This new information revealed that Google had collected, not just the name and location of wireless networks, but also information sent over unsecured wireless networks, which is called payload data.  Google has said that the collection of payload data was unintentional and the result of software code mistakenly included in the Street View cars program.  Google also noted that, because the cars are on the move and the software that the cars use rapidly changes channels, the chance that Google captured data containing anything fragments of data is unlikely. 

• The bill would require any company that collects “covered information” from or about individuals to obtain opt-in consent to a statutorily mandated privacy policy containing at least fifteen enumerated disclosures.  Consent would be deemed adequate if the user expressly opted in to the information collection after being presented with the required disclosures, or in most circumstances if the user “does not decline consent at the time such statement is presented."  This would seem to imply that web sites would need to ensure that privacy policies appear on users’ screens at some point, to either expressly opt in or to fail to “decline consent” when the statement is presented to the user.  At the same time, however, the bill permits privacy policies to be “accessible through a direct link from the Internet homepage of the web site.”  It is unclear, then, whether the bill would consider the existence of such a link to be sufficient to infer that a user “does not decline consent” when merely accessing a web site, which would otherwise obviate the need to obtain opt-in consent.
  
  
• In a few specific circumstances, the bill would permit the use of web site user information for the purposes of marketing, advertising, or selling only with express opt-in consent.  This includes (1) when the web site wishes to disclose the information to unaffiliated third parties, such as advertisement networks, unless certain requirements are met (see the next bullet); (2) when the web site collects or discloses any “sensitive information,” which is defined as medical records or history, race, ethnicity, religious beliefs, sexual orientation, financial records or other information associated with a financial account, or geolocation information; or (3) when the web site collects or discloses “all or substantially all of an individual’s online activity.”
  
  
• Nevertheless, the bill would provide an exception permitting a web site to share user information with unaffiliated third parties for the purposes of marketing, advertising, or selling without express opt-in consent if it:  (1) provides users with a “readily accessible” opt-out mechanism; (2) deletes or renders anonymous any “covered information” within 18 months after it is first collected; (3) allows users to review and modify, or completely opt out of having, any profiles maintained about their preferences by web sites or their advertisement network partners for marketing purposes (these so-called “preference profiles” must be accessible through a hyperlinked “symbol or seal” on the web site and on or near any advertisement served based on the profile); and (4) prohibits advertisement networks from further disclosing any such information they receive.  This would seem to almost directly endorse the use of the online behavioral privacy icon put forth by groups supporting industry self-regulation of behavioral advertising.
  
  
• The term “covered information” would include a number of individual data elements – such as name, e-mail address, and Social Security number – that might otherwise be considered personally identifiable information under other statutory or regulatory regimes (at least in combination with other data elements).  In addition to the novel development of regulating the collection of these data elements individually, the bill includes in its definition of covered information:
  
  "Any unique persistent identifier, such as a customer number, unique pseudonym or user alias, Internet Protocol address, or other unique identifier, where such identifier is used to collect, store, or identify information about a specific individual or a computer, device, or software application owned or used by a particular user or that is otherwise associated with a particular user."
  
  Adopting this definition would be significant because no American privacy law has ever considered an anonymous identifier or IP address to be legally protected information (though IP addresses are considered to be personally identifiable in the EU and FTC Chairman Jon Leibowitz commented just a couple weeks ago that he believes that IP addresses should be considered personal information).  Additionally, this definition means that the bill would apply to any web site that maintains and uses information about users keyed to a unique identifier, which means that it applies to just about every web site that collects user registration information.
  
  

This guidance document is generally consistent with the materials provided by the Centers for Medicare and Medicaid Services (“CMS”) prior to the introduction of HITECH.  For example, like the recently released OCR guidance, CMS historically directed covered entities to refer to the National Institute of Standards and Technology’s Special Publication 800-66 Rev.1, An Introductory Resource Guide for Implementing the HIPAA Security Rule (October 2008) (“NIST 800-66”).  NIST 800-66 frequently directs readers to consult NIST SP 800-30, Risk Management Guide for Information Technology Systems (July 2002), which is also quoted extensively in the recently released OCR guidance.  Moreover, the OCR guidance is quite similar to the HIPAA Security Series, Paper 6: Basics of Risk Analysis and Risk Management which was most recently revised by CMS in March 2007. 

OCR encourages the public to offer feedback on the risk analysis guidance. Comments can be submitted to OCR at OCRPrivacy@hhs.gov

Mark Paulding of the Privacy and Information Management practice in Hogan Lovells' Washington, D.C. office prepared this entry.

