are asking for is a limited proprietary period for data which is not patentable, as Dr. Early suggested. Senator LUGAR. Let me ask why 10 years was selected. Mr. FITZSIMMONS. We would like more. We thought this would be reasonable. I could give three kinds of examples. Jack gave one of a nonpatented product. There may be three or four of us who are in this business. We all make the same product. But, through my research and ingenuity, I find a new use for this product. I spend substantial money in developing it, and substantial years getting it to the point of fruition. I am saying, then, the data that I developed to give me that new use, I should have a proprietary period for. We heard this morning about the concerns Senator LEAHY. After a 10-year period, has the data been made totally public? Mr. FITZSIMMONS. It is not disclosed, but by our proposal, the Administrator can use the data to register that same compound for that use, although it is not publicly disclosed. Mr. CONNER. Totally free for use after 10 years. Mr. FITZSIMMONS. Yes, and no compensation. We have eliminated the compensation aspect by this approach, which we think is a nightmare for EPA. Senator LUGAR. Now, what would be your comment on the research testimony earlier that, essentially, EPA may be requiring, if I read them right, too much research? And is a part of our answer less research and less generation of costs and values, and all of this? Maybe part of our problem, in fact, is, as you say, you have got millions of dollars involved in all these tests, year after year, and all the animals and people, so that there is really something of value. What if we worked the other way around, with much less value in all of this? Would this be a partial relief, and are there hazards, safetywise, in going that way? Mr. FITZSIMMONS. I do not think that we fundamentally object to the requirements of doing everything that is necessary to prove safety and efficacy. We are all a part of the public, too, and we believe in this. I think part of the problem has been, frankly, in the administration of EPA. The facts are, it is taking up to 8 years from the time you discover a compound to get all the data and get it cleared by the EPA. And it was the same with the Department of Agriculture. The time for clearance is getting longer, and longer, and longer, and longer. Our concern is changing requirements on a frequent basis for data. I can give you an example of a product in my own company. It is registered. We are the only producer of it. It is under patent. It has been registered. It is in commercial use. We now have found a way to use it for another purpose. Two and a half years later, we still are not able to get this registered by the EPA, because they keep changing their requirements of what they think is necessary. 93-197-77- -6 Senator LEAHY. We have a vote, and we certainly have gone considerably over the time. I would just like to ask one question before we leave to vote. The Justice Department letter stated prior to the 1972 FIFRA amendments, the generic producers could economically manufacture technical pesticides upon expiration of patent. Prices typically dropped dramatically upon patent expiration. They cite the example of DDT, where the price per pound fell to about one-fourth of its preexpiration price, when competition was introduced. In other words, the Justice Department is saying that the introduction of competition to the manufacture of a chemical upon patent expiration can result in significant benefits to consumers, and among consumers, of course, will be those farmers who have to buy the chemicals to produce their food. Now, should not the question of competition, to possibly lower prices, be a primary concern to the Congress, whether it is in this area or any other? I mean, as a given, should we on the committee have the Justice Department's Antitrust Division carefully review the proposed industry's compromise to be sure that we are not introducing additional anticompetitive factors into the marketplace if we are adopting the proposals made by the Administration? Mr. FITZSIMMONS. Yes. Of course, I would support that the Department of Justice look at it very carefully. Let us remember that on expiration of patent, even with our proposal, anybody is free to make that compound. And, certainly, it is true; as time goes on and more producers get into the marketplace, there is a reduction in prices. I just point out that in the research that develops a new product, this is research that goes on year in and year out. And it is once in a decade, if we are lucky, that we find a product that is ultimately commercialized. It takes some 10,000 compounds to get one commercialized. Senator LEAHY. But even with that, should we be able to justify the details of the toxicity or the metabolism and the environmental data? Should that be allowed to remain a trade secret? Mr. FITZSIMMONS. We believe it should remain a trade secret for the period that we are suggesting here, Senator. Dr. EARLY. From a use standpoint. Mr. FITZSIMMONS. From a use standpoint, but in terms of being able to assess the data, to be certain that EPA's judgment is valid, and we are, in fact, protecting the public's interest. Senator LEAHY. Environmental data, would you say that that could be made available somewhat more easily than the technical data? For example, would we have to have a summary and then have available the technical aspects of it, only to certain qualified individuals, or could all the environmental data be available? Mr. FITZSIMMONS. Well, it is difficult to draw a line. We think the same principles should apply. I would be the first to say, generally speaking, the cost of developing the latter data is less than the toxicological data. But, where do you draw the line? I think the principle is applicable in either instance. Senator LEAHY. There may be more concern, though, on the part of the public to having the availability of the environmentatl data-I mean, readily available; in detail, available for copying, and so forth. And you do not see the public reaction, say, if they have more of an interest in the environmental data than they do in the technical data. Mr. FITZSIMMONS. Well, I would not agree they have a greater interest in the environmental data. I think their first concern is their own health and welfare. Senator LEAHY. Well, that comes into that. Mr. FITZSIMMONS. Which is the toxicological, primarily. Senator LEAHY. So, again, my question was the details of toxicity and of environmental data. Mr. FITZSIMMONS. I think they all fall into the same category. Senator LEAHY. You think they should be available only under the other terms? Mr. FITZSIMMONS. Yes, sir, that is correct. Dr. EARLY. May I make one comment, please? Senator LEAHY. Yes, sir. Dr. EARLY. It will be very short. You talked about increasing or decreasing cost is more competitive coming onto the market. And I think that in many situations, that will happen, as you get more competition in the market. But, let me come back and caution you, the Justice Department should also be concerned, I think, if a requirement comes out for "X" millions of dollars worth of new defensive data, no one is going to do that defensive data unless they have got some protection for that right to use their data, regardless of whether it is one or more parties. Senator LEAHY. Which is the argument that we will meet on any antitrust question of any sort. Dr. EARLY. Surely. Senator LEAHY. Thank you. We will recess until we get through this vote. [A recess was taken.] Senator LEAHY. The next witness is Ralph Engel, the president of the Chemical Specialties Manufacturers Association. Mr. Engel, you are here with whom? STATEMENT OF RALPH ENGEL, PRESIDENT, CHEMICAL SPECIAL- Your statement will be made a part of the record.