for a private, rather than a public, purpose. Finally, Monsanto alleged that the arbitration scheme provided by § 3(c)(1)(D)(ii) violates the original submitter's due process rights and constitutes an unconstitutional delegation of judicial power.
After finding that the data-consideration provisions operated to effect
a taking of property, the District Court found [*1000] that the
compulsory binding-arbitration scheme set forth in § 3(c)(1)(D)(ii) did
not adequately provide compensation for the property taken. *
In deciding this case, we are faced with four questions: (1) Does Monsanto have a property interest protected by the Fifth Amendment's Taking Clause in the health, safety, and environmental data it has submitted to EPA? (2) If so, does EPA's use of the data to evaluate the applications of others or EPA's disclosure of the data to qualified members of the public effect a taking of that property interest? (3) If there [*1001] is a taking, is it a taking for a public use? (4) If there is a taking for a public use, does the statute adequately provide for just compensation?
This Court never has squarely addressed the applicability of the protections of the Taking Clause of the Fifth Amendment to commercial data of the kind involved in this case. In answering the question now, we are mindful of the basic axiom that "‘[property] interests . . . are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.'" Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980), quoting Board of Regents v. Roth, 408 U.S. 564, 577 (1972). Monsanto asserts that the health, safety, and environmental data it has submitted to EPA are property under Missouri law, which recognizes trade secrets, as defined in § 757, Comment b, of the Restatement of Torts, as property. . . . The Restatement defines a trade secret as "any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it." § 757, Comment b. And the parties have stipulated that much of the information, research, and test data that Monsanto has submitted under [*1002] FIFRA to EPA "contains or relates to trade secrets as defined by the Restatement of Torts."
Because of the intangible nature of a trade secret, the extent of the property right therein is defined by the extent to which the owner of the secret protects his interest from disclosure to others. See . . . Restatement of Torts, supra; see also Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 474-476 (1974). Information that is public knowledge or that is generally known in an industry cannot be a trade secret. If an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.
Trade secrets have many of the characteristics of more tangible forms of property. A trade secret is assignable. . . . A trade secret can form the res of a trust, Restatement (Second) of Trusts § 82, Comment e (1959); . . . and it passes to a trustee in bankruptcy. See In re Uniservices, Inc., 517 F.2d 492, 496-497 (7th Cir. 1975).
Even the manner in which Congress referred to trade secrets in the legislative history of FIFRA supports the general perception of their property-like nature. In discussing the 1978 amendments to FIFRA, Congress recognized that data developers like Monsanto have a "proprietary interest" in their data. Further, Congress reasoned that submitters of data are "entitled" to "compensation" because they "have legal ownership of the data." . . .(3) This general [*1003] perception of trade secrets as property is consonant with a notion of "property" that extends beyond land and tangible goods and includes the products of an individual's "labour and invention." 2 W. Blackstone, Commentaries * 405; see generally J. Locke, The Second Treatise of Civil Government, ch. 5 (J. Gough ed. 1947).
Although this Court never has squarely addressed the question whether a person can have a property interest in a trade secret, which is admittedly intangible, the Court has found other kinds of intangible interests to be property for purposes of the Fifth Amendment's Taking Clause. See, e. g., Armstrong v. United States, 364 U.S. 40, 44, 46 (1960) (materialman's lien provided for under Maine law protected by Taking Clause); Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 596-602 (1935) (real estate lien protected); Lynch v. United States, 292 U.S. 571, 579 (1934) (valid contracts are property within meaning of the Taking Clause). That intangible property rights protected by state law are deserving of the protection of the Taking Clause has long been implicit in the thinking of this Court:
Having determined that Monsanto has a property interest in the data it has submitted to EPA, we confront the difficult question whether a "taking" will occur when EPA discloses those data or considers the data in evaluating another application for registration. The question of what constitutes a "taking" is one with which this Court has wrestled on many occasions. It has never been the rule that only governmental acquisition or destruction of the property of an individual constitutes a taking, for "courts have held that the deprivation of the former owner rather than the accretion of a right or interest [*1005] to the sovereign constitutes the taking. Governmental action short of acquisition of title or occupancy has been held, if its effects are so complete as to deprive the owner of all or most of his interest in the subject matter, to amount to a taking." United States v. General Motors Corp., 323 U.S., at 378. See also PruneYard Shopping Center v. Robins, 447 U.S. 74 (1980); Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).
