Philip A. Moffat

(202) 789-6027

pmoffat@bdlaw.com

Nanotechnology EHS Legal Briefing: How

companies are reducing their liability exposure

while achieving regulatory compliance and

market acceptance

_______ Insurance Company

Boston, MA

July 15, 2008

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Overview of Presentation

• Adequacy of existing legal authorities to

regulate EH&S risks

• Tort liability considerations specific to

nanotechnology

• Current voluntary initiatives and practices

to achieve compliance and reduce

potential liability

Existing Legal Authorities

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Observation

• Majority of governments consider existing legal authorities adequate, although future amendments are possible

• Few proposals for laws/regs specific to nano

• Near-term focus on improving implementation through:

- gaining experience with nano;

- developing science for better risk assessment and management; and

- developing guidance, methodologies, classifications, implementing regs, etc.

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Available Opinions on Adequacy

▪ European Commission Communication to Parliament and Council – June 2008

- Recent proposed amendment to REACH annexes to require registration of carbon and graphite

▪ Environment Canada and Health Canada Proposed Regulatory Framework under CEPA – Sept. 2007

• Council of Canadian Academies – July 2008

• U.S. Council on Envt’l Quality – Nov. 2007

▪ FDA Nanotechnology Task Force – July 2007

▪ American Bar Association SEER – June 2006

▪ Australian Office of Nanotechnology (DIISR) –Sept. 2007

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Important Minority Trend - Local Laws

Specific to Nanotechnology

• Berkeley, CA ordinance effective June 2007:

• Applies to “manufactured nanoparticles” – one axis < 100 nm

• File written disclosure plans, regardless of amount used/produced, identifying:

- nanoparticle production or use;

- current toxicity data; and

- plans for safe handling, monitoring, disposal, and release prevention & mitigation

• Cambridge, MA considering similar ordinance: advisory panel assembled and recommendation expected in 2008.

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Important Minority Trend - State Laws

Specific to Nanotechnology

• California Assemblyman Mike Feuer (D) held a public meeting in April to discuss alternative regulatory approaches that could be incorporated in future legislation.

- Proposal expected in 2009

• Wisconsin State Representative Terese Berceau (D) proposing creation of a registry & reporting system either through legislation or regulation for submission of information re:

• type of nanomaterials,

• test methods,

• properties,

• use,

• handling, and

• disposal activities.

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Improving Implementation

• Variety of international and domestic govt’l and quasi-govt’l initiatives to improve implementation of existing legal authorities.

- OECD

- ISO

- UK Defra VRS

- EPA NMSP

- Others

▪ Intended to advance science and methodologies supporting risk assessment and management, as well the knowledge and experience of regulators.

▪ Presentation will not emphasize scientific efforts

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International Initiatives - OECD

▪ Organization for Economic Cooperation and Development (OECD)

- 30 member countries

- Important forum for intergovernmental cooperation

▪ Established Working Party on Manufactured Nanomaterials (WPMN) in September 2006.

• Eight different projects have potential to help establish a globally-harmonized risk assessment & management system for nano.

• Work product likely to influence national regulatory programs and industry practices.

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International Initiatives – ISO TC 229

• Voluntary, consensus-based standards

• Strong liaison with OECD WPMN

• Four Working Groups:

- Terminology & Nomenclature (WG1)

- Metrology & Characterization (WG2)

- EH&S (WG3)

- Material Specifications (WG4)

• Technical report on occupational practices and technical specification on nanoparticle terminology available soon.

• ISO standards may influence future regs, industry practices, and eventually standards of care.

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Foreign Government Initiatives - UK

Many foreign gov’ts active – UK is a good example

• UK Dept of Environment, Food and Rural Affairs (Defra) Voluntary Reporting Scheme (VRS)

- existing environmental and human health risk data from industry and research organizations on free, engineered nanoscale materials in the UK

- unbound at any phase of life cycle, and deliberately engineered to have ≥ 2 dimensions within 0 – 200 nm

• Environment Agency May 19, 2008 Interim Advice re CNT wastes- classify and handle unbound CNT wastes as “inorganic

wastes containing dangerous substances”

- high-temperature incineration recommended

- concern about physiological properties similar to asbestos

• British Standards Institution terminologies & guidance

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Domestic Initiatives

Numerous federal agencies involved:

• NNI- Funding framework for EH&S and other R&D research of 25

federal agencies

• EPA

- White Paper

- Nanoscale Materials Stewardship Program

- TSCA guidance (new v. existing)

- FIFRA enforcement and petition (nanoscale silver)

• FDA

- Nanotechnology Task Force

• NIOSH

- Information Exchange

- Draft Medical Screening Guidance

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EPA Nanoscale Materials Stewardship

• Voluntary program under TSCA for “engineered nanoscale materials”

- Basic program for:

- submission of “known or reasonably ascertainable” data on “existing” substances (PMN +), and

- Risk management program that “considers” nano.

