Law of the Connected Horse? FTC Appropriately in Learning Mode on Internet of Things

Error in legislation is common and never more so than when the technology is galloping forward. Let us not struggle to match an imperfect legal system to an evolving world that we understand poorly. Let us instead do what is essential to permit the participants in this evolving world to make their own decisions.-Frank H. Easterbrook, “Cyberspace and the Law of the Horse,” 1996 University of Chicago Legal Forum 207, 216 (1996).

Law, I have argued, is vulnerable to the competing sovereignty of code. Code writers can write code that displaces the values that law has embraced. And if values of law are to survive, law might well have to respond.-Lawrence Lessig, “The Law of the Horse: What Cyberlaw Might Teach,” 113 Harvard L. Rev. 501, 541 (1999)

As the Federal Trade Commission (FTC) prepares to hold its first workshop on the “Internet of Things” (IoT) on November 19, these early Internet era passages from the famous “law of the horse” debate between Judge Easterbrook and Professor Lessig seem apt. They remind us that with the emergence of new technologies comes the perennial contest over whether the current legal framework provides sufficient protections. To inform that debate with respect to privacy and data security protections, the FTC is using the daylong public workshop to learn about the technologies and data collection in the IoT ecosystem.

No proposals for new laws, regulations or law enforcement initiatives are on the table. The workshop is a mission in fact-finding. And on whatever side of the Easterbrook-Lessig divide one normally resides with respect to the need for new rules, it is hard to disagree that understanding the facts about the IoT landscape is a necessary prerequisite to forming an opinion.

The facts surrounding IoT are varied. On a general level, IoT refers to the information networks comprised of sensors and other technologies embedded in physical objects and linked via wired and wireless networks. Think Uber car service, Nest thermostats and FitBit exercise monitors.

Cisco estimates that there are nearly 11 billion connected objects in the world. By 2020, there may be more than 200 billion connected devices. As IoT matures, more and more everyday objects will “wake up,” become aware of their environments, communicate the information that they collect and receive information from outside sources. This will likely generate substantial economic and social benefits, including improved healthcare, increased public and personal safety, efficient use of resources, business innovations and more.

These benefits will occur when industry is able to layer applications on top of connected devices and create a network of smart systems. Connected devices will communicate with each other, using sensors to observe external conditions and accessing and analyzing external sources of information, such as historical data. A recent article put it this way:

Imagine a portfolio of household good products—your laundry detergent and your dishwater —communicating with you to give a personal record that can help reduce water and energy use. Or imagine medical devices like glucose monitors that come with dietary advice and medicines that provide online side-effect alerts and tests. Or wine and spirits bottles that provide not just terroir history and cocktail tips but also personalized healthy drinking advice.

Not all of the connected objects in the world of IoT collect information associated with people, as one expert explained:

[M]ost applications of [Internet of Things] will have little or nothing to do with consumers and data privacy. An oil company using sensors to monitor its Alaskan pipeline or a kennel club using RFID tags to locate lost canines or a power generation company using sensors on its turbines to predict and avoid potential failures—all applications in operation today—do not fall within the purview of regulations or data privacy concerns.

But many of the new and planned applications within IoT do depend on the collection and communication of personal information.

Maximizing such benefits necessarily will require collecting, retaining and sharing information in new ways. Information sharing on the scale required by IoT implicates privacy and security concerns that have not been traditionally associated with household items and vehicles.

Understanding how that works and what protections work is the focus of the FTC workshop.

At the FTC workshop (here’s the agenda), following some definitional stage-setting and an important discussion of contextual privacy, the program will address the smart home, connected health and fitness and the connected privacy and security issues in a broad context. One of the questions we can anticipate is how to provide notice and choice when there is no screen or no consumer interaction associated with the data collection.

The third panel of the day will look at connected cars. I will participate on behalf of the Future of Privacy Forum (FPF), which has a connected cars working group, and will be joined by panelists from academia, industry and the AAA. We will discuss the different technologies associated with connected cars, limited to consumer-facing technology and not vehicle-to-vehicle and vehicle-to-infrastructure technology—much larger topics. Among the things our panel will discuss are current best practices for the protection of personal data, data security and the benefits of the new technologies from a consumer and public safety perspective.

If the Internet of Things is to achieve its full potential, companies must prioritize security. We will have to address privacy concerns in innovative ways.

Like most FTC workshops, the daylong event is sure to be an important conversation for the privacy community as well as for the FTC itself. But it joins an ongoing conversation. Industry is already paying enormous attention to privacy and security issues. Last year, after receiving input from industry and utility regulators, the Future of Privacy Forum released a smart grid privacy seal program for companies that provide consumer services that rely on energy data. The seal program is powered by TRUSTe and provides privacy guidelines that govern the collection, storage, use and disclosure of consumer energy data. Last month, FPF, along with Sen. Charles Schumer (D-NY) and a group of leading location analytics companies, released a Code of Conduct designed to promote consumer privacy and responsible data use in association with retail location analytics. Next week, the Connected Car Expo at the Los Angeles Auto Show and the Connected Cars North America event in Dallas will both include panels dedicated to privacy and security concerns. From what I have seen, businesses are devoting significant resources to promoting privacy and security in IoT.

But the work is not done.

IoT has revolutionary potential. But that potential may be lost if privacy and security concerns are not adequately addressed and consumer confidence lags.

The recent TRENDnet settlement at the FTC over security vulnerabilities offers a valuable lesson. If the Internet of Things is to achieve its full potential, companies must prioritize security. We will have to address privacy concerns in innovative ways. Many of our current privacy laws were written in the days when the chirps and shrieks of modems signaled our connection to the Internet. Already, we see that those laws struggle to deal with the issues raised by cloud services, GPS data, Big Data analytics, social media and other modern technologies.

How will those laws fare in a world where myriad and continuous data transmissions connect billions of devices in real time?

Flexible, self-regulatory codes of conduct have promise to promote privacy and security in IoT. However, those codes of conduct must be informed by the considered views of a wide range of stakeholders. The FTC’s workshop offers a valuable opportunity to hear many such points of view.

Written By

Christopher Wolf


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