Privacy & Cybersecurity Update - July 2019

Skadden, Arps, Slate, Meagher & Flom LLP

In this month's edition of our Privacy & Cybersecurity Update, we examine New York's new laws expanding consumer protection for data breaches, the D.C. Circuit's two rulings deepening the split regarding standing in data breach cases and a lawsuit challenging the scope of insurance coverage for the NotPetya malware attack. We also discuss Equifax's data breach settlement, as well as the U.K. Information Commissioner's Office response to a proposed framework for online safety and its new guidance on usage of cookies.

New York Enacts Two Laws Expanding Consumer Protection for Data Breaches

Two DC Circuit Rulings Deepen Standing Split in Data Breach Cases

Property Coverage Suit for Loss Caused by NotPetya Malware Attack Raises Questions About ‘Act of War’ Policy Exclusions

UK Data Protection Authority Responds to New Framework for Online Safety

Equifax Reaches Largest-Ever Data Breach Settlement

UK ICO Issues New Guidance on Internet Cookies

 

New York Enacts Two Laws Expanding Consumer Protection for Data Breaches

On July 25, 2019, New York Gov. Andrew Cuomo signed two bills into law that enhance the rights of state residents in the event of a data breach.

New Yorkers will soon have increased rights if they find their personal information has been compromised. The Stop Hacks and Improve Electronic Data Security Act (SHIELD Act)1 expands the definition of personal information to which data breach reporting requirements apply and requires companies to use reasonable measures to protect private information. The second measure, known as the Identity Theft Prevention and Mitigation Services Act2, requires consumer credit reporting agencies that suffer a data breach involving Social Security numbers to provide five years of identity theft protection to affected consumers.

The SHIELD Act expands New York’s current data breach notification law to add the following categories of information to the definition of “private information” to which notification requirements may apply in the event of a data breach:

  • account number or credit or debit card number, in circumstances where such number could be used to access an individual’s financial account without additional identifying information (e.g., security code or password);
  • biometric information; or
  • user name or email address in combination with a password or security question and answer that would permit access to an online account.

The notification requirements now apply in the case of unauthorized access to private information in addition to cases where such information is acquired without authorization.

The SHIELD Act also expands the entities to which the data breach notifications apply. Under the prior version of the state's data breach notification law, any person or business that conducts business in New York and collects private information must notify any state residents whose private information was acquired in a data breach. Under the SHIELD Act, any person or business, regardless of where they conduct business, must notify affected New York residents in the event of a breach of such residents’ private information, but the notice to affected residents is not required if:

  • the exposure of private information was an inadvertent disclosure by persons authorized to access such information, and the entity reasonably determines such exposure will not likely result in the misuse of such information or harm to the affected state resident; such a determination must be documented and retained for five years, and if the incident affects over 500 state residents, the determination must be provided to the attorney general within 10 days after the determination; or
  • notice of the security breach is made to affected New York residents pursuant to breach notification requirements under any other state or federal laws, including the Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act (HIPAA).

Note that in the above cases, while notice to affected New York residents is not required, companies still must notify the state's attorney general, Department of State Division of Computer Protection and Division of State Police.

Finally, the SHIELD Act requires any person or business that maintains computerized private information of New York residents to develop, implement and maintain reasonable safeguards to protect the security, confidentiality and integrity of such data, including its proper disposal. A person or business is deemed to be in compliance if it:

  • is subject to, and in compliance with, the data security requirements under any other state or federal laws, including Gramm-Leach-Bliley and HIPAA; or
  • implements a data security program that includes the following:
    • reasonable administrative safeguards, such as designating a security program coordinator; identifying reasonably foreseeable internal and external risks; assessing the sufficiency of safeguards to control such risks; training employees in the security program practices and procedures; selecting service providers capable of maintaining safeguards and requiring such safeguards by contract; and adjusting the security program in light of changes in circumstances;
    • reasonable technical safeguards, such as assessing risks in network and software design; assessing risks in information processing, transmission and storage; detecting, preventing and responding to attacks or system failures; and regularly testing and monitoring the effectiveness of key controls; and
    • reasonable physical safeguards, such as assessing risks of information storage and disposal; detecting, preventing and responding to intrusions; protecting against unauthorized access and use of private information; and disposing of private information within a reasonable amount of time after it is no longer needed by erasing electronic media.

Failure to comply with the data security provisions of the SHIELD Act may result in penalties assessed by the attorney general of up to $5,000 per violation. There is no private right of action.