- In-depth requires:

- data generation; and

- evaluation of effectiveness of risk management measures.

• Proposal criticized for, inter alia, a lack of:

- deadlines, and

- rules mandating data submission by non-participants.

• 16 Participants in “basic” program to date

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EPA TSCA Guidance

• Guidance released in July 2007 Federal Register.

• Confirms that physical form (e.g., particle size) or properties (e.g., reactivity) will not determine whether a substance is “new” or “existing.”

• Analysis of “molecular identity” will continue to focus on structural and compositional features:

- types and numbers of atoms in a molecule,

- the types and number of chemical bonds, and

- the connectivity and spatial arrangement of atoms in a molecule.

• Current Inventory listings include nano- and bulk-scale versions of chemical substance.

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FDA Initiatives

• Nanotechnology Task Force Report

Released in July 2007

• Three-part report:

- Reviews state of science re nanomaterial

biological interactions

- Identifies science issues of importance to mission

(i.e., biological interactions & current testing

methods) and recommends keeping abreast

through collaboration

- Examines regulatory authority and offers

recommendations

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NIOSH Initiatives

National Institute of Occ. Safety & Health:

• Lead gov’t agency focusing on nanoparticle

occupational exposure research

- Non-regulatory; part of the CDC

• Information Exchange - guidance document on

current best practices

- Field Research Team site visits

- Seeks collaboration with industry, et al.

• Interim guidance on medical screening of

workers potentially exposed to nanoparticles

- No specific tests recommended at this time

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OSHA Initiatives

• No new rulemaking expected in near

future.

• No OSHA nano-specific PELs or other

stds.

• Current general regulations remain

applicable:

– General Duty Clause

– Hazard Communication

Tort Liability Considerations

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Observations

• Common law and statutory tort liability theories are available and appear adequate for current and near-term developments.

- Revolutionary new products in mid- to long-term may require evolution of the law to include new causes of action, damages, etc.

• Nanotechnology currently has a unique risk profile that will present litigation challenges for claims that arise across various aspects of the product life cycle.

- Worker exposure claims

- Product claims

- Environmental release claims

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Unique Litigation Risk Profile

Nanotechnology has a unique litigation risk profile:

• Evolving scientific knowledge re EH&S risks

- Complex general/specific causation analyses possible

- Latent effects could pose challenges for identifying when cause of action accrued

- Invitation for “junk science” by hired experts

- Invitation for “creative” causes of action (e.g., med monitoring)

• Evolving industry practices and standards

- Invitation to second-guess past risk assessment and management practices (e.g., testing, exposure controls, warnings, instructions)

• Evolving regulatory standards

- Invitation to second-guess past practices and to allege failure to disclose risk information to regulators or others

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Liability for Worker Exposures

• Workers’ Compensation may not always be a complete defense:

• California: Johns-Manville Corp. v. Rudkin, 27 Cal. 3d 465 (Cal. 1980) (finding actionable at law the aggravation of disease caused by concealment of its connection with asbestos hazards) .

• West Virginia: Roney v. Gencorp, 431 F. Supp. 2d 622 (S.D. W.Va. 2006) (finding actionable at law fraud re hazards of vinyl chloride monomer).

• Tort theories potentially available given company’s superior knowledge in comparison to workers:

• Intentional Misrepresentation

• Fraudulent Concealment

• Conspiracy

• Traditional product liability theories for injuries to downstream workers.

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Liability for Consumer Products

• Negligence, Strict liability, and warranty theories available:

- Design defect

• risk/utility

• consumer expectations

- Manufacturing defect

- Inadequate warning/instruction

• reasonably foreseeable risks

• Misrepresentation/Fraud

• Deceptive Trade Practices

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Liability for Environmental Releases

• Potential tort claims for harm to natural

resources, human health, & property:

- Product liability theories

- Trespass, nuisance, diminution in value

• Environmental statutes may impose liability

via citizens’ suit or gov’t action:

- State & federal NRD claims, if designated a haz

substance

- Cleanup orders under various statutes (e.g.,

SDWA, RCRA)

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Potential Damages

• Personal injury, including “creative” versions

- “subclinical” injuries

- medical monitoring

• Increased risk of future disease

• Fear-based claims

• Property Damages

- alternative water supplies

- natural resources

• Punitive damages

Minimizing Liability and

Achieving Compliance

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Observation

• Nanotechnology “sector” is proactive in addressing EH&S concerns to achieve present/future compliance and minimize liability risks:

