Approximately seven new chemicals are introduced into commerce in the United States each day, adding to the 80,000 already tallied by the Environmental Protection Agency. Warnings of dioxin in coffee filters, formaldehyde in carpeting, phthalates in cosmetics, bisphenol A in baby bottles and metal cans—to name just a few—have each headlined popular publications, and each was described as correlating to cancer, hyperactivity, obesity, neurological, metabolic or reproductive problems. One government study estimated that, regardless of geographic location or proximity to chemical manufacturing, every person alive today has at least 700 man-made chemicals lingering in his or her body. Since the advent of chemistry as a legitimate science in the early 1800s, our way of life has been immeasurably altered. Man-made chemicals have stirred concerns, but they have also facilitated life-saving innovations, improvements in access to food, and sustained an influential segment of our economy.
The increasing focus on the chemicals in our environs and in our bodies has been accompanied by an increase in calls for regulatory reform. In 2010, the Safe Chemicals Act (SCA) was proposed to replace the 35-year old Toxic Substances Control Act (TSCA). The SCA would shift the burden, from the government to show the substance is not safe, to the producer (or manufacturer) to show the substance is unlikely to cause harm to human health or the environment. It would also significantly expand the information a business applying for a permit must submit to the government, including: the trade name, components, location of manufacturing operations, amounts produced, byproducts, down-stream users, health data, and uses. Currently, companies are able to claim the certain information is “confidential” and it is withheld from public exposure. EPA Administrator Lisa Jackson has announced that the EPA will be prioritizing transparency and limiting the instances in which a permit-applicant may redact details by claiming it constitutes “confidential business information.” The SCA, as proposed, has the potential to require a company to divulge significantly more information than did its predecessor.
Any amendment to TSCA must balance the public’s need for health and safety information and the owner of such information’s need to protect its investment. The chemical industry represents more than $8 billion of the U.S.’s economy. Chemical companies heavily invest in the research and development of new substances, as well as consumer lists, processing methods, uses for existing substances, and suppliers. Despite their being the arguably less sympathy-inducing party in the debate, chemical companies have a right to legal protections for their property. Furthermore, a company whose information has been publicized is at a distinct competitive disadvantage– to domestic competitors as well as those abroad. Manufacturers abroad may face neither such reporting burdens nor the encumbrances of intellectual property laws. The SCA’s detractors predict that extensive reporting requirements will serve as a disincentive to investment in the U.S. market—and ultimately stymie innovation and the development of “greener” chemical alternatives.
Multiple avenues of access could threaten the security of privately held information on chemical substances that fall within the ambit of the SCA. The EPA is not the only agency that requires disclosures. One chemical company may release slices of valuable information to other governmental entities, like Food and Drug Administration for example, which may, in turn, publish its partial data collection. Each piece of information in isolation may not provide any particularly valuable insight, but information harvested from multiple sources could yield significant benefit to a competitor. The risk of disclosure is particularly great in smaller markets, where, even if the company’s name is withheld, a competitor could quite easily deduce its identity. Various EPA employees have stated an interest in sharing information it collects with states and other nations. The more individuals made party to the confidential information, the greater the likelihood some portion of information will escape—either through outright theft or due to an inadvertent disclosure. Employees, leaving on bad terms or acting on behalf of a bribe-offering competitor, can memorize a client list or download research on a new polymer chain with relative ease. Congress, in passing the Trade Secrets Act, recognized employee theft as a significant threat to intellectual property rights. Recently, employees of several prominent chemical companies were found to have taken valuable information with them when they left their respective companies. The ex-employees then attempted to use the ill-acquired information to benefit their work for labs in China that had hired them. Once the previously-guarded information has been seen, it is difficult to restrain its spreading and retain its value. An injunction offers little compensation where the wrongdoer has already seen the content, and even less where the wrongdoer escapes overseas and beyond the reach of the U.S. law.
Common law and federal and state laws afford special protection to a strain of information that does not qualify for patent status: trade secrets. In order to be considered a “trade secret,” for the purposes of the Uniform Trade Secrets Act, a formula, pattern, compilation, program, device, method, technique or process must “derive independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Although the most well-defined property rights pertain to physical property, the Supreme Court has in multiple instances reiterated that intangible rights may not violated without compensation.
The Fifth Amendment states that “nor shall private property be taken for public use, without just compensation.” In the fundamental regulatory taking case, Pennsylvania Coal v. Mahon, 260 U.S. 393, 415 (1922), the Supreme Court held that when a regulation “goes too far” it becomes a taking. Courts may issue injunctions, award damages, and in cases of bad-faith, punitive damages. If an agency action causes the significant devaluation of information, the owner of that information must be compensated. To avoid legal intervention and, potentially restitution, an agency should make public only information narrowly tailored to promote a compelling government interest.
While the importance of protections to environmental and human health is beyond debate, it should not be used as justification to trample companies’ property rights. As an attorney for the American Chemistry Council said, in a conference regarding a recent EPA roll-back on the availability confidentiality claims, “everyone is best served by a reasonable, coordinated approach. One side should not trump the other.” The EPA also has recognized that, while it has economists, engineers, and attorneys at its disposal to assess confidentiality claims, the companies themselves are more in-tune to their own competitive business concerns. The more businesses cooperate with the EPA, the greater the likelihood of accurate and effective determinations. A rational and un-biased analysis of information-disclosure policies is a necessary step toward building a broadly beneficial chemical regulation statute.