The SHIELD Act takes effect on March 21, 2020.

Under the Identity Theft Prevention and Mitigation Services Act, any New York consumer credit reporting agency that experiences unauthorized acquisition of, or access to, a Social Security number must offer to each consumer whose number was breached, or is reasonably believed to have been breached, (1) reasonable identity theft prevention services and (2) if applicable, identity theft mitigation services, in each case for up to five years at no cost to the consumer, unless the agency determines after a reasonable investigation that the breach is unlikely to result in harm to the consumer.

The consumer credit reporting agency must provide all information necessary for consumers to enroll in such services, including information on how consumers can request a security freeze.

The Identity Theft Prevention and Mitigation Services Act takes effect 60 days from the date it was signed into law. It is applicable to any breach of the security systems of a consumer credit reporting agency that occurred within three years prior to the effective date.

Key Takeaways

Companies that collect personal information from New York residents should evaluate their data collection practices to determine whether they are subject to the new broader notification and data security requirements under the SHIELD Act and, if so, begin implementing policies and procedures to be able to comply by March 21, 2020. In particular, companies subject to the data security requirements should determine whether their existing data security programs include the elements listed in the SHIELD Act and, if they do not, consider updating such programs to include any missing elements.

In addition, consumer credit reporting agencies should consider whether they have experienced data breaches within the past three years that are in violation of the Identity Theft Prevention and Mitigation Services Act, and take steps to prepare to offer identity theft prevention and mitigation services to affected consumers, as applicable.

Two DC Circuit Rulings Deepen Standing Split in Data Breach Cases

Two recent rulings in the D.C. Circuit held that increased risk of identity theft due to unauthorized disclosure of personal information may constitute an injury in fact, deepening the split between appellate courts on standing requirements in data privacy litigation.

On June 21, 2019, the D.C. Circuit decided in National Treasury Employees Union v. Office of Personnel Management that heightened risk of identity theft resulting from a cybersecurity breach is sufficient to establish standing at the pleading stage.3 Shortly after, on July 2, 2019, the court held in Jeffries v. Volume Services America Inc. that a receipt printed by the defendant containing all 16 digits of a customer’s credit card number in contravention of the Fair and Accurate Credit Transactions Act (FACTA) satisfied the plaintiff’s standing requirement because the receipt in question increased the plaintiff’s risk of falling victim to identity theft.4 These decisions further deepen the divide between circuits on standing requirements in data breach cases that have been established by the Supreme Court in Spokeo Inc. v. Robins.

Background: Spokeo and the Circuit Split

In Spokeo Inc. v. Robins, the Supreme Court considered whether the Ninth Circuit properly granted the plaintiff standing against a “people search engine” that allegedly gathered and disseminated incorrect information about the plaintiff in violation of the Fair Credit Reporting Act. The Court vacated and remanded the decision because the Ninth Circuit only considered whether the injury in fact was “particularized” and failed to evaluate whether the injury was “concrete.” While the Court stated that this requirement may be satisfied by a risk of real harm, it also stated that a plaintiff cannot satisfy the requirement by alleging a bare procedural violation.

Appellate courts have since split on how Spokeo’s concreteness requirement applies to data breach litigation. The Third, Sixth, Seventh and Ninth circuits have held that victims of data breaches can establish concreteness by showing a heightened risk of future misuse of their stolen information. The First, Second, Fourth and Eighth circuits have ruled that plaintiffs must show actual harm already has manifested. The courts' disagreements also have extended beyond cybersecurity failures to other forms of unauthorized disclosure. The Second, Third, Seventh and Ninth circuits have held that printing the first six digits of a credit card number on a receipt does not confer plaintiffs standing under FACTA, which prohibits merchants from printing “more than the last 5 digits of the card number ... upon any receipt provided to the cardholder.” The Eleventh Circuit, however, has allowed plaintiffs to proceed with litigation after a merchant printed the first six and last four digits of customers’ credit card numbers.

The DC Circuit On Data Breaches

In 2014, cyberattackers breached multiple U.S. Office of Personnel Management (OPM) databases, allegedly stealing the sensitive personal information — including birth dates, Social Security numbers, addresses and even fingerprint records — of more than 21 million past, present and prospective government workers.

