It’s been reported that several websites owned by the FTC were hacked last Thursday. Seven domains were alleged taken down, including, business.ftc.gov, consumer.gov, and consumer.ftc.gov. This is allegedly the second attack on the FTC within a month.
The alleged motivation for the attacks was to protest the FTC’s reluctance to prevent a well known search engine from changing its terms of service. Also, the hackers’ efforts were allegedly in protest of the Anti-counterfeiting Trade Agreement, which has come under recent scrutiny for being overreaching and excessively intrusive.
So, what did this act really accomplish? The FTC’s consumer protection-related resources were hijacked for a period of time. Taking someone else’s property without their permission does not promote freedom of expression, which seems to be their point.
Yesterday, the FTC reported that it had filed its 11th case involving the promotion of dietary supplements via fake news sites run by affiliate marketers. Sure, companies need to be concerned about how consumers are driven to their websites. However, it appears that the driving factor for many of the FTC’s complaints involving fake news sites was not the misleading claims on the affiliates’ websites, but rather the undisclosed negative option continuity plans on the defendants’ websites and the inability of consumers to get refunds.
Even though technology has improved, it’s the same old story. At the end of the day, consumers complain to their state AG’s offices and the FTC because they claim that they were enrolled in undisclosed continuity plans, not that they lost $1.95 for a sample of a product that did not work. The FTC’s Complaint involving the sale of acai berry/colon cleanse products is yet another example of this common fact pattern.
The fact that these products were pitched through allegedly fake new sites is only icing on the cake. If companies honored their 100% money back guarantees, not enough people would complain to give the FTC the incentive to bring an action. The FTC has limited resources so many of its cases are derived from consumers’ complaints. Make no mistake that if you make claims that are on its top hit list (e.g., claims to children or claims directed at curing diseases), you could see an FTC inquiry. However, if everyone is happy, then it’s less likely that your claims will come under scrutiny.
Now, it might not be economically feasible to offer 100% refunds because companies pay out commissions to affiliates to drive consumers to their websites before consumers request refunds. This makes it even more important for companies to make sure that they have defensible positions for using any negative option continuity plans. Also, companies need to understand how consumers were pitched to arrive at their websites. If the true “product” is the continuity plan, then companies need to be ready to defend why all of the downstream affiliate marketing as well as the marketing on their own websites focused on the $1.95 product. While companies like to blur the issue, the question is fairly simple. If at the end of the day, the consumer believed that it was just buying the $1.95 product instead of signing up for the $79.95 plan, you could have an issue. Also, failing to investigate how consumers got to your website (i.e., by failing to monitor downstream affiliate marketing) can only lead to further trouble. Be clever in your marketing, but make sure that consumers understand what they are buying.
Yesterday, the FTC and DOJ announced the release of their Joint Policy Statement regarding the enforcement of U.S. antitrust laws with respect to Accountable Care Organizations (“ACOs”). This is reminiscent of when the Agencies issued their Joint Healthcare Guidelines in 1994, and capitation, HMOs, PPOs and PHOs were the topics of issue. It should be interesting to see how the industry reacts in light of these guidelines.
Yesterday, it was reported that Congress passed free trade agreements with South Korea, Panama and Columbia. The agreements are suppose to, among other things, significantly remove duties and phase out tariffs on various U.S. exports. However, it has also been reported that there are provisions affecting intellectual property law, which must be ratified by the Korean National Assembly. I agree with Professor’s Crouch’s assessment that this appears to be another step toward harmonizing worldwide patent practice. As there will be more incentives for U.S. companies to send products to South Korea, it will be interesting to see if there will be an increase in South Korean patent filings.
It has been reported that Apple co-founder Steve Jobs has died at the age of 56. Bye, bye, Mr. American “i.”
Each time that I traveled to Asia on business over the last seven years, I was asked as to when the world might expect U.S. patent reform. Well, it’s finally here. You cannot look at a paper or a blog without some reference to the America Invents Act being signed into law last Friday.
One of the more immediate implications of this law was to give the USPTO fee-setting authority. As such, there will be a 15 percent surcharge on certain patent fees, effective Monday, September 26, 2011. There is also a newly established ”micro-entity” rate that should be reviewed. All in all, we haven’t seen a rate hike in about three years from the USPTO so it’s better than most industries.
For years, the U.S. has talked about substantially overhauling U.S. patent law so that it conforms with how most of the rest of the world approaches patent rights. Now, it might become a reality. Yesterday, the Senate overwhelmingly passed patent reform legislation, which if signed, will have the greatest effect on patent law in the last fifty years. See http://www.patentlyo.com/patent/2011/02/patent-reform-act-of-2011-an-overview.html for a good overview of the legislation. It has been reported that the President is likely to sign the Smith-Leahy America Invents Act into law in the next few days. The most significant change will be to move from a first-to-invent country toward a first-to-file country. This change will greatly affect U.S. practitioners' patent procurement and litigation strategies. See http://www.patentlyo.com/patentreformbillaspassed.pdf for the language of the Act.
Earlier this week, the FTC approved a final Order settling charges against Beiersdorf, Inc. relating to marketing claims for its Nivea My Silhouette! skin cream product. The Decision and Order can be found at http://www.ftc.gov/os/caselist/0923194/index.shtm along with a copy of the Complaint.
What can be learned from this case? First, don’t believe that just because your competitors’ products have not been questioned by the FTC, your products are immune from review. Second, there can be serious financial repercussions for making questionable claims. According to Section V of the Order, Beiersdorf is required to pay $900,000 to the FTC to settle this matter. Third, in addition to being concerned about whether your more traditional types of marketing are compliant, you need to be careful about the types of keywords that you are purchasing to promote your products. As noted in the Beiersdorf matter, the FTC complained about the purchase of terms, such as “stomach fat” and “thin waist.” Finally, while the matter may be over, Beiersdorf is now under Order with the FTC (the violation of which will trigger significant financial penalties) and has agreed to be monitored by the FTC for five years with regard to certain future claims. While such monitoring provisions are not new, companies often forget about how invasive these provisions can be as it allows the FTC, “upon reasonable notice and request” to ask for, among other things, substantiation for the subject claims. In other words, unlike in civil litigation, the matter is far from being over even though a settlement has been reached. Learn from how the FTC settled matters with others in your field and consider the significant disruptions, both financial and otherwise, that can result if your company makes unsupported or questionable claims.
The FTC has announced changes to several sections of its Rules of Practice used in consumer protection and competition matters before an Administrative Law Judge. According to the FTC, they are designed to help streamline discovery and motion practices. Details of the changes can be found at http://www.ftc.gov/os/fedreg/2011/08/110812part3frn.pdf, which reportedly address such issues as how to label "confidential" documents and the admissibility of expert reports. The FTC's Press Release can be found at http://www.ftc.gov/opa/2011/08/part3.shtm.