Cybersecurity Stuff Happens: Cybersecurity Stuff Happens: A Corporate Counsel's Primer A Corporate Counsel's Primer

for Securityfor Security

Albert GidariJill Chasson

February 19, 2008

INTRODUCTIONINTRODUCTION

Security - a corporate counsel’s full time job It should keep you up at night – a security breach is

your worst nightmare Total number of records lost in security breaches in

U.S. since 2005 = 218,202,156 http://www.privacyrights.org/ar/ChronDataBreaches.htm

#2008

Total cost per record = $197 2007 Ponemon Institute Study www.ponemon.org

INCIDENT RESPONSE PLANNINGINCIDENT RESPONSE PLANNING

Cradle-to-Grave Security Plan

Combine SOX, PCI, and other regulatory drivers for holistic plan

Organize IRP team with key stakeholders and conduct periodic meetings

Training

Audit/Assessment/Corrective Action Plan

ANATOMY OF INCIDENT RESPONSEANATOMY OF INCIDENT RESPONSE

Fix the Breach Preserve Evidence Document Response Costs Law Enforcement Referral Initiate Customer/Employee/State Notice

Call center Credit monitoring Notice letter

Defensive/Remedial Action Plan

LITIGATIONLITIGATION

Most common claim in security breach class action is for negligence

Classic negligence formula applies: duty, breach, causation and damages

Almost universally, companies have won (but, agency enforcement actions are another story)

Stollenwerk v. Tri-West Health CareStollenwerk v. Tri-West Health Care Beneficiaries of government health insurance program brought

action against local manager of the program for negligently failing to secure their personal information following burglary of computer servers containing hard drives with beneficiaries' personal information.

District Court granted SJ, finding cost of credit monitoring service not cognizable damage under AZ law. (2005 WL 2465906, Sept. 6, 2005)

Ninth Circuit affirms and adds that cost of premium monitoring was not a necessary cost, but reverses and remands on causation grounds as to one party who experienced post-burglary incidents of identity theft. (2007 WL 4116068, 9th Cir. Nov. 20, 2007)

Guin v. Brazos Higher Ed. Svc. Corp.Guin v. Brazos Higher Ed. Svc. Corp. Claim: Employer negligently allowed employee to keep unencrypted

nonpublic customer data on laptop that was stolen from employee's home during burglary; argued that GLBA applied to financial information. GLBA does not prohibit someone from working with sensitive data on a

laptop computer in a home office. GLBA does not require PII to be encrypted on laptop. Reasonable care standard met – employee had permission to work at

home, lived in a safe neighborhood. No evidence that plaintiff’s identity “transferred, possessed, or used” by

a third party “with the intent to commit, aid, or abet any unlawful activity.”

No other evidence of damages. Intervening criminal act of another negates causation.

2006 WL 288483 (D. Minn. Feb. 7, 2006)

Pisciotta v. Old National BancorpPisciotta v. Old National Bancorp Putative class asserted negligence and breach of implied

contract claims against bank and its website hosting facility for allowing PII collected through bank's marketing web site to be accessed via database security breach; sought recovery of costs associated with credit monitoring services.

No claim for credit monitoring available under Indiana common law because damages were speculative (no existing injury); "compensable damage requires more than an exposure to a future potential harm."

Indiana Code provision defined database owner's disclosure duties narrowly and provided state-enforced penalties as the exclusive remedy for violations of such duties.

499 F.3d 629 (7th Cir. 2007)

FTC ACTIONSFTC ACTIONS

Section 5 of the FTC Act provides that "unfair or deceptive acts or practices in or affecting commerce are declared unlawful."

FTC actions based on “deception” prong – material representation or omission that is likely to mislead consumers acting reasonably under the circumstances

FTC CONSENT DECREE ELEMENTSFTC CONSENT DECREE ELEMENTS

Establish, implement & maintain comprehensive information security program reasonably designed to protect security, confidentiality & integrity of PII collected from or about consumers

Security Policy in writing Designate Responsible Employee for Security Program Third Party Audit every 2 years Make all audits available to FTC for 5 years 20 years of FTC oversight See e.g., Cardsystems Solution Settlement (2006) at:

http://www.ftc.gov/os/caselist/0523148/0523148consent.pdf

EMPLOYEE ISSUESEMPLOYEE ISSUES

Leading cause of security breaches is employee negligence or dishonesty

Confidentiality Agreement/Policy

Network Access and Use Policy

Disciplinary process for failure to follow policy (e.g., leaving laptop unsecured in hotel room)

PCI DATA SECURITY STANDARDSPCI DATA SECURITY STANDARDS Consists of 12 basic requirements (the "Digital Dozen")

in 6 key areas Build and Maintain a Secure Network Protect Cardholder Data Maintain a Vulnerability Management Program Implement Strong Access Control Measures Regularly Monitor and Test Networks Maintain an Information Security Policy

Compliance may include third party audit or self-assessment, submission of ROC to Visa, quarterly scans

Merchants liable for failures of their service providers

FINANCIAL PRIVACYFINANCIAL PRIVACYPCI DATA SECURITY STANDARDSPCI DATA SECURITY STANDARDS

Compliance Penalties – If a merchant or service provider does not comply with the security requirements or fails to rectify a security issue, Visa may: Fine the acquiring member Impose restrictions on the merchant or its agent, or Permanently prohibit the merchant or its agent from participating in

Visa programs Members receive protection from fines for merchants or service

providers that have been compromised but found to be CISP-compliant at the time of the security breach

Members are subject to fines, up to $500,000 per incident, for any merchant or service provider that is compromised and not CISP-compliant at the time of the incident

Horror Stories – BJ's, CardServices, and more

CONTRACTING FOR SECURITYCONTRACTING FOR SECURITY Contracting: 

Vendors Require vendors who hold data to represent adequate security, indemnify for

breaches, and be obligated to give immediate notice of breach and cooperate in investigation

Reserve your rights to audit and to control any litigation Lessons from HIPAA Business Associate Agreements and GLB Security

Safeguard Rule – flowing down security Customer Terms of Use

Include limits on liability and arbitration clause with waiver of class action right, specify that the service is provided “as is”, disclaim warranty of security

Privacy Policy Be certain not to over-promise and under-deliver Be certain to keep current on security and known security risks

LAWS AND REGULATIONS LAWS AND REGULATIONS

Section 501(b) of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801(b) Implementing regulations: FTC Safeguards Rule,

16 C.F.R. Part 314 HIPAA

Implementing regulations: HHS Security Rule, 45 C.F.R. Parts 160, 162, and 164

Section 404 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. § 7262

FTC Data Destruction Rule, 16 C.F.R. § 682 State security breach laws

http://www.perkinscoie.com/files/upload/securitybreach.pdf