On the heels of the game-changing California Consumer Privacy Act of 2018, California is once again leading the way and setting the standard for cybersecurity and data security with the enactment of the nation’s first law for the “Security of Connected Devices,” which expressly governs cybersecurity requirements that must be adhered to by manufacturers of “smart” devices, otherwise commonly known as the "internet of things."
The law requires that manufacturers incorporate “reasonable security features” for all internet of things devices, and will go into effect on Jan. 1, 2020. Significantly, although the law only applies in California, internet of things manufacturers can expect the law to serve as a blueprint for the enactment of similar legislation in other jurisdictions across the nation.
Overview of the Internet of Things
The internet of things generally refers to the network of physical devices (or "things") that are connected to the internet, collecting and sharing data. The internet of things has digitalized the physical world and has transformed common, everyday objects into smart devices that connect everything from watches to refrigerators to the internet. In the process, the internet of things revolution has brought with it previously unimaginable benefits in the form of efficiency, convenience, safety and savings, just to name a few.
Many have called the rise of the internet of things the third major technological revolution, behind the Industrial Revolution and the creation of the internet. Today, there are a wide range of applications and devices that we use in our daily lives that are impacted by the internet of things. With that said, at the present time we are just in the early stages of the internet of things movement. In fact, some experts estimate that by 2020, the internet of things will be comprised of somewhere between 20 and 50 billion connected devices.
In addition to the myriad of benefits that internet of things technology has to offer, smart devices also present several key challenges and risks as well. Smart technology carries with it sizable privacy and security risks, as internet of things devices are vulnerable to hacking by malicious third parties. It is not difficult to imagine the dangers of security flaws in internet-connected pacemakers and vehicles. And, while connecting baby monitors to Wi-Fi gives parents the benefit of being able to watch their baby from anywhere, a security flaw would allow hackers to have the same access.
Lawmakers in California, cognizant of these risks, enacted the state’s new security of connected devices law in order to “to ensure that internet-connected devices are equipped with reasonable security measures to protect them from unauthorized access, use, destruction, disclosure, or modification by hackers.”
California’s “Security of Connected Devices” Law
The new California internet of things law applies to any “manufacturer” of a “connected device.” A “manufacturer” is defined as “the person who manufactures, or contracts with another person to manufacture on the person’s behalf, connected devices that are sold or offered for sale in California.”
A “connected device” entails “any device, or other physical object that is capable of connecting to the Internet, directly or indirectly, and that is assigned an Internet Protocol address or Bluetooth address.” This expansive definition of covered devices casts an extremely wide net, and is broad enough to encompass essentially all devices that are part of the internet of things universe, including fitness trackers, automobiles, televisions and home devices such as Google Home and Amazon Echo.
The law does not, however, apply to individuals who simply purchase a connected device, or who purchase and brand a connected device. Furthermore, the law also recognizes the preemptive effect of federal regulatory efforts, and does not apply to any internet of things devices that are otherwise “subject to security requirements imposed by federal law, regulations, or guidance promulgated by a federal agency pursuant to its regulatory enforcement authority.”
In addition, also excluded from the law are entities that are subject to the federal Health Insurance Portability and Accountability Act of 1996 or California’s Confidentiality of Medical Information Act to the extent the activity in question is covered by those acts.
Importantly, the new law requires manufacturers of internet of things devices to equip their devices with “reasonable security features.” While the law is lacking on specifics, at a minimum these security features must be: (1) appropriate to the nature and function of the device; (2) appropriate to the information the device may collect, contain or transmit; and (3) designed to protect the device, and any information contained therein, from unauthorized access, destruction, use, modification or disclosure.
Although the law does not provide any definition or discussion of what constitutes “reasonable security features,” the law does provide that if a device utilizes a means of authentication outside a local area network — or, in other words, a remote method of verifying the user’s authority to access the device — the device will be deemed to have a “reasonable security feature” if it includes either: (1) preprogrammed unique passwords for each device sold; or (2) a feature requiring a user to change the default password and generate his or her own unique password before the device can be used for the first time.
Significantly, the law also provides that it does not do any of the following: (1) impose any duty on manufacturers of connected devices related to unaffiliated third-party software installed on a connected device by the device’s user; (2) impose any duty on any electronics store or marketplace for the purchasing and/or downloading of software or apps to review or enforce compliance with the new law; or (3) impose any duty on the manufacturer of connected devices to prevent users from possessing complete control over a device, including preventing the user from modifying the software or firmware running on the device.
Unlike the recently enacted California Consumer Privacy Act of 2018, California’s new internet of things cybersecurity law does not provide a private right of action. Nor does the law provide for any specific monetary penalties. Rather, enforcement authority is maintained exclusively by California’s attorney general, as well as city, county and district attorneys.
While California’s new internet of things law applies only to the state of California, the adopted cybersecurity standards for internet of things devices are likely to influence other states to consider enacting similar legislation in connection with IoT technology. Much like the recently enacted California Consumer Privacy Act, California’s new internet of things law will almost certainly also have an impact on other jurisdictions, likely serving as the de facto national standard for the IoT industry. As such, it is reasonable to posit that legislatures in other states will follow suit and enact their own similar statutes.
Importantly, the language of California’s new internet of things law is extremely vague, as the law provides no substantive guidance or discussion as to what constitutes “reasonable security measures” as that term is applied to internet of things devices. In this regard, outside of the password requirement, the new law does not otherwise mandate any specific standards for implementing “reasonable security features” that would suffice to ensure compliance with the law.
Furthermore, under the law a manufacturer’s “reasonable” measures must be “appropriate” to the device and the information it collects, adding additional ambiguity to the mix. Combined, without clear direction, the law puts companies in a precarious position in terms of determining whether their efforts in providing security measures for internet of things devices satisfy the requirements for compliance under the law.
With that said, companies can look to the Federal Trade Commission’s 2015 staff report on the internet of things and to several internet of things-specific cybersecurity frameworks that provide certification standards for internet of things devices for guidance on how to properly implement “reasonable security features” to comply with the new law.
In particular, CTIA — the wireless industry association — offers a cybersecurity certification program for cellular-connected internet of things devices. Similarly, Underwriters Laboratory — a global safety science leader — also provides its own cybersecurity assurance program, which offers a comprehensive standards-based certification program for internet of things devices.
While neither program will absolutely ensure that internet of things devices are impervious to security vulnerabilities, compliance with these programs may aid covered businesses in establishing that they have implemented “reasonable” security measures sufficient to avoid liability under the new internet of things law. In addition, to limit privacy risks, the FTC’s report encourages data minimization and recommends that companies notify consumers and give them choices about how their data will be used, particularly where data collection is beyond consumers’ reasonable expectations.
While the law does not go into effect until Jan. 1, 2020, manufacturers of internet of things devices — including those that are based outside of California but sell internet of things technology in the state — should start making preparations to comply with the law well in advance of its enactment date to ensure that all future devices put into the stream of commerce comply with the new law by the beginning of next year. In particular, businesses should familiarize themselves with industry standards and relevant guidance pertaining to internet of things device security.
At the same time, manufacturers will also need to develop and implement technology that incorporates reasonable security features into their devices to achieve compliance with the law. Finally, because the law’s security requirements reach beyond the point of initial sale, companies must develop programs for post-market patching, monitoring and vulnerability handling in connection with all internet of things products that are manufactured and offered in the California marketplace.
“What to Know about New Calif. Connected Devices Law,” by Jennifer J. Daniels and David J. Oberly was published in Law360 on March 27, 2019. Reprinted with permission.