FOR COMMUNICATIONS SERVICE PROVIDERS 

            On April 21, 2010, the Federal Communications Commission ("FCC") issued a Notice of Inquiry  that kicks off  a proceeding seeking comment on a "cyber security" certification program designed to encourage communication service providers (i.e., those entities providing communications services by radio, wire, cable, satellite, or lightguide for a fee to one or more unaffiliated entities) to implement a full range of cyber security best practices.  The FCC is reviewing this potential program, which was recommended under the Commission's National Broadband Plan, in an effort to counter cyber attacks and protect the communications infrastructure in the U.S.  Among other things, the FCC cites a 2008 Data Breach Investigation Report that found that 87% of cyber breaches could have been avoided if reasonable security controls had been in place.

            The proposed voluntary certification program would involve security assessments of service providers' networks, to be conducted by the FCC or private sector auditors.  The audit would entail a review of whether the networks comply with "stringent cyber security practices" to be developed by a public-private partnership.   Those providers who successfully complete the audit would receive a special certification and then be able to market their networks as complying with these FCC network security requirements.

            The inquiry is being led by the FCC's Public Safety and Homeland Security Bureau.  The FCC's Notice of Inquiry seeks comment on a variety of topics, including:

·        the costs/benefits of the program

·        whether the program will really lead to an increase in security and improved cyber security practices

·        whether the certification program should be open to all communication providers, or only certain types

·        the composition and operating procedures of a certification authority

·        whether the security criteria should be definitive or established on a case-by-case basis.

·        assessment standards

·        form and duration of the security certification, and the renewal process

·        FCC enforcement process, if any, for the program

·        education process regarding cyber security  for consumers, businesses, and government agencies 

In December 2009, the House passed the “Wall Street Reform and Consumer Protection Act of 2009” (HR 4173). An important provision in the bill would strip the FTC of its powers to regulate consumer financial protection -- while also expanding the agency’s powers in two key ways. First, by giving the FTC “APA” rulemaking authority for areas that fall within the FTC’s jurisdiction and second, by giving the agency greater latitude to assess civil penalties for unfair and deceptive practices.

These amendments will surely impact FTC enforcement of online advertising, marketing, privacy, and data security. For instance, violations under the FTC’s expanded authority could trigger civil penalties even in the absence of an FTC order. Civil penalties would be assessed in antitrust cases brought by the FTC that include a consumer protection claim.

In addition, the HR 4173 language that expands the FTC’s authority would impose liability on companies that “substantially assist” in an unlawful act, even if the company does not have direct knowledge or responsibility for the violation. This provision will probably raise some serious concerns for companies currently enjoying a safe harbor under the Communications Decency Act.

Today, FTC rulemaking jurisdiction comes in two flavors – “APA” rulemaking under certain laws as prescribed by Congress e.g. the Children’s Online Privacy Protection Act, as well as general rulemaking authority under the 1975 Magnusson-Moss Act. Under the latter, the FTC can only regulate “prevalent” unfair and deceptive acts, and must justify that regulation with “substantial evidence.” The key difference between these two types of rulemaking occurs during judicial review; a court can overturn an FTC regulation under Magnusson-Moss if the rule lacks a substantial evidentiary record to support it. In contrast, FTC regulations enacted under the APA rulemaking scheme, such as those implementing COPPA, can only be overturned if the agency was "arbitrary or capricious" in enacting the rule – a much higher standard. As former FTC Chairman Muris explained in his presentation at the panel, Magnusson-Moss gives the FTC authority to act only when a problem occurs often enough to justify a rule, or when a problem has a common cause in a sufficient number of cases.

Current FTC Chairman Jon Leibowitz, supported by President Obama and the Administration, has strongly advocated for an expansion in the FTC’s authority, stating that it is “critical” for the FTC to carry out its mission of protecting consumers. In particular, Leibowitz has argued that the procedural requirements of Magnusson-Moss – such as the requirement that a practice be prevalent before the agency can act - makes FTC rulemaking more burdensome than at most other federal agencies. Although the relevant amendments expanding the FTC’s power are missing from the Senate version of the legislation, it is widely expected that these differences will be worked out in conference. Financial reform legislation appears to be on a fast track - earlier today, a Senate panel approved the bill, and both Republicans and Democrats have indicated that passage is likely.