As has been admitted on numerous occasions, "this Court has generally ‘been unable to develop any "set formula" for determining when "justice and fairness" require that economic injuries caused by public action'" must be deemed a compensable taking. Kaiser Aetna v. United States, 444 U.S. 164, 175 (1979), quoting Penn Central Transportation Co. v. New York City, 438 U.S. 104, 124 (1978) . . . . The inquiry into whether a taking has occurred is essentially an ad hoc, factual inquiry. The Court, however, has identified several factors that should be taken into account when determining whether a governmental action has gone beyond "regulation" and effects a "taking." Among those factors are: "the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations." PruneYard Shopping Center v. Robins, 447 U.S., at 83; see Kaiser Aetna, 444 U.S., at 175; Penn Central, 438 U.S., at 124. It is to the last of these three factors that we now direct our attention, for we find that the force of this factor is so overwhelming, at least with respect to certain of the data submitted by Monsanto to EPA, that it disposes of the taking question regarding those data.
A "reasonable investment-backed expectation" must be more than a "unilateral expectation or an abstract need." [*1006] Webb's Fabulous Pharmacies, 449 U.S., at 161. We find that with respect to any health, safety, and environmental data that Monsanto submitted to EPA after the effective date of the 1978 FIFRA amendmentsthat is, on or after October 1, 1978(5)Monsanto could not have had a reasonable, investment-backed expectation that EPA would keep the data confidential beyond the limits prescribed in the amended statute itself. Monsanto was on notice of the manner in which EPA was authorized to use and disclose any data turned over to it by an applicant for registration.
Thus, with respect to any data submitted to EPA on or after October 1, 1978, Monsanto knew that, for a period of 10 years from the date of submission, EPA would not consider those data in evaluating the application of another without Monsanto's permission. It was also aware, however, that once the 10-year period had expired, EPA could use the data without Monsanto's permission. Monsanto was further aware that it was entitled to an offer of compensation from the subsequent applicant only until the end of the 15th year from the date of submission. In addition, Monsanto was aware that information relating to formulae of products could be revealed by EPA to "any Federal agency consulted and [could] be revealed at a public hearing or in findings of fact" issued by EPA "when necessary to carry out" EPA's duties under FIFRA. § 10(b). The statute also gave Monsanto notice that much of the health, safety, and efficacy data provided by it could be disclosed to the general public at any time. § 10(d). If, despite the data-consideration and data-disclosure provisions in the statute, Monsanto chose to submit the requisite data in order to receive a registration, it can hardly argue that its reasonable investment-backed [*1007] expectations are disturbed when EPA acts to use or disclose the data in a manner that was authorized by law at the time of the submission.
Monsanto argues that the statute's requirement that a submitter give up its property interest in the data constitutes placing an unconstitutional condition on the right to a valuable Government benefit. But Monsanto has not challenged the ability of the Federal Government to regulate the marketing and use of pesticides. Nor could Monsanto successfully make such a challenge, for such restrictions are the burdens we all must bear in exchange for "‘the advantage of living and doing business in a civilized community.'" Andrus v. Allard, 444 U.S. 51, 67 (1979), quoting Pennsylvania Coal Co. v. Mahon, 260 U.S., at 422 (Brandeis, J., dissenting) . . . . This is particularly true in an area, such as pesticide sale and use, that has long been the source of public concern and the subject of government regulation. That Monsanto is willing to bear this burden in exchange for the ability to market pesticides in this country is evidenced by the fact that it has continued to expand its research and development and to submit data to EPA despite the enactment of the 1978 amendments to FIFRA.(6)
Thus, as long as Monsanto is aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data by an applicant in exchange for the economic advantages of a registration can hardly be called a taking. See Corn Products Refining Co. v. Eddy, 249 U.S. 427, 431-432 [*1008] (1919) ("The right of a manufacturer to maintain secrecy as to his compounds and processes must be held subject to the right of the State, in the exercise of its police power and in promotion of fair dealing, to require that the nature of the product be fairly set forth") . . . .