In National Treasury Employees Union v. Office of Personnel Management, two consolidated complaints — one filed by the National Treasury Employees Union and three of its members, and another filed by the American Federation of Government Employees on behalf of several individual plaintiffs and a putative class of others similarly affected by the breaches — alleged that OPM’s cybersecurity practices were unlawfully inadequate. The district court dismissed both complaints for lack of Article III standing and failure to state a claim.

A three-judge panel on the D.C. Court of Appeals held both sets of plaintiffs cleared the “low bar” to establish standing at the pleading stage because the breach was “fairly traceable” to the defendant’s cybersecurity practices and the stolen information left “no question that the OPM hackers ... have in their possession all the information needed to steal [plaintiffs’] identities.” Indeed, some plaintiffs had suffered identity theft after the attack, supporting the inference that there was a “substantial — as opposed to a merely speculative or theoretical — risk of future identity theft.”

While this holding ostensibly marks a split with the First, Second, Fourth and Eighth circuits, the D.C. Circuit distinguished one of these conflicting results. In Beck v. McDonald, the Fourth Circuit held that theft of a personal laptop and four boxes of pathology reports was too speculative to constitute an "injury in fact" because the plaintiffs failed to allege either that the thief “intentionally targeted” the information contained in the laptop or medical records, or that the information was subsequently used by the thief to commit identity theft. The D.C. Circuit pointed out that, in contrast to Beck, the plaintiffs in National Treasury alleged the intentional targeting of their information and subsequent misuse of that information. These allegations made the plaintiffs’ claims comparatively concrete and were sufficient to establish standing in the context of a cybersecurity breach.

The DC Circuit On Credit Card Receipts

In Jeffries et al. v. Volume Services America Inc. d/b/a Centerplate/NBSE et al., Doris Jeffries alleged that Centerplate — a food and beverage company — provided her with a receipt containing all 16 digits of her credit card number, her credit card expiration date and her credit card provider. She claimed that she immediately recognized that the receipt contained her personal information and held onto it for safekeeping. She then filed a class action lawsuit against Centerplate alleging that the company violated FACTA, which contains a “truncation requirement” imposing liability on companies that willfully print more than five digits of the card number or the expiration date on a receipt. The district court granted Centerplate’s motion to dismiss the case for lack of standing because Jeffries alleged that only she viewed the receipt containing her credit card information, making the harm hypothetical as opposed to de facto. In addition, the district court determined that the burden of safeguarding the receipt to prevent misuse of such information was not concrete enough to confer standing.

On appeal, the D.C. Circuit reversed the decision because FACTA measures liability at the point of sale and there was no way to know at that time whether Jeffries would catch Centerpiece’s mistake or throw the receipt in the trash for any malicious third party to find. Because the inclusion of Jeffries’s complete credit card information resulted in an increased risk of identity theft, she suffered a sufficiently concrete injury in fact to satisfy Article III’s standing requirement.

The court distinguished the Third Circuit’s opinion in Kamal v. J. Crew Group, which held that a plaintiff failed to establish standing when a merchant printed the first six digits of his credit card number on a receipt, noting that in Jeffries the inclusion of additional credit card numbers materially increased the risk of identity theft. Finally, the court stated that the risk of identity theft in the Jeffries case was not unacceptably conjectural because her claim did not rely on increased risk of future identity theft as her injury in fact. Rather, Jeffries’ complaint was grounded in the invasion of her concrete privacy interest as protected by FACTA’s truncation requirement.

Key Takeaways

The D.C. Circuit’s pair of recent decisions results in two notable takeaways. First, the D.C. Circuit’s attempt to distinguish potentially conflicting opinions issued by other circuits provides insight regarding the facts that may be relevant in future data breach cases. In the event of a data breach, the National Treasury opinion suggests that the case may turn on whether the plaintiff can plausibly allege that the thief intentionally targeted the stolen information, or can otherwise produce evidence of subsequent misuse of that information. With respect to a FACTA truncation claim, the D.C. Circuit indicates that the number of credit card digits matters, ostensibly ruling that 16 is too many.

Second, the deepening circuit split regarding standing in data breach litigation provides further impetus for the Supreme Court to clarify how Spokeo applies to data breach cases. At the time of writing, however, the Court declined to review any cases that might clarify this issue in the coming 2019 term. For now, the outcome of data breach litigation may depend in large part on the jurisdiction in which a case is filed.

