In a case that could have far-reaching implications for how companies are held liable for data security lapses, the FTC issued an order and opinion unanimously overturning its Chief Administrative Law Judge’s (ALJ) November 2015 dismissal of charges that LabMD’s allegedly lax data security measures were unfair practices under Section 5 of the FTC Act (see our coverage of […]
On 6th July, the UK Government published two independent reviews concerning data security and data sharing in the health and care system in England. At the same time the UK Government launched a public consultation on proposals resulting from these reviews. The public consultation will be of interest to organisations that regularly interact with the public health sector in the UK and in particular to those organisations that rely on access to health data from the NHS for research purposes.
On November 13, 2015, the Federal Trade Commission’s Chief Administrative Law Judge dismissed an FTC administrative complaint based on LabMD’s alleged failure to provide “reasonable and appropriate” security for personal information maintained on its computers. The ALJ concluded that the complaint counsel failed to prove that LabMD’s alleged practices constituted an unfair trade practice. Specifically, according to the ALJ’s initial decision, complaint counsel failed to prove by a preponderance of the evidence the first prong of the three-part unfairness test – that the alleged unreasonable conduct caused or is likely to cause substantial injury to consumers as required by Section 5(n) of the FTC Act. The case is notable for being the first data security case tried before an ALJ and only one of two instances where a company has fought the FTC’s decision to move forward with an enforcement action based on allegations that a company has engaged in unfair practices because of inadequate data security practices. Companies have otherwise voluntarily entered into consent decrees without admitting liability. In the other instance where a company did not capitulate to an FTC enforcement action, Wyndham moved to dismiss the FTC’s lawsuit against it in federal district court based on lack of jurisdiction. Wyndham lost in the district court and on an interlocutory appeal the federal court of appeals upheld that ruling, but remanded the case to district court for a trial on the merits which will assess whether Wyndham’s alleged unreasonable data security practices meet the unfairness factors in section 5(n) of the FTC Act. Accordingly, as the ALJ did here, the court in Wyndham will consider whether the practices and the data breaches there caused or were likely to cause substantial consumer injury under the first prong of an unfairness inquiry
The UK’s Information Commissioner’s Office is known to prefer an “engaging” rather than an enforcement approach with organisations. However, when looking at the “action we’ve taken” page on the ICO website the ICO’s enforcement activity seems to be increasing by the day. While the ICO has stated that it wants to focus its enforcement efforts going forward on unsolicited marketing, such as nuisance messages and calls, breaches of security requirements have to date attracted the majority of the ICO’s enforcement attention. Therefore, organisations operating in the UK would be well-served to focus on understanding and adhering to the ICO’s expectations for data security compliance.
For more than a year now, we have been hearing that the spate of highly-publicized data breaches could lead to federal data security and data breach legislation. On March 25, the House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade took action that brings us closer to seeing that prediction become a reality. In this post, we take a closer look at the bipartisan legislation approved by the subcommittee—the Data Security and Breach Notification Act of 2015 — and discuss five key provisions that are likely to be at issue as the legislation moves forward.
Tonight, the President’s State of the Union address covered, as he put it, “the tasks that lie ahead.” Among the policy initiatives that he proposed, he “urge[d]…Congress to finally pass the legislation we need to better meet the evolving threat of cyber-attacks, combat identity theft, and protect our children’s information.” What he was referring to is a set of cybersecurity and info sharing initiatives and privacy and data security proposals that the White House started rolling out last week. The President also alluded to a report to be released next month that will address the Administration’s actions to curtail domestic surveillance programs. We provide here excerpts of the President’s address that discuss cybersecurity, data security, and privacy.
On December 8, Massachusetts Attorney General Martha Coakley announced a settlement with TD Bank, under which TD Bank must pay $625,000 and take several steps to strengthen its data security practices. The settlement agreement stems from a data breach that impacted over 90,000 Massachusetts residents and over 260,000 customers nationwide. The AG’s approach to this case and the resulting settlement underscore the importance of providing prompt notification following a data breach as well as maintaining adequate oversight over the security practices of third-party service providers.
Last week, the Administrative Law Judge handling the Federal Trade Commission’s complaint against LabMD issued a pair of rulings that will require the Bureau of Consumer Protection to testify about the information security standards on which the FTC intends to rely at trial in order to prove that LabMD’s data security practices were inadequate. The ALJ’s rulings open up inquiry into issues at the center of the debate surrounding the FTC’s authority under Section 5 of the Federal Trade Commission Act: what are the data security standards that the FTC expects companies to meet, and has the FTC given the private sector adequate advance notice of these standards?
The Federal Trade Commission (“FTC”) has settled with two mobile application developers, Fandango and Credit Karma, over charges that they misrepresented the security of their mobile applications. According to the FTC, the developers failed to provide reasonable and appropriate security when their mobile applications transmitted consumers’ sensitive information. The particular issues noted by the FTC in its complaints against the developers differ to some degree, but the complaints share a common thread: the developers disabled the Secure Sockets Layer (SSL) protocol, which authenticates and encrypts communications across networks. In our post, we provide a high-level description of how SSL works, summarize the FTC’s complaints against Fandango and Credit Karma, and identify some important takeaways from these settlements.
