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2000 Term, Number 9 / February  20, 2001

Today the Supreme Court granted certiorari in three cases, two of which are of potential interest to the business community. Amicus briefs in support of the petitioners are due on Friday, April 6, 2001, and amicus briefs in support of the respondents are due on Monday, May 7, 2001. Any questions about these cases should be directed to Donald Falk (202-263-3245), Eileen Penner (202-263-3242) or Miriam Nemetz (202-263-3253) in our Washington office.

1. OSHA –– Coast Guard –– Jurisdiction to Regulate Uninspected Vessels. The statutory authority of the Occupational Safety and Health Administration ("OSHA") to regulate workplace safety conditions does not extend to "working conditions of employees with respect to which other Federal agencies * * * exercise statutory authority to prescribe or enforce standards or regulations affecting occupational safety or health." 29 U.S.C. § 653 (b)(1). The Coast Guard is statutorily authorized to "administer laws and promulgate and enforce regulations for the promotion of safety of life and property on and under the high seas and waters subject to the jurisdiction of the United States covering all matters not specifically delegated by law to some other executive department." 14 U.S.C. § 2. The Court granted certiorari in Chao v. Mallard Bay Drilling, Inc., No. 00-927, to decide the extent to which the Coast Guard's exercise of its authority to regulate safety on marine vessels precludes OSHA from regulating the safety of seamen.

An explosion on a drilling barge operated by Mallard Bay Drilling, Inc., killed four employees and seriously injured two others. The Coast Guard investigated the explosion and concluded that Mallard had failed to take certain appropriate steps to prevent and handle explosions. Lacking regulations governing those matters, the Coast Guard referred the matter to OSHA. Based on the Coast Guard's investigation, OSHA charged Mallard with several violations of the Occupational Safety and Health Act.

In its administrative appeal, Mallard did not challenge the merits of the charges, asserting instead that OSHA lacked authority to regulate working conditions aboard its barge. The administrative law judge rejected Mallard's position, finding that OSHA's jurisdiction was not preempted by the Coast Guard's regulation of marine vessels. The Occupational Safety and Health Review Commission affirmed.

The Fifth Circuit reversed. 212 F.3d 898 (2000). The court of appeals held that the Coast Guard has exclusive authority over the working conditions, including the safety conditions, of seamen. The court concluded that "‘the Coast Guard's comprehensive regulation and supervision of seamen's working conditions [creates] an industry-wide exemption [from OSHA] for seamen serving on vessels operating on navigable waters.'" Id. at 901 (quoting Donovan v. Texaco Inc., 720 F.2d 825, 826 (5th Cir. 1983)). The court rejected the Secretary of Labor's position that the Coast Guard's authority does not extend to uninspected vessels, which the Coast Guard has regulated to only a limited extent, and which it does not regularly inspect to ensure compliance with safety standards.

The decision of the Fifth Circuit conflicts with decisions of the Second, Ninth, and Eleventh Circuits, which have held that the Coast Guard's regulation of uninspected vessels is not so pervasive as to preclude OSHA jurisdiction over safety conditions on those vessels. See Herman v. Tidewater Pac. Inc., 160 F.3d 1239 (9th Cir. 1998); In re Inspection of Norfolk Dredging Co., 783 F.2d 1526 (11th Cir. 1986); Donovan v. Red Star Marine Servs., Inc., 739 F.2d 774 (2d Cir. 1984).

This case is of interest not only to businesses operating on the navigable waters, and other businesses subject to workplace regulations imposed by agencies other than OSHA, but to all businesses that oppose an expansive construction of OSHA's regulatory authority. The Supreme Court likely will decide whether Section 653(b)(1) limits preemption to the specific "working conditions of employees with respect to which" another federal agency has actually issued and enforces regulations, or whether instead another agency's regulation of some working conditions in a particular industry precludes OSHA regulation of other conditions in the same industry.

2. Patents — Sexually Reproduced Plants. The Supreme Court granted certiorari today in J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc., No. 99-1996, to decide whether sexually reproduced plants are patentable subject matter and therefore may receive the protection afforded by utility patents to any "new or useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." 35 U.S.C. § 101. Two other statutes specifically make available intellectual property protection for plant varieties, using standards that are different (and somewhat more lenient) than those governing the issuance of a utility patent. The Plant Patent Act (PPA), 35 U.S.C. §§ 161-164, applies only to asexually reproduced plants. The Plant Variety Protection Act (PVPA), 7 U.S.C. § 2321 et seq., offers some protection for sexually reproduced plants, but the "certificates" issued under the PVPA confer narrower rights than patents, and are subject to broader exceptions.

Pioneer Hi-Bred International, Inc. holds utility patents for several sexually produced corn hybrids. J.E.M. Ag Supply, Inc. and other seed vendors (collectively "J.E.M.") purchased and then resold Pioneer seed corn of the patented hybrid varieties. Because J.E.M. is not an authorized sales representative for Pioneer, and is not otherwise licensed to make, use or sell the patented hybrids, Pioneer sued J.E.M. in an Iowa federal district court, alleging that J.E.M. had infringed Pioneer's patents. J.E.M. counterclaimed for a declaratory judgment that Pioneer's patents were invalid. Contending that the PPA and the PVPA provide the only means of intellectual property protection for plants, J.E.M. moved for summary judgment. The district court denied summary judgment, 49 U.S.P.Q.2d 1813 (N.D. Iowa 1998), but certified the case for interlocutory appeal, which the Federal Circuit accepted.

