Cybersecurity / Data Security

FCC adopts privacy rules; Privacy Shield challenge; Amendments to EU data transfer decisions; FTC data breach guidance; DOT vehicle cybersecurity best practices; HHS guidance on HIPAA and FTC compliance

FCC approves privacy rules for broadband providers

In a 3-2 vote, the Federal Communications Commission approved new rules governing internet service providers’ collection and use

Russians Hack Clinton Campaign System; FTC: LabMD Liable in Data Security Suit; EU Member States issue statement on Privacy Shield; NIS Directive published – Implementation into national law by May 2018; EU Data Protection Supervisor: e-Privacy directive should meet GDPR-requirements.

Clinton Campaign Data Breach brings data security into 2016 campaign yet again

On July 29, an F.B.I. official told the New York Times that computer systems used by the Clinton presidential campaign were hacked in the latest in a string of cybersecurity attacks targeting political entities. The Times noted the attacks appeared to have been carried out by the Russian intelligence services.  These revelations follow news of similar attacks carried out earlier in the summer, including a Russian government hack of the Democratic National Committee’s computer network. Investigations into both attacks are ongoing.

FTC Reasserts Data Security Enforcement Powers in suit against LabMD

Late last week, the FTC issued its long-awaited final order in its investigation of LabMD’s alleged unfair data security practices. FTC filed charges against LabMD, a clinical laboratory used by physicians, for allegedly failing to protect sensitive personal information for over 750,000 patients.  An ALJ had earlier dismissed FTC’s charges, holding that LabMD’s data security practices failed to cause substantial consumer injury. The Commission unanimously reversed that decision.

FTC claimed that LabMD “lack[ed] even basic precautions to protect . . . sensitive consumer information maintained on its computer system. Among other things, it failed to use an intrusion detection system or file integrity monitoring; neglected to monitor traffic coming across its firewalls; provided essentially no data security training to its employees; and never deleted any of the consumer data it had collected.” Firms collecting personal information should note that future FTC enforcement is likely to note the absence of any of these systems as evidence of sub-par data security practices.

This suit follows the FTC’s 2014 victory in the Wyndham case, which validated the FTC’s authority to regulate data security.  For more information on the Wyndham decision, see the Crowell Data Law blog post on the subject.

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Yesterday, Crowell & Moring hosted an International Association of Privacy Professionals (IAPP) KnowledgeNet featuring the Federal Trade Commission’s (FTC) new Chief Technologist, Lorrie Cranor.

In her short time at the FTC, Cranor has already made waves by encouraging companies to rethink mandatory password changes.  At the event, Cranor spoke about the focus of her

FTC Settles IoT Enforcement Action; HHS Releases HIPAA/NIST Crosswalk; HHS Provides FAQs on Patient Fees for PHI Release; Judicial Redress Act Becomes Law

FTC Identifies Reasonable Security Measures Through IoT Enforcement Action

The Federal Trade Commission (FTC) settled charges with ASUSTek Computer, Inc. (ASUS), a manufacturer of home router and home networking (or “home cloud”) equipment, related to the security of the devices. According to the settlement, ASUS advertised that its home routers and networking equipment could protect the connected computers “from any unauthorized access, hacking, and virus attacks.” The FTC alleged, however, that ASUS did not secure data in a reasonable way and instead exposed consumers to hackers. The settlement emphasizes the FTC’s interest in securing devices connected to the Internet of Things (IoT) and provides additional guidance regarding the FTC’s view of “reasonable” security.

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California AG Defines “Reasonable Security;” Apple Opposes FBI Hack Request; Russia to Enforce Data Localization with (Surprise) Audits; HHS Helps Health App Developers Determine if Subject to HIPAA; Carrier IQ Agrees to $9M Data Leak Settlement

California AG Defines “Reasonable Security”

California Attorney General (AG) Kamala Harris published the 2016 “California Data Breach Report,” which lays out what the state believes to be “reasonable security” for the purpose of California’s law that requires protecting personal information.

This is the first time California has recommended an external industry standard as a baseline “reasonable security” requirement. According to the California AG, the chosen standard (Center for Internet Security’s (CIS) Critical Security Controls (formerly known as the SANS Top 20)), is a consensus list of the “best defensive controls to detect, prevent, respond to, and mitigate damage from cyber attacks,” and is updated periodically to keep up with technology. The FTC has previously recommended using industry standards, but did not go as far as California in prescribing a particular one.