Earlier this month, the Payment Card Industry Security Standards Council (PCI SSC) released Version 3.0 of the Payment Card Industry Data Security Standard (PCI DSS), which includes several enhanced security requirements that will affect how businesses protect payment card data in their systems. The updated standard calls upon businesses to take a more active role in security compliance. It also addresses several common vulnerabilities in the cardholder data environment, including weak passwords, fallible authentication methods, unpatched malware protection, and inadequate threat monitoring practices. The end result is a standard that gives businesses a clearer, yet more stringent, set of baseline requirements for protecting cardholder data. Compliance with Version 3.0 is required as of January 1, 2015, although some of the new requirements will not go into effect until July 1, 2015. Until then, they are recommended as best practices.
Last month, the FTC announced its settlement with technology company TRENDNet over charges that the company’s lax security practices led to the public exposure of private video feeds. TRENDNet manufactures a range of networking hardware, including Internet-accessible surveillance cameras. According to the FTC complaint, some of the feeds from these cameras were disclosed online without authorization. Under the terms of the settlement, TRENDNet is enjoined from misrepresenting the security and privacy features of its Internet-accessible products and their associated apps, and the company must establish a comprehensive security program subject to biennial third-party assessments. The FTC describes this settlement as the conclusion of the agency’s first enforcement action “against a marketer of an everyday product with interconnectivity to the Internet” – also known as the “Internet of Things.” Our post addresses what insights the settlement provides regarding the FTC’s current approach to enforcing security standards and indicates that the FTC may be broadening its characterization of sensitive data.
With cybersecurity now ranked as the top concern for general counsel and corporate board members, and with the regulatory and legislative landscape so active (e.g., the House’s passage of CISPA and the President’s Executive Order), Hogan Lovells is proud to be a sponsor of the inaugural Cybersecurity Law Institute, to be held at the Georgetown University Law Center in Washington, DC, on May 22–23, 2013.
The February 21 edition of The Corporate Counsel.Net blog presents an audio interview with Hogan Lovells partner Harriet Pearson in which the following topics are addressed: Why cybersecurity is a hot topic for lawyers now, and not just IT staff. The signficance of recent interactions on this topic between Senator Rockefeller and the CEOs of the […]
Government contractors soon may be compelled to protect against the compromise of information that is resident on their network and computer systems. The Federal Acquisition Regulatory Council (FAR Council) issued on August 24 a proposed rule on “Basic Safeguarding of Contractor Information Systems”. The proposal would add a new FAR subpart and contract clause requiring small and large contractors, including commercial items contractors, to employ basic security measures to protect information from unauthorized disclosure, loss, or compromise.
Following up on a public workshop held earlier this year, today the Federal Trade Commission (FTC) issued a set of truth-in-advertising and privacy guidelines for mobile device application (app) developers. Titled “Marketing Your Mobile App: Get it Right From the Start,” the guidelines provide an overview of key issues for all app developers to consider.
Widely-reported efforts to craft compromise cybersecurity legislation failed 52-46 in a key Senate vote on August 2 despite bipartisan engagement and the Obama Administration’s vocal support.
Comments filed recently with the Federal Communications Commission (FCC) show a deep divide over whether the agency should pursue further action to address privacy and security of information stored on mobile devices. Reply comments are due soon.
On May 14, Hogan Lovells’ partner Chris Wolf moderated a panel discussion presented by the Congressional Internet Caucus Advisory Committee entitled, “New Internet Privacy Legislation: What the White House, Federal Trade Commission and the European Commission Are Recommending.” The FTC’s Maneehsa Mithal began the event with a brief overview of the FTC’s Commission Report on protecting consumer privacy, and the panelists, led by Mr. Wolf, engaged in a discussion about the FTC Report, the White House’s privacy white paper, and the proposed EU Data Protection Regulation.
Late last year, the Hong Kong Privacy Commissioner for Personal Data published a Guidance Note to assist data users with properly handling and protecting personal data contained in portable storage devices, including USB memory sticks, tablet/notebook computers, mobile/smart phones, personal digital assistants, portable hard drives and optical discs such as DVDs. This post reviews practical recommendations set forth by the Privacy Commissioner to help data users manage the security risks associated with the use of portable storage devices.
Companies facing claims for failing to properly secure their customers’ data may also find themselves in litigation with their insurance carriers over whether the claims that arise from such data security incidents are covered under their existing insurance policies. This entry describes one such recent lawsuit.
Massachusetts information security regulations took effect on March 1, 2010. In approximately five weeks, covered companies face a compliance deadline relating to their third party service provider contracts.
A federal judge dismissed all but one of the claims financial institutions brought against Heartland Payment Systems for the breach of Heartland’s computer systems that affected approximately 130 million consumers, demonstrating that it may be difficult to hold companies legally responsible for breaches of their data. The financial institution plaintiffs balked at Heartland’s settlement offers and instead sought relief from the court, but only the alleged violation of Florida’s consumer-protection statute survived Heartland’s motion to dismiss, an outcome which may deter future plaintiffs affected by data breaches from rejecting settlement offers to litigate their claims.
Data stored in the cloud will be subject to numerous data security laws, explains Hogan Lovells partner Phil Porter in a recent article. Specific types of data will trigger different security regulations, ranging from HIPAA rules for health data, to Gramm-Leach-Bliley Act rules for financial service data, to COPPA for data about children. Data hosted in the cloud in the U.S. might also subject the data to U.S. national security rules, including USA Patriot Act. Cloud service providers and customers need to tailor their contractual provisions to match these regulatory imperatives.