Chevron Chemical Co. v. Costle

• Decision Date: 03 March 1981
• Docket Number: No. 80-2037,80-2037
• Citation: 641 F.2d 104
• Parties: , 11 Envtl. L. Rep. 20,156 CHEVRON CHEMICAL COMPANY, Appellant, v. Douglas M. COSTLE.
• Court: U.S. Court of Appeals — Third Circuit

Page 104

641 F.2d 104

16 ERC 2004, 11 Envtl. L. Rep. 20,156

CHEVRON CHEMICAL COMPANY, Appellant, v. Douglas M. COSTLE.

No. 80-2037.

United States Court of Appeals Third Circuit.

Argued Nov. 6, 1980.

Decided Feb. 4, 1981.

As Amended Feb. 19, 1981.

Rehearing and Rehearing In Banc Denied March 3, 1981.

Richard J. Abrams, Stephen E. Herrmann, Richards, Layton & Finger, Wilmington, Del., Noble K. Gregory (argued), Brian D. Bellardo, Pillsbury, Madison & Sutro, San Francisco, Cal., for appellant Chevron Chemical Co.

Angus Macbeth, Acting Asst. Atty. Gen., Land and Natural Resources Div., Donald W. Stever, Jr., Chief, Pollution Control Section, Stephen D. Ramsey, Anne S. Almy, Patrick J. Cafferty, Jr. (argued), Attys., Dept. of Justice, Washington, D.C., for appellee.

Before GIBBONS and WEIS, Circuit Judges and WHIPPLE, District Judge. ^*

OPINION OF THE COURT

GIBBONS, Circuit Judge.

Chevron Chemical Company (Chevron) appeals from an order of the district court denying its motion for a preliminary injunction and granting the motion of the defendant, Douglas M. Costle, Administrator of the United States Environmental Protection Agency (EPA). Chevron's amended complaint alleges that EPA possesses test data submitted by it in order to obtain registration for sale in interstate commerce of the pesticide naled and fungicide paraquat, and seeks preliminary injunctions prohibiting 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 district court concluded that EPA was entitled to judgment as a matter of law. We affirm, although on grounds somewhat different from those the district court relied on, 499 F.Supp. 732.

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 expired 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 agricultural 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 condition 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 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 transferred to EPA, 35 Fed.Reg. 15623 (1970).

Beginning in 1955 and continuing to 1979, Chevron submitted to EPA and its predecessor agencies test data supporting 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 involving the results of metabolism, toxicity, efficency, and tolerance testing on plants and animals, required expenditures 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 Chevron, development of the information required to demonstrate 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 information 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, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report or record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, processes, operation, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, 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 provided 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 disclosed. 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 selling the compounds as agricultural fungicides or pesticides. ¹

In 1972 Congress enacted the Federal Environmental Pesticide Control Act of 1972. Pub.L. 92-516, 86 Stat. 973. This legislation reenacted the registration requirements of the 1947 law and its subsequent amendments, but in the interest of environmental protection provided more stringent test data submission requirements. The lobbying battle over this legislation was intense, and among the features which aroused perhaps the most serious controversy was that embodied in section 3(c)(1)(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 application 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 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 agency were to consider the contents of its own files in support of another manufacturer's application for registration, 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 carry 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 compromise of what was originally enacted by the House of Representatives. As there proposed, the bill provided that

... if requested by the Administrator, a full description 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 Administrator in support of any other application for registration.

H.R. 10729 § 3(c)(1)(D). H.Rep.No.92-511, 92d Cong. 1st Sess. at 17(1971). 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 entrant's compound was both safe and efficacious unless 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 applicant, 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...