Prior to the 1972 amendments, FIFRA was silent with respect to EPA's authorized use and disclosure of data submitted to it in connection with an application for registration. Another statute, the Trade Secrets Act, 18 U. S. C. § 1905, however, arguably is relevant. That Act is a general criminal statute that provides a penalty for any employee of the United States Government who discloses, in a manner not authorized by law, any trade-secret information that is revealed to him during the course of his official duties. This Court has determined that § 1905 is more than an "antileak" statute aimed at deterring Government employees from profiting by information they receive in their official capacities. See Chrysler Corp. v. Brown, 441 U.S. 281, 298-301 (1979). Rather, § 1905 also applies to formal agency action, i. e., action approved by the agency or department head.
It is true that, prior to the 1972 amendments, neither FIFRA nor any other provision of law gave EPA authority to disclose data obtained from Monsanto. But the Trade Secrets Act is not a guarantee of confidentiality to submitters of data, and, absent an express promise, Monsanto had no reasonable, investment-backed expectation that its information would remain inviolate in the hands of EPA. In an industry that long has been the focus of great public concern and significant government regulation, the possibility was substantial that the Federal Government, which had thus far taken no position on disclosure of health, safety, and environmental data concerning pesticides, upon focusing on the issue, would [*1009] find disclosure to be in the public interest. Thus, with respect to data submitted to EPA in connection with an application for registration prior to October 22, 1972,(7) the Trade Secrets Act provided no basis for a reasonable investment-backed expectation that data submitted to EPA would remain confidential.
A fortiori, the Trade Secrets Act cannot be construed as any sort of assurance against internal agency use of submitted data during consideration of the application of a subsequent applicant for registration.(8) Indeed, there is some evidence that the practice of using data submitted by one company during consideration of the application of a subsequent applicant was widespread and well known. Thus, [*1010] with respect to any data that Monsanto submitted to EPA prior to the effective date of the 1972 amendments to FIFRA, we hold that Monsanto could not have had a "reasonable investment-backed expectation" that EPA would maintain those data in strictest confidence and would use them exclusively for the purpose of considering the Monsanto application in connection with which the data were submitted.
The situation may be different, however, with respect to data submitted by Monsanto to EPA during the period from October 22, 1972, through September 30, 1978. Under the statutory scheme then in effect, a submitter was given an opportunity to protect its trade secrets from disclosure by designating them as trade secrets at the time of submission. When Monsanto provided data to EPA during this period, it was with the understanding, embodied in FIFRA, that EPA was free to use any of the submitted data that were not trade secrets in considering the application of another, provided [*1011] that EPA required the subsequent applicant to pay "reasonable compensation" to the original submitter. § 3(c)(1)(D), 86 Stat. 979. But the statute also gave Monsanto explicit assurance that EPA was prohibited from disclosing publicly, or considering in connection with the application of another, any data submitted by an applicant if both the applicant and EPA determined the data to constitute trade secrets. § 10, 86 Stat. 989.
Thus, with respect to trade secrets submitted under the statutory regime in force between the time of the adoption of the 1972 amendments and the adoption of the 1978 amendments, the Federal Government had explicitly guaranteed to Monsanto and other registration applicants an extensive measure of confidentiality and exclusive use. This explicit governmental guarantee formed the basis of a reasonable investment-backed expectation. If EPA, consistent with the authority granted it by the 1978 FIFRA amendments, were now to disclose trade-secret data or consider those data in evaluating the application of a subsequent applicant in a manner not authorized by the version of FIFRA in effect between 1972 and 1978, EPA's actions would frustrate Monsanto's reasonable investment-backed expectation with respect to its control over the use and dissemination of the data it had submitted.