The Federal Circuit affirmed. 200 F.3d 1374 (2000). The court of appeals rejected J.E.M.'s contention that the enactment of the PPA and PVPA reflected congressional intent to exclude plants from the broad definition of patentable subject matter in Section 101. The Federal Circuit observed that the Supreme Court had held that patentable subject matter under Section 101 of the Patent Act included "anything under the sun that is made by man." Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). That scope included living things (in Chakrabarty, a genetically engineered bacterium). The court of appeals noted that the Court in Chakrabarty had rejected the argument of four dissenting Justices who contended that the PPA and the subsequent legislative history of the Patent Act established that Congress did not believe that utility patents were available for living things. 200 F.3d at 1378. In the Federal Circuit's view, the intervening enactment of the PVPA did not impose any new limit on the scope of Section 101, because "the PVPA does not purport to remove plants from the patent statute." Ibid. Although Pioneer also holds PVPA certificates on the patented hybrids, the court believed that the two forms of protection were complementary rather than mutually exclusive. Ibid.

This case is important to the biotechnology industry and other businesses involved in the development or use of new plant varieties. The case could have a more sweeping impact on the biotechnology industry if the Court reconsiders the scope of its 5-4 decision in Chakrabarty. 

* * * * *

Readers of the Docket Report may be interested in a recent Supreme Court decision in the field of environmental law. Mayer, Brown's client Solid Waste Agency of Northern Cook County ("SWANCC"), a consortium of 23 municipalities, had been stymied for more than a decade in its efforts to develop a landfill by the U.S. Army Corps of Engineers, which claimed jurisdiction over the landfill site under Section 404 of the Clean Water Act on the ground that numerous ponds there serve as habitat for migratory birds. Though Section 404 reaches only "navigable waters," the Army Corps interpreted that term to include all waters and wetlands "the use, degradation or destruction of which could affect interstate commerce." 33 CFR §328.3(a)(3). Its "migratory bird rule" treated any actual or potential use of any water or wetland by migratory birds as affecting interstate commerce, on the theory that people engage in interstate commerce to hunt and watch migratory birds. 51 Fed. Reg. 41217. In this way, the federal government asserted jurisdiction over tens of millions of acres of isolated, non-navigable intrastate ponds, mudflats, and wetlands. Landowners and businesses were required to obtain permits from the Corps for any activity that filled or dredged jurisdictional water—activities that included not merely building upon or regrading a wetland, but even "walking, bicycling or driving a vehicle through a wetland." 58 Fed. Reg. 45,020. Section 404 permit proceedings could be immensely costly and time consuming. In SWANCC's case, for example, the permit proceedings took four years and generated a 47,000 page administrative record.

On January 9, the Supreme Court, by a 5-4 vote, disapproved both the "migratory bird rule" and the underlying regulation that purports to reach any water or wetland with some commerce connection. Rejecting the Solicitor General's arguments in defense of federal jurisdiction, the Court held that Section 404 of the Clean Water Act by its plain terms applies only to waters that are navigable in fact or with improvements, and to waters and wetlands that have a "significant nexus" to and are "inseparably bound up with" navigable waters, such as tributaries of navigable rivers and wetlands "adjacent to open water." In addition—continuing its recent trend of rejecting overly expansive interpretations of the federal commerce power and preserving the powers of states in our federalist system—the Court held that the migratory bird rule raised "significant constitutional and federalism questions" and thus was not entitled to Chevron deference. There were, the Court observed, serious questions whether the activity regulated by the rule "substantially affects interstate commerce." In addition, the rule usurped "the States' traditional and primary power over land and water use." SWANCC's position was supported in the Supreme Court by 45 amicus organizations representing a broad range of business interests, including developers, farmers, ranchers, mining companies, industrial landowners, and states and municipalities, and was opposed by numerous environmental and civil rights groups and the State of California.

The Court's decision is of immediate benefit to all landowners and businesses faced with claims of federal authority over isolated wetlands or waters. Beyond that, the Court's willingness to set aside a broad agency interpretation of a major environmental statute, and its continuing interest in keeping federal power within constitutional limits, should encourage businesses troubled by expansive applications of other environmental laws, such as the Endangered Species Act and CERCLA. Chicago partner Tim Bishop argued the case for SWANCC in the Supreme Court and was assisted on the briefs by Sharon Swingle. Mayer, Brown lawyers have extensive experience with property rights litigation and appeals, including litigation under the Clean Water Act, Endangered Species Act, and other environmental statutes, claims for just compensation under the Takings Clause, and constitutional and statutory challenges to federal or state regulations that interfere with property rights. More details of Mayer, Brown's practice in this area may be found on the Web at www.mayerbrown.com/propertyrights, or by calling Tim Bishop at 312-701-7829.

This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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