Carson Products Co. v. Califano

594 F.2d 453
CourtCourt of Appeals for the Fifth Circuit
DecidedMay 4, 1979
DocketNo. 77-1603
StatusPublished
Cited by16 cases

This text of 594 F.2d 453 (Carson Products Co. v. Califano) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Carson Products Co. v. Califano, 594 F.2d 453 (5th Cir. 1979).

Opinion

CHARLES CLARK, Circuit Judge:

This appeal concerns the efforts of the Carson Products Company to have an ingredient in one of its cosmetics products exempted from federal disclosure requirements as a trade secret. Carson raises a due process challenge to the procedures used by the Food and Drug Administration to determine the trade secret status of the ingredient, and it attacks on the merits the FDA’s determination that the ingredient is not a trade secret. We affirm. Carson was afforded due process. The FDA’s action denying trade secret status for the Carson ingredient was based on substantial evidence and- was not arbitrary or capricious.

I.

The Carson Products Company manufacturers “Gold Magic Shaving Power.” Gold Magic is a “depilatory,” a substance used for the removal of hair. The shaving powder is mixed with water and used to remove hair as an alternative to shaving. It has been successful on the market, particularly with black males, who frequently experience special skin irritation problems from shaving with a razor.

Under the Fair Packaging and Labeling Act, 15 U.S.C. §§ 1451 et seq., the Secretary of Health, Education and Welfare is authorized to promulgate regulations for the public disclosure of the ingredients of consumer products. 15 U.S.C. § 1454. Pursuant to section 5(c)(3)(B) of the Act, 15 U.S.C. § 1454(cX3)(B), the FDA has issued regulations providing that “The label on each package of a cosmetic product shall bear a declaration of each ingredient in descending order of predominance.” 21 C.F.R. § 701.-3(a). Only the names of the ingredients in the order of volume used in the product need be declared; nothing in the Act or the regulations requires the disclosure of percentages or quantity levels of particular ingredients.

The Act expressly states that its disclosure requirements shall not “be deemed to require that any trade secret be divulged.” 15 U.S.C. § 1454(c)(3)(B). In accordance with that statutory caveat, the FDA regulations exempt from mandatory disclosure any ingredient certified by the FDA as a trade secret. 21 C.F.R. § 2061(a). If the ingredient qualifies as a trade secret it may be referred to on the product package with the phrase “and other ingredients.” 21 C.F.R. § 701.3(a).

On March 19, 1973, Carson asked the FDA to declare one of the ingredients in Gold Magic, referred to here by the pseudonym “05,”1 a trade secret exempt from disclosure. Ingredient 05 is included in Gold Magic to offset two problems that had previously prevented widespread public acceptance of depilatories for removal of facial hair. One problem was that the ingredients traditionally used in depilatories tended to produce an unpleasant odor; a second problem was that the depilatory action of those ingredients was not fast enough to work upon a man’s beard within a reasonable time. After five years of research at a cost of $350,000, Carson discovered that the inclusion of ingredient 05 in its product resulted in a fast-acting depilatory with a pleasant scent. Although ingredient 05 itself has depilatory properties, its primary function in Gold Magic is to act as an accelerator for the main depilatory in [456]*456the product, calcium thioglycolate.2 Carson explained both the research history and the competitive advantages of ingredient 05 in its submission to the FDA, and further asserted that none of its competitors appeared to know of its presence in Gold Magic.3

On August 19, 1974, the FDA denied trade secret status for ingredient 05 with the statement that “scientific and technical literature in the field of cosmetics indicate that this type of ingredient is used in-the formulation of this type of cosmetic product.” The FDA letter cited a single article from a scientific journal to support its position that the use of ingredient 05 in prod-, ucts such as Gold Magic had been previously disclosed.4

Carson administratively appealed the FDA decision, presenting written response to the FDA’s interpretation of the scientific literature cited by the agency. On January 2, 1975, the FDA again denied Carson’s request. In addition to the article previously relied on by the FDA, the agency cited two foreign patents as examples of disclosure of the use of ingredient 05. The letter stated that: “It is entirely possible that some competitors are not aware of this specific use of this ingredient, and that no other depilatory presently uses it. In our judgment, this is not sufficient for it to be determined to be a trade secret in view of its mention in the public literature.” Carson asked the FDA on May 20, 1975, to reconsider its decision, submitting a written rebuttal to the significance of the two foreign patents cited by the agency in its January 2, 1975, letter. The FDA took the position that the January 2, 1975, denial constituted final agency action which could not be reconsidered pursuant to FDA regulations, and it refused to reopen the matter.

Still unwilling to concede, Carson resubmitted its products statement to the FDA on May 20, 1975, arguing that the FDA was free to reconsider any matter at any time either at its own initiative or at the behest of any interested person. Carson did not submit any additional substantive arguments concerning ingredient 05 with its request, but relied on all its past written submissions concerning its interpretation on the sources cited by the FDA.

In its response on December 4, 1975, the FDA stated that it had reconsidered the issue “in its entirety,” including all prior written submissions made by Carson concerning the sources that had been previously cited by the FDA. The FDA concluded that “[ajfter reconsidering all data and information submitted,” ingredient 05 did not qualify as a trade secret. The letter stated that its conclusion was “based on the reasons set forth in our letter of January 2, 1975.”

Carson filed suit in the District Court for the Southern District of Georgia challenging the FDA’s determination that ingredient 05 was not entitled to classification as a trade secret. On cross motions for summary judgment, the district court found against Carson, holding that as a matter of law the FDA’s action was based on substantial evidence and was not arbitrary or capricious. See 5 U.S.C. § 706(2)(A), (E). On appeal Carson challenges the district court’s judgment on the merits, and raises for the [457]*457first time a due process attack on the procedures followed by the FDA.

II.

Carson alleges that the procedures utilized by the FDA to evaluate Carson’s trade secret claim violated due process. Carson relies primarily on a recent decision by the United States District Court for the District of Columbia, Zotos International, Inc. v. Kennedy, 460 F.Supp.

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594 F.2d 453, Counsel Stack Legal Research, https://law.counselstack.com/opinion/carson-products-co-v-califano-ca5-1979.