On Tuesday, the Office of the Comptroller of the Currency (OCC), the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS), the National Credit Union Administration (NCUA), the Federal Trade Commission (FTC), the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC) (the "Joint Agencies") issued the Final Model Privacy Form under the Gramm-Leach-Bliley Act (GLBA).
SearchSecurity.com published an article by me yesterday (Interpreting 'risk' in the Massachusetts data protection law) concerning the risk-based elements of Massachusetts' data security regulation (201 CMR 17.00, et. al). The gist of the article is that any company that chooses anything less than "strict compliance" with the specific written information security policy ("WISP") and control requirements of the regulation must be able to legally support their decision based on the regulation's risk elements. What this amounts to is developing a legal opinion interpreting and applying those risk-based factors to the organization's particular circumstances.
In business or technical discussions with potential investors, customers, suppliers, licensors, franchisees, or joint venture partners, it is often very difficult to determine how much needs to be disclosed and exactly who "owns" which information and ideas. Were the parties just brainstorming? Did they independently develop a similar approach to a problem? Litigation over NDAs can be costly, public, and ultimately unsatisfactory to the party claiming a breach, especially if it is hard to prove the intended scope of the agreement and the actual source of information. When is it worthwhile using NDAs, and how can they be made more effective?
Cloud computing promises incredible benefits for companies looking for inexpensive and scalable computing solutions without the need (or the costs or employees) to do it all themselves. However, as foreshadowed in the InfoLawGroup's "Legal Implications of Cloud Computing" series (see Part One, Part Two and Part Three) data security, privacy and legal compliance issues are beginning to cause great concern. Stories like this highlight these concerns. High profile information security snafus (fairly or unfairly) have also stoked the fire: Rackspace power outage, Amazon denial of service attack, and the Sidekick Data Loss. Data leakage is maybe problematic as well based on Cloud architecture. In fact, the InfoLawGroup has encountered some companies that are taking a pass on cloud computing ("v. 1.0") because of regulatory, privacy and security concerns. Do these compliance concerns threaten the Cloud computing model or potentially reduce the cost benefits it promises?
As we noted earlier this week, Massachusetts indicated late last week it would issue its last round of amendments to its data security regulations scheduled to take effect March 1, 2010, 201 CMR 17.00. The last round of amendments are not particularly significant, although it is worth noting that, contrary to the amendments made in August, this round clarifies that the regulations cover any entity that even stores personal information of Massachusetts residents, in addition to those that receive, maintain, process, or otherwise have access to personal information. Here is the press release from the Office of Consumer Affairs and Business Regulation. Here is the final version of the Regulations. Doug Cornelius has a great analysis here. The effective date of the regulations is still March 1, 2010.
Today the Senate Judiciary Committee approved two federal data security bills, Senator Leahy's S. 1490, the Personal Data Privacy and Security Act, and Senator Feinstein's S. 139, the Data Breach Notification Act. Of course, there have been dozens of proposed federal breach notification bills over the past several years, from both sides of the aisle. Senator Leahy's office issued this statement earlier today. While we cannot predict the fate of S. 1490 and S. 139, and we will have future occasion to comment on the bills in more detail, Tanya and I wanted to highlight a few notable provisions now.
Friday was a busy day for identity theft and data security regulations. Not long after the Federal Trade Commission announced it was extending the enforcement deadline for the Red Flags Rule for the fourth time, word came from BNA's Privacy & Security Law Report that the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR) had filed with the Massachusetts Secretary of State its final amendments to 201 CMR 17.00, the state's data security regulations. BNA reported that OCABR plans to make the amendments public sometime this week. BNA further reported that there are no major changes, but that there will be some clarification with respect to contracts between persons who own or license personal information and third-party service providers (201 CMR17.03(2)(f)(2)). You can check out Dave's post on the last round of significant revisions to the regulations in August, complete with redline. We have seen a lot of activity in the blogosphere about the new changes, but nothing official yet. And so far, no announcements of further delays in the effective date, currently set for March 1, 2010. We will report as soon as we hear more information.
The FTC extended the deadline for enforcement of the Red Flags Identity Theft Rule. The new enforcement deadline is June 1, 2010. The deadline was extended at "the request of Members of Congress." www.ftc.gov/opa/2009/10/redflags.shtm
The Federal Trade Commission will begin enforcing its Red Flags Rule this Sunday, November 1. Financial institutions and creditors that hold covered accounts, as defined under the Rule, must have written Red Flags identity theft prevention programs in place by November 1. Earlier today the American Bar Association reported that a federal judge in Washington, D.C., ruled that the FTC exceeded its authority by applying the Red Flags Rule to practicing lawyers. The FTC is expected to appeal today's ruling.
On Friday, the California Court of Appeal, Fourth Appellate District, certified for publication its October 8 opinion in Pineda v. Williams-Sonoma, the most recent in a string of decisions regarding California's Song-Beverly Credit Card Act of 1971, California Civil Code § 1747.08. On first glance, Pineda appears uneventful. The Court merely reiterated its December 2008 holding in Party City v. Superior Court, 169 Cal.App.4th 497 (2008), that zip codes are not personal identification information for purposes of the Act, right? Not so fast. In fact, the Pineda court added a couple of new wrinkles that are worth a second look. First, the court reaffirmed its Party City holding even though Pineda specifically alleged that Williams-Sonoma collected the zip code for the purpose of using it and the customer's name to obtain even MORE personal identification information, the customer's address, through the use of a "reverse search" database. Second, the court held that a retailer's use of a legally obtained zip code to acquire, view, print, distribute or use an address that is otherwise publicly available does not amount to an offensive intrusion of a consumer's privacy under California law.
While there is much debate on the IT side as to whether Cloud computing is revolutionary, evolutionary or "more of the same" with a snazzy marketing label, in the legal context, Cloud computing does have a potential significant impact on legal risk. Part three of our ongoing Cloud legal series explores the relationships in the Cloud, and the potential legal implications and impacts suggested by them.
Remember Candie's shoes and Op shorts? The FTC announced yesterday that it has settled charges against Iconix Brand Group, an owner, licensor, and marketer of popular kids' apparel brands such as Candie's, Op, Mudd, and Bongo, for allegedly violating the Children's Online Privacy Protection Act (COPPA). Among other things, Iconix will pay a $250,000 civil penalty. The FTC filed its complaint and submitted its consent decree and order for approval yesterday in the Southern District of New York.
This week the federal court in the Hannaford class action asked the highest court in Maine to clarify whether cardholders' "loss of time and effort" are sufficient injuries to ground a negligence claim following a payment card security breach.