Property Coverage Suit for Loss Caused by NotPetya Malware Attack Raises Questions About ‘Act of War’ Policy Exclusions

Snack-food company Mondelez International, Inc. (Mondelez) is challenging its property insurer Zurich American Insurance Company’s (Zurich) reliance on an “act of war” exclusion in its policy to deny Mondelez coverage for losses resulting from the crippling NotPetya malware attack. The case, which is currently pending in Illinois state court, could be the first to determine whether an act of war policy exclusion applies to deny coverage for a cyber-related loss.

Background

On June 27, 2017, computers and servers at snack-food giant Mondelez were infected with the so-called NotPetya malware. The attack spread to thousands of the company's servers and laptops, halting company communications, rendering hardware useless and disrupting supply chains, which led to backlogs and unfulfilled product orders. All told, Mondelez claims that the malware infection caused it to incur losses in excess of $100 million.

According to U.S. officials, Mondelez was not the target of the NotPetya attack, which was part of a Russian campaign to destabilize Ukraine. Kremlin-affiliated hackers, using a cyber-weapon stolen from the U.S. National Security Agency, targeted a popular Ukrainian tax software company and its customers. NotPetya quickly spread, paralyzing government and industry in Ukraine and infecting global companies, including Mondelez. The U.K., Canada and Australia joined the U.S. in officially blaming Russia for the attack. The Kremlin adamantly denied responsibility.

Mondelez Claims Over $100 Million in Damages; Zurich Denies Coverage

Shortly after the NotPetya infection, Mondelez provided notice of loss under its “all risks” property insurance policy issued by Zurich. By letter dated June 1, 2018, Zurich denied coverage under Mondelez's policy based on an exclusion for “hostile or warlike action.” That exclusion bars coverage for any loss resulting from a “hostile or warlike action in time of peace or war, including action in hindering, combating or defending against an actual, impending or expected attack by any: (i) government or sovereign power (de jure or de facto); (ii) military, naval or air force; or (iii) agent or authority of any party specified in i or ii above.”

On October 10, 2018, Mondelez brought suit against Zurich in the Cook County Circuit Court of Illinois for wrongful denial of coverage for the company's NotPetya malware loss.5 Although Zurich has yet to answer the complaint, insurance industry players have taken a keen interest in the case and its implications. Two of the issues raised by this case are discussed below.

Should Legacy Exclusions Such as an Act of War Encompass Cyberattacks?

In its complaint, Mondelez alleges that act of war exclusions have never been applied to a malicious cyber incident and that invoking the exclusion for “anything other than conventional armed conflict” is “unprecedented.” Indeed, the act of war exclusion is a legacy exclusion, crafted before insurers and policyholders anticipated modern acts of cyber warfare. As a result, interpreting the exclusion to apply to malware and ransomware attacks at least arguably could deprive policyholders of coverage they did not understand was excluded. On the other hand, courts have concluded that legacy policy provisions are applicable to previously unforeseen circumstances and new technologies. For example, in recent years, courts have applied various types of legacy policy language to digital privacy claims, data leaks and long-tail injury or damage claims.

What Evidence Suffices to Bring Cyberattacks Within the Ambit of Act of War Exclusions?

If the Mondelez court were to conclude that the act of war exclusion in the company's policy extends to the NotPetya attack, Zurich will face a critical hurdle: proving that the attack was carried out by a state actor. As noted above, applying the exclusion requires that the hostile or warlike action has been performed by a state, military arm of a state, or some agent or authority thereof. Tracing the source of a cyberattack, unlike many acts of conventional warfare, can be difficult, and it is unclear what kind of evidence the court will deem sufficient to demonstrate that the attack was carried out by a state actor. Although the U.S. intelligence agencies and several of its allies concluded that Russia was responsible for the NotPetya attack, marshalling evidence tracing the hack to its source could prove challenging. Nevertheless, it is conceivable that a court may conclude that the pronouncements of government and intelligence officials constitute sufficient proof of state action for Zurich to apply the exclusion.

Key Takeaways

Industry players likely will continue to watch Mondelez closely for any rulings on the act of war exclusion. Although it is unlikely to be the final word on the topic, any ruling on the applicability of the act of war exclusion will have an impact on insurers’ and policyholders’ understanding of the scope of coverage for cyberattacks under policies with act of war exclusions. Regardless of the outcome of this case, policyholders and insurers may want to consider clarifying policies’ act of war exclusions, including with respect to their applicability to cyberattacks, whether the attackers can be both state and non-state actors, and the type of proof necessary for the exclusion to apply.