The right to exclude others is generally "one of the most essential sticks in the bundle of rights that are commonly characterized as property." Kaiser Aetna, 444 U.S., at 176. With respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data.(9) [*1012]
That the data retain usefulness for Monsanto even after they are disclosedfor example, as bases from which to develop new products or refine old products, as marketing and advertising tools, or as information necessary to obtain registration in foreign countriesis irrelevant to the determination of the economic impact of the EPA action on Monsanto's property right. The economic value of that property right lies in the competitive advantage over others that Monsanto enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge.
EPA encourages us to view the situation not as a taking of Monsanto's property interest in the trade secrets, but as a "pre-emption" of whatever property rights Monsanto may have had in those trade secrets. The agency argues that the proper functioning of the comprehensive FIFRA registration scheme depends upon its uniform application to all data. Thus, it is said, the Supremacy Clause dictates that the scheme not vary depending on the property law of the State in which the submitter is located. This argument proves too much. If Congress can "pre-empt" state property law in the manner advocated by EPA, then the Taking Clause has lost all vitality. This Court has stated that a sovereign, "by ipse dixit, may not transform private property into public property without compensation. . . . This is the very kind of thing that the Taking Clause of the Fifth Amendment was meant to prevent." Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S., at 164. [*1013]
If a negotiation or arbitration pursuant to § 3(c)(1)(D)(ii) were to yield just compensation to Monsanto for the loss in the market value of its trade-secret data suffered because of EPA's consideration of the data in connection with another application, then Monsanto would have no claim against the Government for a taking. Since no arbitration has yet occurred with respect to any use of Monsanto's data, any finding that there has been an actual taking would be premature.(10)
In summary, we hold that EPA's consideration or disclosure of data submitted by Monsanto to the agency prior to October 22, 1972, or after September 30, 1978, does not effect a taking. We further hold that EPA consideration or disclosure of health, safety, and environmental data will constitute a taking if Monsanto submitted the data to EPA between October 22, 1972, and September 30, 1978;(11) the data constituted trade secrets under Missouri law; Monsanto had designated the data as trade secrets at the time of its submission; the use or disclosure conflicts with the explicit assurance of confidentiality or exclusive use contained in the statute during that period; and the operation of the arbitration provision [*1014] does not adequately compensate for the loss in market value of the data that Monsanto suffers because of EPA's use or disclosure of the trade secrets.
We must next consider whether any taking of private property that may occur by operation of the data-disclosure and data-consideration provisions of FIFRA is a taking for a "public use." We have recently stated that the scope of the "public use" requirement of the Taking Clause is "coterminous with the scope of a sovereign's police powers." Hawaii Housing Authority v. Midkiff, ante, at 240 . . . . The role of the courts in second-guessing the legislature's judgment of what constitutes a public use is extremely narrow.
The District Court found that EPA's action pursuant to the data-consideration provisions of FIFRA would effect a taking for a private use, rather than a public use, because such action benefits subsequent applicants by forcing original submitters to share their data with later applicants. It is true that the most direct beneficiaries of EPA actions under the data-consideration provisions of FIFRA will be the later applicants who will support their applications by citation to data submitted by Monsanto or some other original submitter. Because of the data-consideration provisions, later applicants will not have to replicate the sometimes intensive and complex research necessary to produce the requisite data. This Court, however, has rejected the notion that a use is a public use only if the property taken is put to use for the general public. Midkiff, ante, at 243-244 . . . .
