The Internet of Things Cybersecurity Improvement Act of 2017: A potential mandate for security standards applicable to Internet-connected devices purchased by the U.S. government

by Hogan Lovells
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On 1 August 2017, a bipartisan group of four U.S. senators (Steve Daines (R-MT), Cory Gardner (R-CO), Mark Warner (D-VA), and Ron Wyden (D-OR) introduced the Internet of Things (IoT) Cybersecurity Improvement Act of 2017. This bill would establish minimum cybersecurity requirements for Internet-connected devices purchased by the U.S. Government and provide liability protections for security researchers who disclose security vulnerabilities and defects affecting these devices. Primary responsibility for implementing the statute would lie with the Director for the Office of Management and Budget (OMB), who must issue guidance to executive agencies within 180 days after enactment. The legislation was prompted by a series of massive IoT cyberattacks within the past year. Each of the attacks took advantage of security vulnerabilities in Internet-connected devices that enabled them to be co-opted into global networks known as “botnets.” Once created, these botnets harnessed the significant collective computing power of the network for malicious purposes.

These requirements would have significant impacts on government contractors that sell Internet-connected devices to the U.S. Government and to original equipment manufacturers (OEMs). According to a report from Govini, titled Internet of Things Taxonomy, the U.S. Government spent US$35bn on IoT solutions, including device-based applications, cybersecurity solutions, wireless devices, and sensors, from FY2011 through FY2015, with US$9bn spent in FY2015 alone. As the senators implied in a fact sheet, the breadth of U.S. Government spending on these devices and the U.S. Government’s procurement of commercial-off-the-shelf items likely would cause the security requirements contained in this legislation to reverberate across the U.S. economy as manufacturers adopt many of these security requirements across their commercial product lines.

Much of the legislation appears designed to implement recommendations published by the Chief Information Officer of the U.S. Department of Defense in a 2016 report titled DoD Policy Recommendations for the Internet of Things. For example, this legislation would lead to government-wide standards for limiting network access of IoT devices and precluding unsecured IoT devices from being used on U.S. Government networks. The bill requirements are also largely consistent with the approach taken in an ongoing multistakeholder effort led by the National Telecommunications and Information Administration (NTIA) aimed at developing voluntary security standards for commercial Internet-connected devices more broadly, as well as guidance published in November 2016 by the Department of Homeland Security on Securing the Internet of Things.

 

Applicability

The IoT Cybersecurity Improvement Act of 2017 broadly applies to all “Internet-connected devices” procured by the U.S. Government. The bill defines “Internet-connected device” as “a physical object that” can “connect[] to and is in regular connection with the Internet” and “has computer processing capabilities that can collect, send or receive data.” This definition is broad, but includes an important yet undefined limitation—the device must be “in regular connection with the Internet.” If left unchanged, the bill’s failure to define what it means to be “in regular connection with the Internet” likely would be a critical question facing contractors and procuring agencies when deciding whether a particular device qualifies as an Internet-connected device.

 

Contractor requirements

This bill would require agencies purchasing Internet-connected devices to insert five clauses into solicitations that could impose substantial burdens on contractors. These clauses would require contractors to (1) make four certifications when submitting proposals regarding their devices’ vulnerabilities and security; (2) notify the procuring agency during contract performance of any vulnerabilities learned of subsequent to contract award; (3) provide patches to address security vulnerabilities or defects; (4) repair or replace the devices if the vulnerabilities or defects cannot be remedied through a patch; and (5) inform the agency about the devices’ ability to be updated.  

In the initial procurement phase, offerors wishing to sell Internet-connected devices to the U.S. Government must certify the following in their proposals:

The device as of proposal submission is free of “any hardware, software, or firmware component with any known security vulnerabilities or defects” identified in the National Institute for Standards and Technology (NIST), National Vulnerability Database (NVD), and any similar databases identified by OMB. However, the offeror may disclose a vulnerability to the Government and request that the head of the procuring agency issue a waiver and accept the vulnerability. The waiver application must “identify the specific known vulnerability,” actions that the agency can take to “limit or eliminate the ability for an adversary to exploit the vulnerability,” and “include a justification for secure use of the device notwithstanding the persisting vulnerability.” Note that, unlike other waivers discussed below, authority for waiving disclosed defects would be vested in the head of the procuring agency as opposed to OMB.

