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PETROLITE CORP. v. UNITED STATES EPA

June 25, 1981

PETROLITE CORPORATION, Plaintiff,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, et al., Defendants



The opinion of the court was delivered by: GREENE

MEMORANDUM

 Plaintiff seeks a preliminary injunction restraining EPA from disclosing or considering in other applications data plaintiff has submitted, on two *fn1" grounds: (1) that the statute effects an unconstitutional taking of private property either for a private purpose or, alternatively, without just compensation; and (2) that it violates the due process clause of the Fifth Amendment by virtue of both its procedural and its retroactive provisions.

 The government has responded with a motion for summary judgment, and, after extensive briefing and an oral hearing on the motions, the Court disposes of all issues in this Memorandum.

 I

 Prior to 1972, FIFRA was silent on the question of the use of submitted data to support the registration of other applicants' pesticides. *fn2" In that year, Congress amended the Act to convert it into a comprehensive regulatory statute governing the use of pesticides, and for the first time it legislated on both the use and the disclosure of data. *fn3" Section 10 of the 1972 Act allowed applicants to designate portions of submitted data they considered trade secrets (or confidential commercial or financial information), and it prohibited EPA from publicly disclosing any such information. The statute further provided that no trade secret data the public disclosure of which was prohibited by section 10 could be used in support of another registration application. *fn4" Curiously, the 1972 amendment did not specify any effective date, but that deficiency was remedied in 1975, when Congress amended the statute again to mandate that the 1972 use and disclosure provisions applied only to data submitted on or after January 1, 1970. *fn5"

 In 1978, Congress comprehensively revised the FIFRA disclosure and use provisions, *fn6" changing both the disclosure and use sections. The disclosure prohibition was narrowed from the 1972 provision (which had been interpreted by the courts to cover all "trade secrets," as that term is defined in the Restatement of Torts) to a ban on disclosure of three specific types of information: manufacturing processes, inert ingredients, and methods for testing for such ingredients. *fn7" Insofar as use is concerned, the amended statute divided data into three categories. The first classification, data submitted in support of pesticides registered after September 30, 1978, was granted a period of exclusive use for ten years from the date of the registration. The second group, data submitted after December 31, 1969, was provided a period of fifteen years of use only with compensation, either by negotiation or through mandatory, binding, and nonreviewable arbitration. The third category of data, for which the periods of exclusive use and compensation under the statute had expired, were made available for unlimited use.

 The rough net effect of this arrangement was to establish a middle ground between the pre-1972 unlimited use provision and the exclusive use stipulation, requiring permanent compensation, of the 1972 amendment. For all future registrations, the original data submitter would be entitled to ten years of exclusive use and five years of mandatory compensated licensing, to be followed by unlimited use in perpetuity. The 1978 scheme handled the transition problem by stipulating that data submitted between 1970 and 1978 would qualify for future compensation to the extent necessary to provide a total compensation period of fifteen years from registration. Data submitted before 1970, and hence previously unregulated by statute, but considered freely by agency practice (see note 2 supra), remained available for unlimited use without compensation. *fn8" Finally, the 1978 statute eliminated any exemptions from these use provisions for trade secret or proprietary data.

 Plaintiff's challenges to the 1978 amendments go to both the use and the disclosure provisions of the statute. It seeks to restrain EPA both from issuing registrations for chemicals to plaintiff's competitors based in part on data submitted by plaintiff to EPA and from the disclosing plaintiff's test data. Plaintiff has not stated expressly that the specific test data at issue span all three categories of the 1978 statute, *fn9" but from the thrust and scope of the legal arguments presented by the parties, it may be inferred that they do, and that therefore the constitutionality of the use and disclosure provisions of the statute are before the Court in their entirety. *fn10"

 II

 It is customary to begin an analysis of a takings issue by determining whether a bona fide property right exists, because in the absence of such an entitlement there can be no constitutional violation. In a recent case in which the identical use conditions of the 1978 statute at issue here were challenged, the Court of Appeals for the Third Circuit held that there is no property right to non-use by the government of data voluntarily submitted to it, and on that basis it dismissed the challenge to the statute without further inquiry. See Chevron, supra, 641 F.2d at 114-16; see also, Mobay Chemical Corp. v. Costle, 517 F.Supp. 254 at 267 (W.D.Pa.1981). Although the reasoning in Chevron may well be sound, in the view of this Court the existence vel non of a property interest is a difficult and close question that need not be addressed to resolve the pending motions. Instead, this Memorandum assumes arguendo that there is a valid property right at stake and proceeds to what the Court conceives to be the least troublesome legally of the three *fn11" major questions involved whether the use of submitted data by EPA constitutes a taking.

 III

 To resolve whether the statute works a taking of property, the three categories of data must be analyzed separately, not only because the statute treats them differently, but also because plaintiff's expectations ...


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