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President announces cybersecurity action plan; Congress passes Judicial Redress Act; French DPA notice provides compliance guidance; and FCC set to enforce CPNI rules.

President Obama Announces Cybersecurity Action Plan

The President announced his Cybersecurity National Action Plan (CNAP) this week, with a FY 2017 Budget proposal that includes $19 billion on CNAP initiatives – a 35 increase in cybersecurity spending over his FY 2016 budget. While the CNAP focuses on the private sector’s role in shoring up the nation’s cybersecurity, it contemplates only voluntary activities and does not impose obligations on the private sector. The CNAP includes plans to expand support for critical infrastructure, improve cyber hygiene, enhance cyber incident response, establish the Commission on Enhancing National Cybersecurity, modernize government IT and governance, and develop cybersecurity technology and workplace skills. To read more about the proposals and what it means for companies, please see our Client Alert on the CNAP.

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On February 8, 2016, the French Data Protection Authority (CNIL) publicly issued a formal notice to Facebook, following a joint investigation with four other EU regulators, asking the U.S. social network provider to comply with the French Data Protection Act within three months’ time. The notice (unofficial English translation available here), outlined several alleged violations of the law, including:

  1. collection of non-user data;
  2. collection of sensitive data (sexual orientation and political/religious views) without users’ “explicit consent” (i.e., a tick box);
  3. collection of “excessive” information to verify identities (e.g., requesting medical records when users replace their surname with that of a celebrity);
  4. use of cookies without notice or consent;
  5. failure to define and observe proportional data retention periods and failure to ensure data security (e.g., stronger password requirements);
  6. failure to obtain CNIL authorization for processing related to preventing fraud and banning users; and
  7. transfer of data to the U.S. under the invalidated U.S.-EU Safe Harbor (Safe Harbor) (alleged based on the company’s privacy statement).

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HHS proposes new substance abuse information confidentiality rules; HHS releases PHI disclosure fact sheets; U.S.-EU Safe Harbor replacement announced; OCR levies civil monetary penalties; and FTC settles charges with technology company for installing apps without consent.

HHS Proposes Update to Substance Abuse Confidentiality Rules

The U.S. Department of Health and Human Services (“HHS”) announced a proposed rule to modernize the federal substance abuse confidentiality rules (42 C.F.R. Part 2), which were last substantively updated in 1987. The proposed updates are intended to help health care providers improve integrated care efforts in the electronic environment. For further information, see our C&M Health Law blog post on the topic.

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For only the second time in its history (following the $4.3 million Cignet case) the U.S. Department of Health and Human Services (HHS) Office of Civil Rights (OCR) imposed civil money penalties (CMPs) on a company for violating the Health Insurance Portability and Accountability (HIPAA) Privacy Rule.

Lincare, Inc. (Lincare), a home health provider, was required to pay $239,800 in CMPs after an HHS Administrative Law Judge (ALJ) found that the undisputed evidence in the case established that Lincare violated HIPAA because it did not implement policies and procedures to safeguard records containing its patients’ protected health information (PHI).

The OCR investigation began when an individual complained to OCR that a Lincare employee left behind documents containing the PHI of 278 patients when the employee moved residences. According to the ALJ, Lincare had inadequate policies and procedures in place to safeguard PHI taken offsite even though employees regularly removed material from the business premises. Further evidence suggested that Lincare had an unwritten policy requiring certain employees to store PHI in their own vehicles for extended periods of time.

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Certain European Union (EU) Member States’ data protection authorities (DPAs) have already started to announce investigations and or “prudential measures” for data transfers solely relying on the invalidated “U.S.-EU Safe Harbor Framework” (Safe Harbor).

In the aftermath of the announcement of the “EU-U.S. Privacy Shield” (Privacy Shield), the Article 29 Working Party (WP29), comprised of all EU Member State DPAs, announced an extension of the “grace period” for U.S. data transfers based on alternative transfer mechanisms (e.g., EU standard contractual clauses and Binding Corporate Rules) other than Safe Harbor, at least until the Privacy Shield has been reviewed by WP29 (likely by the end of March 2016).

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