- Many voluntary initiatives underway outside of government in addition to Nano Risk Framework

- Indicators of good practice are readily available

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Nanotechnology Occupational Safety &

Health (NOSH) Consortium

• Established in October 2005

• Industry, academia & gov’t members

• Deliverables:

- develop a nanoparticle generator and

characterize the aerosol as a function of time

- measure filtration & barrier efficiency of

various filter media (e.g., respirator, clothing,

gloves) to specific engineered nanoparticles

- develop a prototype device for daily exposure

monitoring of nanoparticles in air

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Int’l Council on Nanotechnology

International multi-stakeholder organization:

• Develop & communicate information re human health & environmental risks

– EH&S database

– Host events re EHS & nano

– Provide technical info for decision makers

– Communications development for stakeholders

• Completed studies re best practices in occupational settings

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Responsible Nano Code

• Royal Society, Insight Investment, NIA, and Knowledge Transfer Network, assembled multi-stakeholder working group.

• Voluntary, principles-based code of conduct for large & small organizations along value chain (incl. retail).

• Goal of establishing international consensus on “good practice” in as many sectors as possible.

• Seven principles & indicators of compliance.

• Framework of Good Practice and Benchmarking Process under development.

- Independent assessment of adherents & non-adherentsbeginning in 2009

• September/October 2008 release date.

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Responsible Nano Code

Principles include:

- Board (or delegate) assumes responsibility for

nano-developments & compliance with Code

- Involve stakeholders proactively

- I.D & minimize occupational risk (including

downstream)

- Perform thorough risk assessment & management

across product life cycle

- I.D. & respond to social - ethical implications

- Engage suppliers & partners to adopt Code

- Transparent re activities & Code implementation

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Good Practice #1

•Keep updated on science supporting risk assessment and management.

“Experts are overwhelmingly of the opinion that the adverse effects of nanoparticles cannot be reliably predicted or derived from the known toxicity of the bulk material.” Source: Allianz & OECD, Small Sizes that Matter

(2005)

“Until more is known about their environmental impact we are keen that the release of nanoparticles and nanotubes in the environmentbe avoided as far as possible.” Source: Royal Society and the Royal

Academy of Engineering, Nanoscience and nanotechologies: Opportunities and uncertainties (2004) (emphasis added).

• ICON, NIOSH, SAFENANO databases

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Good Practice #2

An established process for regular evaluation, mgmt & communication of potential risks as data develop is important for minimizing liability and achieving compliance.

- Include risks across product life cycle

- Independent testing when appropriate

- Employee training integrated into process

- Designated responsible person(s)

- Auditing when appropriate

- Assists with “good” documentation practices

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Good Practice #2 – cont’d.

Why is Practice #2 Important?

• Helps satisfy duties to test, warn and may facilitate I.D. of avoidable risks in product design

- liability avoidance?

- reduces potential for harm/injury and risk of paying compensatory damages

- may avoid punitive damages

• Helps achieve current and possibly future regulatory obligations (e.g., OSHA)

• Current opportunities: Nano Risk Framework, existing product stewardship practices/policies, Responsible Nano Code, to name but a few

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Good Practice #3

• Keep updated on industry standards and practices.

- Benchmarking: N.A. industry worker protection efforts:

- “North American organizations more frequently reported administering nano-specific EHS programs including training, and monitoring the work environment than organizations in other parts of the world. Similarly, North American organizations more often reported using high capital cost engineering controls such as clean rooms, closed piping systems, and separate HVAC systems, compared to organizations from Asia that indicated more widespread use of glove boxes, glove bags and respirators.”Source: ICON, A Survey of Current Practices (2006).

- Life Cycle Assessment ISO 14040: 2006

- Occup. Inhalation Exposure & Assmt ISO TR 27628: 2007

• Many sources of info - ISO, ASTM, NIOSH, NOSH, ICON

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Good Practice #4

• Engage regulatory agencies as appropriate.

- May reduce later allegations of withholding information

from regulators.

- May help I.D. current & future compliance obligations.

- May help educate regulators.

- May reassure public and other stakeholders.

• Many opportunities available:

- EPA NMSP

- NIOSH Info Exchange & Field Team Visits

- UK Defra VRS

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Conclusion

• Most governments consider current legal authorities adequate to regulate nanotechnology, but they are working to improve implementation with the assistance of independent scientists and industry.

• Nanotechnology currently has a unique profile that may increase risk of tort litigation and pose challenges for defendants.

• Nanotechnology “sector” is proactively addressing potential liability, regulatory, and public perception risks.