UK Data Protection Authority Responds to New Framework for Online Safety

In April 2019, the U.K. government published the Online Harms White Paper (the white paper) proposing a new legal and regulatory framework for online safety. The white paper outlined a new statutory duty of care, the implementation of new codes of practice and the creation of an independent regulatory body to enforce this framework. During the white paper’s consultation period, which ended on July 1, 2019, the U.K.'s data protection authority, the Information Commissioner’s Office (ICO), published a response, reinforcing the importance of regulation in this space and also pointing out key areas for improvement. The white paper now goes through the legislative process to determine whether it becomes law.

The White Paper

In April, the U.K. Department for Digital, Culture, Media & Sport and the secretary of state for the Home Department published a white paper on online harms, setting forth proposed legislative and non-legislative measures designed to keep British citizens safe from harms defined to include illegal, hostile or hurtful patterns of online behavior (e.g., promulgating disinformation, cyberterrorism, hacking and cyberbullying) by individuals and organizations that target the safety and security of individuals.

The plan is designed to increase corporate responsibility and transparency with regard to users’ safety online and proposes a new statutory duty of care for companies, requiring them to take "reasonable steps" to ensure users’ safety (for instance, through easy-to-use online complaint functions that allow users to raise either concerns about specific pieces of harmful content or activity, or wider concerns about the company’s compliance with its duty of care).

In addition, the white paper sets forth plans to create a new role for an independent regulator that will implement, oversee and enforce the new legal and regulatory framework, as well as oversee compliance by companies with the duty of care. The white paper also proposes a new media and digital literacy program designed to help users manage their own online safety.

The ICO's Response

As part of the consultation period, the ICO published its response, penned by U.K. Information Commissioner Elizabeth Denham. While Denham agreed with many of the proposed initiatives, she called for a broader understanding of internet harms, including those involving the use of personal data, which she emphasized cannot be positioned separately from the wider ecosystem of internet regulation. That is, any attempt to mitigate online harms must approach the problem holistically and across all government regulatory bodies to effectively use all existing regulatory tools and innovative new frameworks. Accordingly, Denham points out several gaps in the white paper, including the absence of an analysis of what is already regulated (and what is not) and “the lack of engagement … with the societal harm of electoral interference and the need for greater transparency in online political advertising and micro targeting.”

As for who should enforce the white paper’s initiatives, Denham explained that the role should be filled by an existing regulatory body that already has experience in data protection and content regulation. Denham stated that the regulator should take a cooperative and coordinated approach involving key U.K. regulators in the internet economy (i.e., the ICO, the Competition and Markets Authority, the Electoral Commission and the Financial Conduct Authority). The white paper named the U.K. Office of Communications (Ofcom) as a candidate for the role, but only for an interim period during which a separate regulatory body would be set up. Denham noted that an interim approach would be difficult to execute in practice, as well as unnecessary given Ofcom's ability to develop capacity to support the role permanently.

Denham commented on the proposed duty of care, acknowledging that it was an "important part of the solution," but that it lacked the speed required to actively combat online harms. She proposed that the U.K. government also implement appropriate sanctions and powers that are comparable to those provided to the ICO under the General Data Protection Regulation (GDPR), including the power to compel information, carry out non-consensual audits, take cross-jurisdictional action and issue substantial fines.

Finally, Denham highlights one existing tension between privacy and security: the prevention of many online harms requires the monitoring of individual activities, a level of surveillance that could come into conflict with the ICO’s mission to safeguard privacy. So far, insufficient definition has been given to the white paper’s initiatives to determine whether any necessary surveillance would infringe on privacy rights.

Key Takeaways

From the ICO's perspective, the white paper’s approach is only a starting point in the search for online safety, digital literacy and corporate accountability. In order to have the far-reaching effects the government intends, its approach must be holistic, collaborative and built on the efforts of existing regulators with effective enforcement powers. We will continue to monitor developments with respect to the white paper as it moves through the U.K. legislative process.

Equifax Reaches Largest-Ever Data Breach Settlement

In the largest settlement ever reached in a data breach case, Equifax has agreed to pay up to $700 million to settle claims arising from a breach that exposed the personal data of nearly 150 million people. It also agreed to spend $1 billion to improve its data security over the next five years. The global settlement resolves a nationwide, multidistrict class action litigation and investigations from the Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB) and nearly every state.