The CFPA would be a new independent federal agency – the composition of which would vary depending on whether you are looking at the House Bill (5 members and a Director for two years) or Senate Bill (5 members). Its enactment would strip the FTC and other federal banking agencies of their federal consumer protection powers under a number of laws, including the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Secure and Fair Enforcement for Mortgage Licensing Act, the Truth in Lending Act and the Truth in Savings Act. In short, any product or service that results from or is related to engaging in a financial activity and that is to be used by a consumer “primarily for personal, family or household purposes” will come under the new agency’s purview.

At today’s session, we saw differing viewpoints from both Tim Muris, former FTC Chairman, and Julie Brill, incoming FTC Commissioner, on this current push to expand the FTC’s authority under financial reform legislation.

Former Chairman Muris views the FTC’s current role as important, and he sees FTC rulemaking as relevant in certain areas – e.g. the do-not-call rules. He is concerned about the current proposals to expand the FTC’s authority because the agency often lacks industry-specific knowledge and expertise (I see this most recently in the area of privacy, as the FTC is currently gleaning this knowledge through its Exploring Privacy roundtable series). Muris also thinks the agency’s rulemaking authority under Magnusson-Moss is more than sufficient as it imposes an obligation on the agency to be clear about its proposed theories while focusing its evidence on key questions. He cites the agency’s recent business opportunity rulemaking as an example of an instance where the FTC initially proposed a broad rule that would have disproportionately impacted both fraudulent and legitimate business. The FTC eventually narrowed its proposed business opportunity rule after the public comment process.

On civil penalties, Muris thinks these are important only when a company violates an FTC order or rule. He sees blanket civil penalty authority as a mistake that may have unintended consequences – such as a penalty on a firm’s stock price. He’s also concerned that the standard of review laid out in the financial reform legislation will return the FTC’s definition of unfairness to its pre 1994 definition i.e. the Sperry-Hutchinson or "cigarette rule" which defines an unfair practice as one that is injurious to consumers, violate established public policy or is it unethical or unscrupulous. As many know, Congress amended the FTC Act in 1994 to specify that an unfair act or practice is one that causes or is likely to cause substantial injury to consumers that is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or competition.

Providing a counterpoint to Muris’ remarks, FTC Commissioner Julie Brill, speaking “on behalf of herself,” is generally in favor of expanding the FTC’s authority. She sees the FTC as both a law enforcement and regulatory agency. She views civil penalties as just “one of the arrows” in the FTC’s quiver – not to be used in every instance, but as appropriate. As a law enforcer, she does not see the FTC’s request to have civil penalty authority as unusual – since most state AGs already have this type of authority. To view such penalties as “automatic” is particularly misleading to her, since the FTC would only be able to obtain such penalties after judicial review in court. Brill also sees the FTC as a regulatory agency and notes that APA rulemaking is enjoyed by most other federal agencies. In addition, she points out that APA rulemaking under the proposed amendments would also be subject to review by a judge in court. Brill also views civil penalties as helpful in quantifying equitable remedies to compensate consumers for their injury - e.g. disgorgement or restitution for data breach violations.

Taking a broader view of the situation, Brill sees an expansion of the FTC's authority as a way to make the agency's enforcement efforts more effective – which benefits both consumers and competition in the long run. She also feels that consumers want an agency that has the right enforcement tools – not an “emasculated” FTC - and finds it surprising that the issue is even being debated, given the events of the financial meltdown and the current economic recession.

On the subject of FTC regulation, Brill is strongly in favor of an update, noting that rulemaking under Magnusson-Moss can often take up to 8 – 10 years. She recalls comments she made on the hearing aid rule as an Assistant AG in Vermont in 1992 – rules that have yet to be issued, nearly 20 years later. Her statements suggest that expanded rulemaking authority might give companies in dynamic industries – such as technology - FTC regulation that actually keeps pace with innovation.

The question of course, is whether such FTC regulation would also stifle innovation preemptively. Companies have started to take note of the recent push to expand the FTC’s power, and it is likely that the topic will continue to be debated fiercely in the coming weeks as financial reform legislation comes to a vote. Some have even expressed concerns that such an expansion of the FTC’s rulemaking authority could impact funding and investment in technology and Internet companies by both Wall Street and Silicon Valley VCs. For more, take a look at this transcript of the Progress & Freedom Foundation’s recent forum entitled “Supersizing the FTC.”

More information can be found at http://www.ftc.gov/opa/2010/02/controlscan.shtm.

The top ten complaints for 2009 are: