California “Green Chemistry” Law May Force Companies to Re-Think Trade Secret Strategy

Under California’s “Green Chemistry Initiative” (GCI) the state has listed 1,200 chemicals as “chemicals of concern.”  Makers of consumer products that contain these chemicals will have to disclose these components if the products are made or sold in California.

Companies that use the chemicals are required to submit detailed regulatory filings, which will be posted online for public review and comment.  The information would also be available to a company’s competitors.

The state may eventually limit or ban the listed chemicals.

The California Department of Toxic Substances Control (DTSC) approved the GCI’s regulations in July of 2013 and the regulations took effect in October.

However, one important aspect of the final regulations has not yet been resolved.  In August, the California Office of Administrative Law disapproved two provisions of the regulations that were intended to protect trade secrets.

The Office disapproved Section 69509.1(c) due to impermissible vagueness in the “substantive criteria” that the DTSC would apply to determine whether submitted materials should be designated as trade secrets.

The Office also disapproved Section 69509.1(a) due to uncertainty over when the trade secret designation would be made, and whether DTSC could decline to designate something a trade secret.

With trade secret protection for chemical formulas regulated by the GCI thus in limbo, the time is ripe for companies to re-evaluate their strategies for protecting proprietary information.

The two primary ways for a company to protect proprietary information (such as a chemical formula) are via patent law and trade secret law.

For patent applications filed on or after June 8, 1995, US patent law protects an invention for 20 years from the filing date of the earliest US patent application.

Information can theoretically be protected as a trade secret “forever” as long as it is not disclosed.  For example, the formula for Coca Cola has been a trade secret since the drink was invented in 1886.  (“The Vault of the Secret Formula” is an exhibit at the World of Coca-Cola museum in Atlanta.)

If disclosure is mandated under the GCI, and adequate trade secret protections do not apply, companies may wish to seek patent protection for their chemical formulas.

However, under the “on-sale bar” doctrine, an inventor may not acquire a patent if

the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of application for patent in the United States.

Under a recent decision by the Federal Circuit, this “offer to sale” includes an offer by an authorized supplier to make the product at issue and sell it to the inventor – even if the product is not yet offered for sale to the general public.

Thus, patent protection won’t be a viable option to protect trade secrets associated with products that have been for sale for years.

Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

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