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A Massachusetts law that effectively requires tobacco companies to disclose trade secrets would not cause any uncompensated takings, the 1st U.S. Circuit Court of Appeals held on Oct. 16. Philip Morris Inc. v. Reilly, No. 00-2425. The ruling comes in a case filed by Philip Morris Inc. and nine other tobacco manufacturers that sought to enjoin enforcement of the state’s Tobacco Ingredients and Nicotine Yield Act, which requires the companies to disclose to the state all of the additives in each product in descending order of quantity. The lists become public records if their disclosure could reduce risks to public health. According to the court, each brand has a closely guarded combination of roughly 700 additives. Under the act, manufacturers have 60 days either to challenge the state’s decision to disclose the ingredients or to pull their products from the Massachusetts market. The state enacted the law because scientists were unable to study the interaction between the various cigarette ingredients under current federal law, which only requires the companies to submit an aggregate list of ingredients without disclosing quantities or manufacturer identity. Earlier, the 1st Circuit had rejected the companies’ federal pre-emption claims. The newest ruling tackled purely constitutional issues: takings, due process and commerce clause claims. The circuit court had affirmed a preliminary injunction based on a likelihood of success. But after the district court issued a permanent injunction, the panel reversed, rejecting all three claims on the merits. “It’s interesting, from a process prospective, how the court reached two different conclusions on the same issue in the same case,” said Henry C. Dinger of Boston’s Goodwin Procter, counsel for Philip Morris. According to the circuit court, the manufacturers were receiving the benefit of being allowed to market their products in Massachusetts in exchange for voluntary submission of data. The majority cited a 1984 U.S. Supreme Court case, Ruckelshaus v. Monsanto Co., which said that “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 [being able to sell its pesticides] can hardly be called a taking.” However, dissenting 1st Circuit Judge Bruce M. Selya said the court’s holding was “bad policy as well as bad law,” because it would “permit a state to violate the trade secrets of nearly every legitimate business without providing compensation so long as the state is acting under its police power.” Selya noted that in Monsanto, the pesticide manufacturers received exclusive-use rights to their data for 10 years and enforced compensation from competitors for the next five years, which was something more than what they had under the previous status quo. But here, the act did not give the tobacco manufacturers anything more than what they already had. The tobacco companies have not reached a final decision as to whether they will appeal, Dinger said.

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