Philip Morris, Inc. v. Reilly

Brief Fact Summary.

Tobacco companies sued the state of Massachusetts under the Takings Clause of the Fifth Amendment after being required to provide their ingredients list to all tobacco products sold within the state.

Synopsis of Rule of Law.

A regulation depriving someone of intellectual property is considered a taking under the Fifth Amendment.

Facts.

Massachusetts required tobacco companies to give their ingredient lists to the state for all products sold within the state. The tobacco companies sued claiming that disclosing their ingredient lists was an unconstitutional taking of their trade secrets. The trial court granted judgment in favor of the tobacco companies and the appeals court reversed. The appellate court then agreed to rehear the case.

Issue.

Whether a regulation depriving someone of intellectual property is considered a taking under the Fifth Amendment?

Held.

Yes. The judgment of the trial court is affirmed. A regulatory taking exists because tobacco companies have made significant investments to protect their trade secrets and if their trade secrets are disclosed, it would have a negative impact on their brand. Similarly, it is not clear whether the disclosure of the ingredient list would promote public health. Because there is no just compensation, the government violates the Takings Clause.

Dissent.

(Lipez, J.) The regulation is not inherently unconstitutional and must be determined on a case-by-case basis because the regulation only state that it may disclose some of the ingredients lists.

Concurrence.

(Selya, J.) Intellectual property should be treated as real property. As such, if courts apply a per se rule to real property, courts should apply a per se rule to intellectual property.

Discussion.

In order for a taking to be constitutional under the Fifth Amendment, the tobacco companies must receive just compensation. To determine whether a regulatory taking has occurred, the court must determine: (1) The economic impact of the regulation, (2) whether the actions of the government interferes with reasonable expectations of the company’s investments, and (3) the character of the government’s actions.