So long as the taking has a conceivable public character, the means by which it will be attained is for Congress to determine. Here, the public purpose behind the data-consideration provisions is clear from [*1015] the legislative history. Congress believed that the provisions would eliminate costly duplication of research and streamline the registration process, making new end-use products available to consumers more quickly. Allowing applicants for registration, upon payment of compensation, to use data already accumulated by others, rather than forcing them to go through the time-consuming process of repeating the research, would eliminate a significant barrier to entry into the pesticide market, thereby allowing greater competition among producers of end-use products. Such a procompetitive purpose is well within the police power of Congress. See Midkiff, ante, at 241-242.(12)
Because the data-disclosure provisions of FIFRA provide for disclosure to the general public, the District Court did not find that those provisions constituted a taking for a private use. Instead, the court found that the data-disclosure provisions served no use. It reasoned that because EPA, before registration, must determine that a product is safe and effective, and because the label on a pesticide, by statute, must set forth the nature, contents, and purpose of the pesticide, the label provided the public with all the assurance it needed that the product is safe and effective. It is enough for us to state that the optimum amount of disclosure to the public is for Congress, not the courts, to decide, and that the statute embodies Congress' [*1016] judgment on that question. We further observe, however, that public disclosure can provide an effective check on the decisionmaking processes of EPA and allows members of the public to determine the likelihood of individualized risks peculiar to their use of the product.
We therefore hold that any taking of private property that may occur in connection with EPA's use or disclosure of data submitted to it by Monsanto between October 22, 1972, and September 30, 1978, is a taking for a public use.
Equitable relief is not available to enjoin an alleged taking of private
property for a public use, duly authorized by law,(13)
when a suit for compensation can be brought against the sovereign subsequent
to the taking. The Fifth Amendment does not require that compensation
precede the taking. Generally, an individual claiming that
the United States has taken his property can seek just compensation under
the Tucker Act, 28 U. S. C. § 1491.(14) United
States v. Causby, 328 U.S. 256, 267 (1946) ("If there is a taking,
the claim is ‘founded upon the Constitution' and within the jurisdiction
[*1017] of the Court of Claims to hear and determine") . . . .
With respect to data disclosure to the general public, FIFRA provides
for no compensation whatsoever. Thus, Monsanto's argument that Congress
intended the compensation scheme provided in FIFRA to be exclusive has
no relevance to the data-disclosure provisions of § 10.
Because we hold that the Tucker Act is available as a remedy for any uncompensated taking Monsanto may suffer as a result of the operation of the challenged provisions of FIFRA, we conclude that Monsanto's challenges to the constitutionality of the arbitration and compensation scheme are not ripe for our resolution. Because of the availability of the Tucker Act, Monsanto's ability to obtain just compensation does not depend solely on the validity of the statutory compensation scheme. The operation of the arbitration procedure affects only Monsanto's ability to vindicate its statutory right to obtain compensation from a subsequent applicant whose registration application relies on data originally submitted by Monsanto, not its ability to vindicate its constitutional right to just compensation.
Monsanto did not allege or establish that it had been injured by actual arbitration under the statute. While the District Court acknowledged that Monsanto had received several offers of compensation from applicants for registration, it did not find that EPA had considered [*1020] Monsanto's data in considering another application. Further, Monsanto and any subsequent applicant may negotiate and reach agreement concerning an outstanding offer. If they do not reach agreement, then the controversy must go to arbitration. Only after EPA has considered data submitted by Monsanto in evaluating another application and an arbitrator has made an award will Monsanto's claims with respect to the constitutionality of the arbitration scheme become ripe.
We find no constitutional infirmity in the challenged provisions of FIFRA. Operation of the provisions may effect a taking with respect to certain health, safety, and environmental data constituting trade secrets under state law and designated by Monsanto as trade secrets upon submission to EPA between October 22, 1972, and September 30, 1978.(16) But whatever taking may occur is one for a public use, and a Tucker Act remedy is available to provide Monsanto with just compensation. Once a taking has occurred, the proper forum for Monsanto's claim is the Claims Court. Monsanto's challenges to the constitutionality of the arbitration procedure are not yet ripe for review. The judgment of the District Court is therefore vacated, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered. [*1021]
Justice O'Connor, concurring in part and dissenting in part.
I join all of the Court's opinion except for Part IV-B and the Court's conclusion, ante, at 1013, that "EPA's consideration or disclosure of data submitted by Monsanto to the agency prior to October 22, 1972 . . . does not effect a taking." In my view public disclosure of pre-1972 data would effect a taking. As to consideration of this information within EPA in connection with other license applications not submitted by Monsanto, I believe we should remand to the District Court for further factual findings concerning Monsanto's expectations regarding interagency uses of trade secret information prior to 1972.
