‘Actual Harm’ Tops FTC Concerns, Acting Chief Says

By Joyce E. Cutler

Preventing actual — rather than theoretical — harm, is a key issue for the Federal Trade Commission, acting FTC Chairman Maureen Ohlhausen told a Silicon Valley audience Oct. 26.

The commission is focused on actual harm from privacy protections to patents, Ohlhausen said. That means not blocking a legitimate innovation that competitors might think is unfair to blocking practices that lead to identity theft.

“Is it likely to happen?” Ohlhausen said. “It’s not just any injury.”

As an example of actual harm, Ohlhausen pointed to a 1971 case in which the agency blocked Philip Morris Inc. from inserting samples of razor blades in home delivered Sunday newspaper advertisements. “We didn’t have to wait for kids to swallow the razor blades to say that was an unfair practice and you have to stop.”

FTC has brought more than 500 privacy and data enforcement cases, Ohlhausen said during a talk at Cooley LLP in Palo Alto, Calif. FTC recently announced it was investigating Equifax Inc. following a data breach that exposed the credit report records of some 143 million U.S. consumers and others around the globe.

Yet often the injury from a data breach, for example, can’t be traced to a specific actor and the agency instead looks at the data involved. The FTC pursued Wyndham Worldwide Corp. for data breaches in which criminals in the Ukraine used the data for identity theft. “That’s kind of where I’m trying to draw the line between substantial injury and theoretical,” she said.

Wyndham agreed in December 2015 to implement a comprehensive data security program and file compliance reports for 20 years to settle FTC charges that lax data security “unfairly exposed” hundreds of thousands of customers’ payment card information.

Patent Protection

Patents are hugely important for Silicon Valley, and the issue came up during a question and answer session with the audience.

FTC lawyers are delving into the interface of patent law and antitrust over concerns about “patent assertion entities,” or PAEs. PAEs don’t make a product and instead make money from their patents through licensing and litigation that generally is settled for less than $300,000, Ohlhausen said.

“What we’re trying to get at is there a litigation problem? Is there is an IP problem?” she said. Ohlhausen has been reluctant to push back against companies’ aggressive use of patent licenses, citing the need to protect their innovation. In a report released last October, the agency stopped short of recommending law changes to address potential litigation abuse.

The bigger impact, she said, will come from the U.S. Supreme Court’s ruling in TC Heartland v. Kraft Foods Group Brands that patent owners must sue where an alleged infringer has a place of business. That decision is designed to stop patent trolls from filing lawsuits in court districts that are deemed friendly to patent owners.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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