The Internet of Things and the Inevitable Collision with Product Liability PART 4: Government Oversight

by Wilson Elser
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The exponential growth of the Internet of Things (IoT) is far outpacing the ability of stakeholders to address safety standards and security concerns. This is not unusual as rapidly developing technology often challenges regulators and standards organizations to develop a framework for consensus governance. However, because the IoT transcends so many industries, there will be unprecedented difficulties with respect to harmonization of standards that will apply from one industry sector to another.

The efforts to develop and implement safety standards and government regulations have been taking place globally, albeit in fits and starts and not necessarily in synchronization among the developed countries. Nonetheless, as governments take note of the IoT, the number of threats identified continues to multiply.

Red Flags for Datamining
On September 10, 2015, the Federal Bureau of Investigation (FBI) posted online a public service announcement warning of IoT risks for cybercrime, which include vulnerabilities to individuals’ and businesses’ personal data as well as the potential for “compromising the IoT device to cause physical harm.” [Emphasis added.] Universal Plug and Play (UPnP) protocol used to access many IoT devices was identified as being especially vulnerable to exploitation.

AT&T reported in its Cybersecurity Insights, Volume 1, October 1, 2015, that it had seen a dramatic 458 percent increase in IoT vulnerability scans against IoT-connected devices.

Business and technology writer George V. Hulme wrote recently “… security is no longer just about data and access to IT systems and applications. It’s also about how all those linked physical devices communicate, and that adds a new and dangerous dimension. With everything interconnected, everything is also now at risk of Internet-based attacks that look just like cyberattacks we see today, with data theft, denial-of-service exploits and malicious hackers hijacking devices and making them do their bidding – only on a potentially much larger scale.” He goes on to cite the international research and analysis group IDC as reporting that it “… expects 90 percent of networks will have an IoT breach within two years.”

The Wall Street Journal reported on August 6, 2015, about Yodlee, a business that among other things buys and sells data. Yodlee provides online personal finance tools to a number of the largest U.S. banks. When the banks’ customers use the tools supplied by Yodlee, it sells some of the data to other businesses, such as hedge funds, that use the data for predictive analytics. The article characterized the information collected and sold as “more granular than ever,” allowing investors to look into specific transactions by consumers in advance of securities filings to gain an advantage in estimating revenue. The article noted that while steps are taken to scrub the data Yodlee sells to its customers to protect privacy and that it requires that buyers not re-sell the data, researchers at MIT claimed they can unmask roughly 90 percent of people in a data base of anonymous credit card transactions with as little as four pieces of information.

Mining personal data is, in fact, nothing new. Security expert and author Marc Goodman in his recently published book Future Crimes describes many instances where personal data of individuals is collected and sold to third parties. Google and Facebook are identified among the major players. Goodman characterizes consumers who freely give up their personal data as a result of accepting the conditions contained in the Terms of Service (ToS) agreements with Internet companies, in effect becoming the “product” not the actual customer. The real customer is in fact the companies buying the data from the Internet companies. Thus, the exponential growth of IoT will undoubtedly fuel the efforts by companies to collect and harvest data from all manner of interconnected products and create new markets for the acquisition of personal data.

Report to the President
In November 2014, the National Security Telecommunications Advisory Committee (NSTAC) issued its Report to the President on the Internet of Things. The committee noted: “In 2008, the U.S. National Intelligence Council warned that the IoT would be a disruptive technology by 2025 … [Seven] years later, this warning remains valid, though it now seems certain that the IoT will be disruptive far sooner than 2025 – if it is not so already.” [Emphasis added.]