* You have heard the testimony here today. What do you feel about the compromise that has been suggested by industry generally? Mr. ENGEL. We, as an association, agree with that compromise although I do have some comments with regard to another aspect of it. Senator LEAHY. What is that? *See p. 173 for the prepared statement of Mr. Engel. Mr. ENGEL. Basically, I believe the 3 (C) (1) (D) provision, as EPA continually uses it, is somewhat of a strawman. It was used for abandoning its conditional registration policy and for failure to process registrations. A review of the 3(c) (1) (D), however, demonstrates that this is not the case, that in pertinent part 3(c) (1) (D) provides that each applicant for registration of a pesticide shall file with the administrator a statement which includes an agreement to pay reasonable compensation for producing the tests they have relied upon. There is no basis in the law, frankly, for registration to be held up based upon disputes over compensation. To that degree, 3(c) (1) (D) is a strawman. I recognize that the issue is related somewhat to 10(b), which is the trade secret provisions. CSMA believes firmly that trade secrets are important to our industry and should be recognized as such. We are research intense rather than capital equipment oriented. As an industry, we don't invest huge sums in capital equipment, our investment is in the research, and that has to be protected. When the recent dispute came up regarding 3 (c) (1) (D) and 10(b) in the form of lawsuits. This occurred based on the fact that EPA had made known that they were going to release all data, trade secret or otherwise. Senator LEAHY. What about the question I raised this morning about the Department of Justice, their view that the proposed industry amendment, the statutory year period patent protection should be sufficient, according to them. If we had the proposed industry amendment would that grant the developer to test out a 10-year period for exclusive use of this data? Would it be an extension of the 17-year patent right? Mr. ENGEL. I would like our general counsel to answer. Mr. O'CONNOR. I think the Department of Justice's position reflects a misunderstanding of how patent protection and trade secret protection go hand in hand. In fact, the Supreme Court in the Kewanee Oil Co. case in 1974 said there is nothing inconsistent between patent protection on the one hand and trade secret protection on the other. The patent goes to create an exclusive right to sell a given pesticide. The trade secret protection has nothing to do with the product itself but rather, with the data that gives rise to the right to sell it as a pesticide under the FIFRA. So, there is a distinction. You can't patent safety and efficacy data. To the extent it is protected, it is protected as a trade secret, and this distinction has got to be kept in mind. I think DDT perhaps is as good an example as any for illustrating the difference. DDT was discovered in the late 1800's. Its insecticidal properties, however, weren't realized until something like 1930. DDT is a compound that is a chlorinated hydrocarbon and this whole class of products was put on the market in the late 1940's. They are all off patent. There are lots of registrations for varying uses of these pesticide. products and the financial investment in these registrations is not in the product itself but rather, in sustaining the efficiency and safety of the product. It is that data that the association is seeking to have protected as a trade secret, as distinct from the product. Most of our products are using commonly manufactured pesticides. What these companies in the specialty chemical field do is develop new uses by combinations and permutations of active and inert ingredients and it is the data that supports those new uses. That is their financial investment as distinct from the cost of developing the active ingredient itself. Senator LEAHY. Then would you agree with their interpretation of trade secrets, and I will repeat what I quoted earlier coming from their letter: Trade secret status should be routinely extended only to truly secret information concerning manufacturing processes and perhaps a list of deliberately added inert ingredients in formulated in-use products? Mr. O'CONNOR. I see no basis for limiting trade secret protection that narrowly. There is no reason why trade secret protection can't cover safety and efficacy data if the company can prove that the data meets the test for trade secret. Senator LEAHY. Senator Lugar. Mr. ENGEL. May I make a comment ? Senator LEAHY. Sure. Mr. ENGEL. I didn't get the opportunity at the beginning to indicate that we represent a vast industry aside from agricultural pesicides. We represent nonagricultural pesticide industries and, as such, we have some problems that I have outlined in short a statement that I would like to cover if I may. One of the major problems that we have is the separation of administration of nonagricultural pesticides from agricultural pesticides. We would like seriously to see that happen. In fact Senator LEAHY. I would ask, incidentally, and I don't mean to be rude, but I would ask you to be brief as possible because we will have to be back on the floor at 12 noon. Everybody who is not heard by 12 will not be heard. Mr. ENGEL. I will use 5 minutes. Senator LEAHY. That will be 5 minutes from the time of the people who are waiting. Go ahead. Mr. ENGEL. Section 25 (a) of FIFRA expressly requires the administrator to recognize the difference in concept and usage of various classes of pesticides. We find, frankly, that the regulations that existed under FIFRA are agriculturally oriented. Many test requirements imposed on our membership such as disinfectant manufacturers are residue and wildlife tests, which have nothing to do with these products but refer to agriculture type pesticides. That is an area that concerns us. The separation and classification from registration for generic registration. We generally agree with this procedure but we believe it must be tied to, again, separation of agricultural from nonagricultural pesticides. These two areas, the separation and classification from registration for generic registration, are band aids. They are responding to symptoms. They don't get to the heart of the problem and the heart of the problem is the separation of the two types of pesticides and the administration of them. Conditional registration we fully support. Otherwise, we have an anticompetitive situation that has developed because conditional regis |