Background

Equifax, one of the country’s three major credit reporting agencies, maintains a website where consumers can dispute information in their credit reports. The website ran on Apache Struts, an open source code. In March 2017, a vulnerability was discovered in the Apache software and a patch was issued. However, Equifax failed to properly apply the patch and the agency's scanning tool failed to identify the vulnerability. As a result, Equifax’s systems were infiltrated in May 2017, more than two months after the Apache Struts patch was first made available. Between May 2017 and June 2017, Equifax’s monitoring systems failed to detect the infiltration, and hackers were able to steal personal information from approximately 147.9 million American consumers, including names, dates of birth, Social Security numbers, addresses and other sensitive information. Equifax did not notify affected consumers until seven weeks after first learning of the breach.

More than 300 class actions were filed against Equifax arising from the breach and consolidated into a multidistrict litigation in the Northern District of Georgia.6 The FTC, CFPB and every state, as well as the District of Columbia and Puerto Rico, also pursued action against Equifax. After nearly two years of negotiations, a global settlement was reached.

The Settlement

On July 22, 2019, the Northern District of Georgia granted preliminary approval to the nationwide class action settlement, which provides for monetary and injunctive relief.

Under the settlement, Equifax will pay $380.5 million into a non-reversionary fund to cover the settlement's benefits and costs, including attorneys’ fees. Affected consumers may submit claim forms to receive compensation of $25 per hour (for up to 20 hours) for time spent taking preventative measures or dealing with identity theft. They also may receive reimbursement of up to $20,000 for (1) documented losses from the breach, such as the cost of freezing or unfreezing a credit file; buying credit monitoring services; or losses from identity theft or fraud; and (2) 25 percent of any money paid to Equifax for credit monitoring or identity theft protection subscriptions in the year before the breach. Equifax will pay an additional $125 million into the fund if needed to cover excess claims for out-of-pocket losses.

Class members will initially have six months to claim benefits. If money remains in the fund the claims period will be extended by four years, during which class members may recover for out-of-pocket losses and time spent rectifying identity theft that occurs after the end of the initial six-month claims period. The extended claim period reflects the fact that harm from a data breach may not materialize until years later because the hackers chose not to use the stolen data immediately, or because the stolen data standing alone does not suffice to effectuate an identity theft until later combined with other pilfered data.

The settlement also seeks to safeguard affected consumers from future harm and to restore their stolen identities. For four years, Equifax will provide three-bureau credit monitoring and identity protection services through Experian, and, for an additional six years, the agency will provide one-bureau credit monitoring through Equifax. It also will provide $1 million of identity theft insurance for four years. Those class members who already have credit monitoring or protective services in place will instead receive $125. For seven years, Equifax will provide identity restoration services to help class members victimized by identity theft, including access to a U.S.-based call center, assignment of a certified identity theft restoration specialist, and step-by-step assistance in dealing with credit bureaus, companies and government agencies.

Equifax also agreed to entry of a consent order requiring the company to spend a minimum of $1 billion on cybersecurity measures over five years. Among other things, the agency agreed to implement a comprehensive information security program; conduct vulnerability scanning; monitor and log security events, operational activities and transactions on its network; conduct incident response exercises; and engage in patch management. Equifax’s compliance will be audited by independent experts and subject to the court’s enforcement powers.

Equifax also has agreed to pay penalties of $100 million to the CFPB and $175 million to 48 states, as well as the District of Columbia and Puerto Rico. The only states not participating in the settlement are Massachusetts and Indiana, which have filed their own suits.

Key Takeaways

The Equifax breach resulted in a historic settlement requiring Equifax to pay up to $700 million in settlement money and fines, spend $1 billion in cybersecurity measures over the next five years, and be subject to oversight from auditors and the court. The breach may have been avoided by timely application of a patch to a known vulnerability on its webpage. As such, companies that process personal information should confirm that they have effective policies and procedures in place to identify and implement patches for known vulnerabilities.

UK ICO Issues New Guidance on Internet Cookies

On July 3, 2019, the U.K. ICO released, for the first time, guidance on the use of cookies and similar technologies (new guidance) in order to clarify the interplay between the GDPR and the U.K. Privacy and Electronic Communications (EC Directive) Regulations 2003 (as amended) (PECR). The new guidance comes in the lead-up to the proposed EU ePrivacy Regulation, which is intended to replace the Privacy and Electronic Communications (EC) Directive 2002/58/EC, upon which the PECR is based. Implementation of the EU ePrivacy Regulation has been delayed and is now expected in 2020 at the earliest.