It is important to distinguish at the outset public disclosure of trade secrets from use of those secrets entirely within EPA. Internal use may undermine Monsanto's competitive position within the United States, but it leaves Monsanto's position in foreign markets undisturbed. As the Court notes, the likely impact on foreign market position is one that Monsanto would weigh when deciding whether to submit trade secrets to EPA. Thus a submission of trade secrets to EPA that implicitly consented to further use of the information within the agency is not necessarily the same as one that implicitly consented to public disclosure.
It seems quite clearindeed the Court scarcely disputesthat public disclosure of trade secrets submitted to the Federal Government before 1972 was neither permitted by law, nor customary agency practice before 1972, nor expected by applicants for pesticide registrations. The Court correctly notes that the Trade Secrets Act, 18 U. S. C. § 1905, flatly proscribed such disclosures. The District Court expressly found that until 1970 it was Government "policy that the data developed and submitted by companies such as [Monsanto] be maintained confidentially by the [administrative agency] and was not to be disclosed without the permission of the data submitter." Monsanto Co. v. Acting Administrator, EPA, 564 F. Supp. 552, 564 (1983). Finally, . . . [*1022] [a] 1972 statement by the National Agricultural Chemicals Association [alleged] that "registration information submitted to the Administrator has not routinely been made available for public inspection." It is hard to imagine how a pre-1972 applicant for a pesticide license would not, under these circumstances, have formed a very firm expectation that its trade secrets submitted in connection with a pesticide registration would not be disclosed to the public.
The Court's analysis of this question appears in a single sentence: an "industry that long has been the focus of great public concern and significant government regulation" can have no reasonable expectation that the Government will not later find public disclosure of trade secrets to be in the public interest. * * * [*1023]
The Court's tacit analysis seems to be this: an expectation of confidentiality can be grounded only on a statutory nondisclosure provision situated in close physical proximity, in the pages of the United States Code, to the provisions pursuant to which information is submitted to the Government. For my part, I see no reason why Congress should not be able to give effective protection to all trade secrets submitted to the Federal Government by means of a single, overarching, trade secrets provision. We routinely assume that wrongdoers are put on notice of the entire contents of the Code, though in all likelihood most of them have never owned a copy or opened a single page of it. It seems strange to assume, on the other hand, that a company like Monsanto, well served by lawyers who undoubtedly do read the Code, could build an expectation of privacy in pesticide trade secrets only if the assurance of confidentiality appeared in Title 7 itself.
The question of interagency use of trade secrets before 1972 is more difficult because the Trade Secrets Act most likely does not extend to such uses. The District Court found that prior to October 1972 only two competitors' registrations were granted on the basis of data submitted by Monsanto, and that Monsanto had no knowledge of either of these registrations prior to their being granted.
If one thing is quite clear it is that the extent of Monsanto's pre-1972 expectations, whether reasonable and investment-backed or otherwise, is a heavily factual question. It is fairly clear that the District Court found that those expectations existed as a matter of fact and were reasonable as a matter of law. But if the factual findings of the District Court on this precise question were not as explicit as they might have been, the appropriate disposition is to remand to the District Court for further factfinding. That is the course I would follow with respect to interagency use of trade secrets submitted by Monsanto before 1972.
2. [Court's footnote 6] A study by
the Office of Pesticide Programs of the EPA showed that in 1977 approximately
400 firms were registered to produce manufacturing-use products. It
was estimated that the 10 largest firms account for 75% of this country's
pesticide production. A correspondingly small number of new pesticides
are marketed each year. In 1974, only 10 new pesticides were introduced.
3. [Court's footnote 8] Of course,
it was not necessary that Congress recognize the data at issue here as
property in order for the data to be protected by the Taking Clause. We
mention the legislative history merely as one more illustration of the
general perception of the property-like nature of trade secrets.
