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At the end of 2002, the 1st U.S. Circuit Court of Appeals in Philip Morris v. Reillystruck down a Massachusetts law known as the Disclosure Act. It required tobacco companies to disclose all the ingredients used in their products, subjecting those trade-secret ingredient lists to almost certain public disclosure. Philip Morris argued that the law’s attempt to further the public interest by requiring public disclosure of additives was an unconstitutional deprivation of the tobacco companies’ property without compensation in violation of the takings clause of the U.S. Constitution. The court correctly decided that it was, and struck down the law. That decision did not come easily. The en banc decision reversed a prior panel holding that upheld the law. In the prior decision, the panel disregarded the tobacco companies’ Hobson’s choice — either subject their trade secrets to disclosure, thereby destroying their value, or cease selling products in Massachusetts. It relied upon “the Commonwealth’s indisputably rational concern regarding the health effects of tobacco additives,” the lack of “explicit assurance[s] of confidentiality” that bind the Massachusetts Department of Public Health and the ability of the state to redefine property interests to address health and safety concerns. This last idea, a dictum in the panel decision, caused a great deal of concern. The takings clause prevents a state from destroying property interests at will, regardless of whether those interests may coincide with health or safety concerns. The en banc court reversed with a different takings analysis, finding that the companies had an expectation that their secrets were entitled to protection and that Massachusetts had not shown that destroying the companies’ trade secrets was necessary to achieve the possible beneficial effect of the Disclosure Act. What now? Massachusetts (and other like-minded states) needs to craft new laws that will further public goals, but pass constitutional muster. Can there be a way to collect information about harmful contaminants contained in tobacco products without vitiating the companies’ trade secrets and triggering the takings clause? The answer is yes. Future statutes must be narrowly tailored to achieve the goal of information exchange without going so far as to create an atmosphere open to indiscriminate disclosure of trade secrets. The Massachusetts statute was too broad — it called for almost certain public disclosure of “any added constituent other than tobacco, water, or reconstituted tobacco sheet.” Such public disclosure of entire brand-specific ingredient lists would have unnecessarily destroyed trade secrets worth millions of dollars. If the state’s goal is to further disclosure of harmful ingredients to the public, it could rewrite its statute to follow Minnesota’s example by requiring tobacco companies to disclose only the use of specific additives. MATCH GOAL WITH DISCLOSURE Or, if the goal is for the state to have access to the complete ingredient lists, Texas may be a good model. Texas requires the reporting of brand-specific ingredient information, but it prohibits public disclosure for those lists that are protected trade secrets. These are good examples, achieving public good through disclosure without destroying trade secrets. Another approach would combine the Minnesota and Texas laws by requiring the companies to disclose their ingredient lists with a provision that only the existence of certain, specific additives (such as those shown to cause harmful health effects) would become public, and then only after an appropriate hearing. Similar laws can be (and sometimes are) used across state and federal levels to require companies to disclose the ingredients of a variety of substances whose compositions are considered trade secrets: foods, cleaners, cosmetics, paints, fuels, etc. As long as the law is appropriately tailored to the public benefit (such as disclosing the potentially deadly existence of peanuts in prepared foods) and achieves the benefit without publicly and unnecessarily disclosing the trade secret, the law should avoid a takings violation. Disclosure of an ingredient because it is per se harmful or harmful in defined-quantities combinations, may be carried out in a manner that is not inconsistent with the takings clause. If the secret-ingredient ratios are the trade secrets, perhaps public disclosure of a complete, but nonquantified ingredient list would not constitute a taking. For other secrets, disclosing partial ingredient lists (which may have little independent value) may satisfy the statutory goal of identifying certain ingredients without taking the trade secrets. David Wolf, a founding partner of Boston’s Wolf, Greenfield & Sacks (www.wolfgreenfield.com) , focuses on trial and appellate work in patent, trademark, copyright and trade- secret litigations. Ilan N. Barzilay is an associate at the firm, where he counsels clients in patent, trademark and intellectual property matters.

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