 

The device “relies on software or firmware components capable of accepting properly authenticated and trusted updates from the vendor.”

 

The device “uses only non-deprecated industry standard protocols and technologies for functions,” including “communications, such as standard ports for network traffic,” “encryption,” and “interconnection with other devices or peripherals.”

 

The device “does not include any fixed or hard-coded credentials used for remote administration, the delivery of updates, or communication.”

 

Post-award, contractors would be required “to notify the purchasing agency of any known security vulnerabilities... of which the vendor... becomes aware for the duration of the contract.” If a security vulnerability or defect were to arise, contractors would be required to provide patches “to fix or remove” that vulnerability or defect “in a properly authenticated and secure manner.” Finally, contractors would be required to provide the purchasing agency with general information on the ability of the device to be updated. This information could include “the manner in which the device receives security updates,” “the anticipated timeline for ending security support,” “formal notification when security support has ceased,” and “any additional information recommended by the NTIA.”

 

Exceptions

The bill contains two exceptions: OMB could issue a waiver, or the procuring agency could find that the device complies with security standards that exceed those required under the bill. OMB has exclusive authority to issue waivers and may do so if (1) the device has “limited data processing and software functionality,” (2) “an executive agency reasonably believes that” imposing the various requirements would make procuring the device “unfeasible or economically impractical,” and (3) that agency “petition[s] the OMB for a waiver to” the bill’s requirements. Even once a waiver is issued, the bill indicates that contractors would be required to mitigate the cybersecurity risks by satisfying alternative requirements established by OMB after consultation with NIST. Notably, although the bill allows for waivers, these waivers might be viewed only as temporary solutions because the bill would require OMB in conjunction with NIST and the private sector to “stipulate additional requirements for management and use of non-compliant devices, including deadlines for the removal, replacement, or disabling of non-compliant devices.”

A device would also be exempt if it satisfies “an existing third-party security standard” if that standard “provides an equivalent or greater level of security” than that required under the bill. It is likely that a device would meet the requirements of this exemption if, for example, it satisfies baseline controls in NIST Special Publication 800-53 in accordance with the NIST Risk Management Framework.

 

Enforcement

The legislation does not contain any specific enforcement mechanisms. However, if enacted, failure to comply with these requirements could result in the procuring agency rating proposals as technically unacceptable and thus ineligible for contract award, contract disputes, False Claims Act liability, and, depending on the nature of the violation, suspension or debarment.

 

Other provisions

The bill also contains liability protections for security researchers who in good faith identify and disclose vulnerabilities in Internet-connected devices. The legislation would exempt these researchers from liability under the Computer Fraud and Abuse Act (CFAA) as well as the Digital Millennium Copyright Act (DMCA), so long as they followed coordinated disclosure guidelines to be developed by the U.S. Department of Homeland Security National Protection and Programs Directorate (NPPD).

These liability protections address a widespread recognition that security researchers can play a crucial role in enabling organizations to address previously undiscovered vulnerabilities before they may be exploited by malicious actors. Although the protections apply only to Internet-connected devices “of the class, model, or type provided by a contractor to a department or agency of the United States,” imposing such protections on a significant portion of the IoT market may encourage non-federal IoT device vendors to provide similar support to security researchers who disclose vulnerabilities in good faith and consistent with developed standards.

 

Impact on OEMs

OEMs should be particularly interested in this bill. Many electronic devices purchased by the U.S. Government are obtained through resellers. Resellers would be subject to the requirements of this bill notwithstanding the fact that they were not involved in manufacturing the devices or their products and might not be directly involved in supporting the security of these devices. As a result, if the bill is enacted as currently written, OEMs should expect resellers to attempt to transfer responsibility for these requirements through their contracts with OEMs.

Hogan Lovells will continue to monitor the progress of this legislation.

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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