Among the more compelling and thought-provoking findings reached by the committee were:

  • “The line between consumer and industrial devices continues to blur, with consumer devices used – intentionally or not – in ways that affect national security/emergency preparedness (NS/EP). The strong growth in interconnected, potentially adaptive devices implies a larger cybersecurity attack surface with potentially cascading adverse effects in both the cyber and physical domains.”
  • “IoT represents a convergence, or perhaps a collision, of IT [information technology] and OT [operational technology]. To this point, the two disciplines have approached cybersecurity differently. IT security involves patches and frequent updates and the ability to take systems offline as needed, while OT security is largely based on obscurity and specialization, in large part because of the need for systems to remain online, whether compromised or not. This disconnect creates gaps that attackers could exploit.”
  • “Innovation and adoption of IoT technology are outpacing the development of IoT governance structures and related policies. This appears to be true at both the national and global levels.”
  • “The emergence of IoT and the convergence of IT and OT demand experts who understand and can respond effectively to these new challenges. Academic programs that integrate core concepts and the implications of new interdependencies are needed, as are training programs for practicing professionals in both IT and OT and in the development of future IoT.”

Since the report was issued, Congress has stepped up its efforts to investigate the IoT and its implications for good and ill.

  • In February 2015, the U.S. Senate Committee on Commerce, Science and Transportation held a hearing titled “The Connected World: Examining the Internet of Things.”
  • In March 2015, the U.S. House of Representatives Energy & Commerce Committee, Subcommittee on Commerce, Manufacturing, and Trade held a hearing on the Internet of Things.
  • In March 2015, the U.S. Senate passed a resolution aimed at tackling many of these concerns.
  • On June 23, 2015, a group of U.S. senators sent a letter to the Government Accountability Office (GAO) to undertake a study to determine among other things the technical standards needed for various devices to efficiently communicate with each other and with users.
  • On July 29, 2015, the U.S. House of Representatives, Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on the current and future challenges facing the Internet of Things.

Government Action versus Self-Regulation
In response to these developments, industry leaders have expressed concerns to Congress that such efforts at regulation could stifle innovation. In addition to hearings, federal agencies are taking action to make businesses implement measures to ensure cybersecurity is at the foundation of the development of any product that will connect to the Internet.

In March 2015, the Federal Trade Commission (FTC) established the Office of Technology Research and Investigation (OTRI) as the successor to the Mobile Technology Unit (MTU). The OTRI “… will build upon the groundwork by tracking an even broader array of investigative research on technology issues involving all facets of the FTC’s consumer protection mission, including privacy, data security, connected cars, smart homes, algorithmic transparency, emerging payment methods, big data and the Internet of Things.”

In addition, the FTC published a primer for IoT businesses that provides some basic guiding principles for IoT device manufacturers and software companies to take into account in order to build a platform of security from the ground up. The FTC notes that “[w]hat’s reasonable will depend on a number of variables, including the kind and amount of information collected, the type of functionality involved, and the potential security risks.”

Meanwhile, in January 2015, The Online Trust Alliance (OTA) created the IoT Trustworthy Working Group (ITWG), a multi-stakeholder initiative, that in August 2015 issued an IoT Trust Framework discussion draft for the Internet of Things. The framework focuses on best practices in security and privacy and sustainability within two primary categories: (1) home automation and connected home products and (2) wearable technologies, limited to the health and fitness categories.

The End Game
Sustainability has been identified as a critical area for security – a device that is secure when bought could eventually become vulnerable if not properly supported. This entails recognizing that security and privacy must by design be a priority from the outset of product development and be addressed holistically focusing on end-to-end security and privacy.

The ITWG’s IoT Trust Framework proposes 23 minimum requirements and a commitment to comply with all relevant regulatory requirements. In addition, there are 12 other recommendations that go above and beyond the initial recommendations.

Among the areas requiring minimum compliance are making the privacy policy readily available, optimizing the design for user interface, identifying all personally identifiable data collected, providing data purging options for users and incorporating encryption by default.

These fledgling efforts by industry, government and technology advocacy groups are going to be challenged to keep pace with the speed at which IoT applications are multiplying. New stakeholders, including experts from all walks of science, industry, business, insurance and the legal profession, will need to join forces proactively sooner rather than later to help the IoT fulfill its promise and hopefully minimize the real and potential threats involving physical damage, personal injury, or compromised personal data and security.

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Wilson Elser
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