Interplay Between GDPR and PECR

The PECR provides specific privacy rights in relation to electronic communications and applies to any technology that stores or accesses information on the user’s device. This could include, for example, cookies and similar technologies, such as HTML5 local storage, local shared objects and fingerprinting techniques. Cookies assist in allowing a website to recognize a user's device and generally make websites work more efficiently. For example, they allow website providers to analyze website traffic and track users' browsing behaviors. Cookies often contain personal data, such as a user's location, IP addresses and/or website preferences.

Many of the areas of regulation that fall within the scope of the PECR also fall within the scope of the GDPR because the use of cookies typically involves processing personal data. The new guidance confirms that the key concepts of consent and transparency under the PECR must be interpreted in accordance with their definitions as enhanced under the GDPR. The new guidance therefore confirms that information provided about cookies on a website must be concise, intelligible and made available in an easily accessible form. In addition, where consent is obtained for the purpose of setting cookies, it must be freely given, granular and informed. The higher standard of consent means that implied consent would not constitute valid consent under the GDPR regarding the use of cookies or the processing of personal data. Accordingly, the new guidance clarifies that when companies send marketing messages or use cookies or similar technologies, they must comply with both sets of requirements under the PECR and the GDPR before doing so.

In particular, applying GDPR standards for consent has several implications, including the ban on pre-checked boxes and the use of “cookie walls.” Cookie walls require users to “accept” the setting of cookies before they can access an online service’s content and will often be non-compliant since they give users no choice but to accept the cookie. Cookie walls may only be permitted when falling under the specific exception in Recital 25 of PECR, which permits cookie walls so long as they are only used for specific website content, rather than general access, and facilitate the provision of online services requested by the user.

This is known as the strictly necessary exception, which applies where online collection of personal data is necessary in order to provide that particular online service. For example, companies may need a user’s credit card information to process a transaction or a user’s mailing address to ship a product. Outside of this exception, the use of cookie walls is likely to be in violation of the GDPR-enhanced consent requirement. The new guidance places a specific emphasis on analytics cookies, noting that these would not fall into this exemption.

Audits

The new guidance recommends that all website owners conduct a “cookie audit” to help ensure compliance with both sets of requirements under PECR and the GDPR. The ICO provides recommendations for these reviews, including:

  • identifying cookies operating on or through the website;
  • confirming the purpose of the cookies;
  • confirming whether the cookies are linked to other data and might involve processing personal data;
  • confirming whether cookies are “strictly necessary” or whether they will require user consent; and
  • documenting findings and follow-up actions, while building in an appropriate review period.

Other Guidance

The new guidance covers a number of other topics, including an acknowledgment by the ICO that handling third-party cookies is one of the most challenging areas in which to achieve compliance with both PECR and the GDPR. Where a website sets third-party cookies, such as those on an advertising network, both the website owner and the third party have responsibility for ensuring that users are clearly informed and give consent. The ICO is committed to continuing to work with industries and other European data protection authorities to address the difficulties in finding workable solutions.

The new guidance does not clarify every point of uncertainty that arises within PECR. The proposed EU ePrivacy Regulation, an EU legislative instrument that is intended to replace the Privacy and Electronic Communications (EC) Directive 2002/58/EC (which is implemented through the PECR in the U.K.), may provide clarity on any remaining items of uncertainty. However, implementation of the EU ePrivacy Regulation has been delayed and is not expected until 2020 at the earliest.

Key Takeaways

The new guidance demonstrates that, in spite of a delay in the implementation of the EU ePrivacy Regulation, cookies are still a regulatory priority for EU member states. Other EU data protection authorities, including the French and Dutch authorities, also have published new guidance on cookies. The ICO and the other EU data protection authorities recommend that companies subject to the GDPR revisit their cookie usage policies and practices in light of the consent and transparency requirements under the regulation without waiting for the EU ePrivacy Regulation to come into force.

_______________

1 A copy of the SHIELD Act may be found here.

2 A copy of the Identity Theft Prevention and Mitigation Services Act may be found here.

3 The decision is available here.

4 The decision is available here.

5 Mondelez Int’l, Inc. v. Zurich Am. Ins. Co., No. 2018-L-11008, complaint filed, 2018 WL 4941760 (Ill. Cir. Ct., Cook Cty., Oct. 10, 2018).

6 In re: Equifax Inc. Customer Data Security Breach Litigation, No. 1:17-md-2800-TWT (N.D. Ga.)

 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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