4. [Court's footnote 9] Contrary to
EPA's contention, Justice Holmes' dictum in E. I. du Pont de Nemours
Powder Co. v. Masland, 244 U.S. 100 (1917), does not undermine our
holding that a trade secret is property protected by the Fifth Amendment
Taking Clause. Masland arose from a dispute about the disclosure
of trade secrets during preparation for a trial. In his opinion
for the Court, the Justice stated:
Back to Text
5. [Court's footnote 10] The Federal
Pesticide Act of 1978 was approved on September 30, 1978. 92 Stat.
842. The new data-consideration and data-disclosure provisions applied
with full force to all data submitted after that date.
Back to Text
6. [Court's footnote 11] Because the
market for Monsanto's pesticide products is an international one, Monsanto
could decide to forgo registration in the United States and sell a pesticide
only in foreign markets. Presumably, it will do so in those situations
where it deems the data to be protected from disclosure more valuable
than the right to sell in the United States.
8. [Court's footnote 13] The Trade
Secrets Act prohibits a Government employee from "[publishing], [divulging],
[disclosing] or [making] known" confidential information received in his
official capacity. 18 U. S. C. § 1905. In considering the
data of one applicant in connection with the application of another, EPA
does not violate any of these prohibitions.
9. [Court's footnote 15] We emphasize
that the value of a trade secret lies in the competitive advantage it
gives its owner over competitors. Thus, it is the fact that operation
of the data-consideration or data-disclosure provisions will allow a competitor
to register more easily its product or to use the disclosed data to improve
its own technology that may constitute a taking. If, however, a
public disclosure of data reveals, for example, the harmful side effects
of the submitter's product and causes the submitter to suffer a decline
in the potential profits from sales of the product, that decline in profits
stems from a decrease in the value of the pesticide to consumers, rather
than from the destruction of an edge the submitter had over its competitors,
and cannot constitute the taking of a trade secret.
10. [Court's footnote 16] Because
the record contains no findings with respect to the value of the trade-secret
data at issue and because no arbitration proceeding has yet been held
to determine the amount of recovery to be paid by a subsequent applicant
to Monsanto, we cannot preclude the possibility that the arbitration award
will be sufficient to provide Monsanto with just compensation, thus nullifying
any claim against the Government for a taking when EPA uses Monsanto's
data in considering another application. The statutory arbitration
scheme, of course, provides for compensation only in cases where the data
are considered in connection with a subsequent application, not in cases
of disclosure of the data.
11. [Court's footnote 17] While the
1975 amendments to FIFRA purported to carry backward the protections against
data consideration and data disclosure to submissions of data made on
or after January 1, 1970, 89 Stat. 751, the relevant consideration for
our purposes is the nature of the expectations of the submitter at the
time the data were submitted. We therefore do not extend our ruling
as to a possible taking to data submitted prior to October 22, 1972.
12. [Court's footnote 18] Monsanto
argues that EPA and, by implication, Congress misapprehended the true
"barriers to entry" in the pesticide industry and that the challenged
provisions of the law create, rather than reduce, barriers to entry. Such
economic arguments are better directed to Congress. The proper inquiry
before this Court is not whether the provisions in fact will accomplish
their stated objectives. Our review is limited to determining that
the purpose is legitimate and that Congress rationally could have believed
that the provisions would promote that objective.
13. [Court's footnote 19] Any taking
of private property that would occur as a result of EPA disclosure or
consideration of data submitted by Monsanto between October 22, 1972,
and September 30, 1978, is, of course, duly authorized by FIFRA as amended
15. [Court's footnote 21] Exhaustion
of the statutory remedy is necessary to determine the extent of the taking
that has occurred. To the extent that the operation of the statute
provides compensation, no taking has occurred and the original submitter
of data has no claim against the Government.
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16. [Court's footnote 22] We emphasize
that nothing in our opinion prohibits EPA's consideration or disclosure,
in a manner authorized by FIFRA, of data submitted to it by Monsanto.
Our decision merely holds that, with respect to a certain limited
class of data submitted by Monsanto to EPA, EPA actions under the data-disclosure
and data-consideration provisions of the statute may give Monsanto a claim
for just compensation.