FTC Should Recognize Its Limitations, Need for Education, Ohlhausen Says

Ohlhausen said it’s important to involve people who are more knowledgeable, which means hiring technology-savvy people at the agency and recruiting input from stakeholders. In recent years, the FTC created the position of chief technologist -- “an excellent idea” -- and is “trying to hire staff lawyers and economists who have some technology background,” she said. The agency encourages industries to craft best practices and self-regulation and seeks input from stakeholders through workshops, she said. That’s in an attempt to answer the question, “What does the commission need to know as the market changes, as technology changes,” Ohlhausen said.

Ultimately, the FTC is “a consumer-oriented agency,” Ohlhausen said. “We need to be careful that we're not taking choices away from consumers.” Instead, the FTC is always considering what consumers want from and need to know about these changing markets and technologies, she said. Evaluations of the agency shouldn’t be based solely on how many cases it brings or settlements it reaches, she continued. Ultimately, commissioners must ask, “does it make consumers better off,” she said.

It’s important to have all stakeholders at the table for discussions, said Gigi Sohn, president of Public Knowledge. Sohn pointed to the World Conference on International Telecommunications. Many developing nations signed on to the International Telecommunication Regulations pushed by “authoritarian regimes” because they felt they wouldn’t have a voice in the conversation otherwise, she said: “We have to be willing to engage … and make them feel like they have a voice,” even if it means government entities and companies providing the funds those developing countries need to be able to participate.

The FTC should investigate patent assertion entities (PAE), said economics Prof. Carl Shapiro of the University of California-Berkeley and former member of the White House Council of Economic Advisers in the Obama administration. “I encourage you to do an investigation to shine sunlight on” the companies that litigate patents for profit rather than to protect the innovation protected by the patent, Shapiro told Ohlhausen. “More and more, there are funds investing in these, there are auctions, it’s a whole business model,” he continued. “There are shell companies all over the place here.”

Ohlhausen pointed out that the FTC held a workshop on PAEs in December (CD Dec 11 p11). “It’s a good first step because we should know what we're doing,” she said. The FTC also submitted comments with the Department of Justice to the U.S. Patent and Trademark Office about requiring PAEs to disclose information about the owner of the patent, she continued. “There are a variety of things we're going to be doing."

Music streaming service Spotify has been sued for patent infringement in the U.S. four times since it started in the U.S. 18 months ago, said General Counsel Jared Grusd. “The application of patent law to startups and to growing companies is an area that we're particularly attuned to."

The over-enforcement of patent rights also happens in the realm of copyright, Sohn said. There is a “general abuse” of the Digital Millennium Copyright Act takedown process and “general abuse of copyright,” she continued: “I don’t think it’s as stark as the patent situation … but I don’t think copyright and trademark should escape the same scrutiny” as patent enforcement problems. Copyright holders should think about what they can do to minimize piracy, including making content “ubiquitous, fairly priced and easy to use,” she said. “I'd love to hear the content companies talk about what their best practices are."

Voluntary stakeholder efforts can work, said Sohn. She pointed to the Copyright Alert System -- a partnership between ISPs and the MPAA and RIAA through which the service providers notify, educate and eventually penalize subscribers who access infringing content through peer-to-peer networks -- for which she’s on the advisory board. “It’s not a perfect system, but it’s a lot better than legislation,” she said.

There’s a place for antitrust policy in the digital space, said Howard Shelanski, director of the FTC Bureau of Economics, speaking for only himself on a later panel. Antitrust policy opponents often argue that incumbent firms and new entrants to the market have the same incentive to innovate, but that ignores the fact that incumbent firms have an equal, if not stronger incentive, to block those new entrants from accessing the market, he said: This should be considered “undercounting” the cost of under-enforcement. Incumbent firms can mimic innovation from smaller firms rather than innovating on their own, he said. “This is really harmful conduct” not only for the smaller firms, but for innovation in general, he continued.