Such disclosure of all chemical ingredients in products may lead to final product manufacturers being placed in the awkward situation of asking suppliers to divulge ingredient information, unique combinations of ingredients, and/or formulas that are patented, proprietary, or considered trade secrets. Many times these formulas are provided to final product manufacturers only under confidentiality agreements. The legislation, in those cases, would appear to require manufacturers to violate those confidentiality agreements by disclosing chemical ingredient information.
In addition, the bill requires that a manufacturer complete a complicated and unworkable formal process to have product information protected as a trade secret. This includes a showing of how secrecy leads to value, the ease of duplication if disclosure is made, how the chemical identity relates to how the chemical is made, how the manufacturer maintains secrecy, and how hard it is to reverse engineer the product. Most importantly, this includes disclosure of the basis for the manufacturer’s determination that its ingredients are not hazardous. That is, prove the negative.
Finally, if the state Department of Toxic Substances Control (DTSC) determines that the product is not deserving of trade secret protection for any number of listed reasons, including request from the public, the government can affirmatively disclose the product information. In order to prevent disclosure, the manufacturer will have 30 days to file for an injunction. That is an unfair and unworkable time frame.
A coalition of business interests led by the California Chamber of Commerce is opposing the bill on the grounds it increases costs to consumers and will expose confidential business information. It fears that the definition of product will be expanded “to include everything under the California sun.”
The bill would also eliminate trade secret protection after six years unless the manufacturer renews its claim. There is no apparent purpose for such a sunset provision on a trade secret claim other than to burden and place additional expense on the manufacturer. Finally, the bill provides no protections against private rights of action, including actions that may arise under California consumer fraud laws.
We could go on, but isn’t that enough reason to conclude the bill strikes the wrong balance?