As we move into the second month of 2019, we’d like to give an overview of the trends we see developing in the cybersecurity and data privacy area for the year. We’ll be sure to elaborate on these areas with more details as they unfold.
Over the past five to ten years, the advancement of technology has produced a flurry of corporate cyber-attacks. Data breaches make the news virtually every day.
Too often, however, companies seek compensation for their data breach losses by making claims on commercial general liability (CGL) or property policies – policies that simply were not written to cover these types of perils.
Instead, companies should be looking to cyber insurance, which offers more reliable coverage for the kinds of losses associated with a data breach. Cyber insurance offers varying coverage options for corporate clients and can be tailored to the type of information that needs to be protected and the data risks that are the most significant to the company.
If you want to learn more on data breach litigation issues, court rulings on coverage for cyber-attacks and cyber coverage options, join the educational webinar: Data Breach Litigation: Recent Trends and Developments. The webinar takes place on Wednesday, June 20, 2018 at 12:00 p.m.-1:00 p.m. (ET) and will be led by Husch Blackwell Senior Counsel, Eric Levy. The webinar will be hosted on The Knowledge Group and the first 30 registrants will receive complimentary passes.
Blockchain technology is seeing increasingly wide use internationally, but security issues are becoming a major problem.
Blockchain is a public electronic ledger that can be openly shared among users and that creates an unchangeable record of their transactions. Each transaction, or “block”, is time-stamped and linked to the previous one. Each block is then linked to a specific participant. Blockchain can only be updated by consensus between users in the system, and when new data is entered, it can never be erased, edited, adjusted, or changed.
For over twenty years, my father was a wholesale seafood supplier. One day over dinner (probably lobster, because that’s just how we rolled), my father tells us that he has hired an off-duty US Department of Agriculture inspector to inspect the fish that his company will be sending out to its grocery store clients. When I asked him if this was a legal requirement, he said it was not (the Department of Health and Human Services, via the FDA, apparently regulates fish, not the USDA). When I then asked him why he was doing it, he said, “If you were in the grocery store and you saw one piece of fish labelled ‘USDA Government Inspected’ and one piece of fish without that label, which one would you buy?” An informal “seal” program had been born!
Eight months after a significant data breach involving customer data was reported to Panera Bread company by a security researcher and within a day of an article being published laying out the nature and extent of the breach, the company on April 2, 2018 acknowledged the data leak. However, it insisted that fewer than 10,000 consumers had been affected in contrast to the more than 7 million customers several security researchers estimate were affected.
The story is not so much the vulnerability in Panera’s online food ordering system that exposed the customer’s information, nor the fact that Panera may not have been aware of the breach before the researcher contacted it, but rather about Panera’s delay disclosing the breach and its refusal to acknowledge the magnitude of the customer information leaked. Panera is likely to become the poster child for what not to do in addressing a data breach. For example, Panera does not have a dedicated method to accept vulnerability reports from security researchers, it ignored numerous communications from the security researcher that attempted to alert the company to the breach and became defensive about his report, including accusing the security researcher of being a scammer of some sort. Perhaps the greatest surprise is it waited eight months to acknowledge the leak and to set about fixing it. In the meantime more customers were likely affected by the disclosures of personal information. In addition, the reputational harm to Panera because it failed to respond quickly and forcefully, could be significant.
A national standard that includes a set notice period for businesses to disclose data breaches to customers would have avoided the situation Panera finds itself in. The delay could create substantial risk that customers take legal action against the company. For nearly the last ten years many U.S. data security and breach notification laws have been introduced in the Congress but none have passed. Currently at least one Senate and one House bill have been introduced. H.R. 5388, the Data Accountability and Trust Act and S. 2179 the Data Security and Breach Notification Act have been introduced. Both bills contain provisions that generally require consumers to be notified of any breach within 30 days after its discovery.
Panera is not alone in having delayed in reporting breaches. Equifax and Target are among the many in that category. In fact, in 2017 Uber actually paid two hackers to keep quiet about a cyberattack that exposed the data of 57 million Uber riders and drivers. State and federal lawmakers and security experts all agree that the lack of transparency by businesses, governmental entities and other organizations is a problem that needs to be addressed. While many state legislatures have passed data breach notification periods, the Congress has been unable to pass legislation to address this and other issues resulting from the many significant data breaches that occur almost daily. While it is not clear that consumers have changed their online activity because of these breaches, that day may come.
Once again, we realize that we have little control over how information we share on social media is ultimately used. The recent revelation that a data analytic firm retained by Trump’s presidential campaign used the Facebook data of more than 50 million people to target them with political ads is both shocking and unsurprising at the same time. Facebook’s business model is built on collecting and monetizing our data and Facebook has previously been less than forthright about its privacy policies. But I bet few people anticipated that their “likes” would be used by Trump’s political consultants to sway their vote.
While details are still emerging, it appears the basic facts are as follows. In 2015, Dr. Aleksandr Kogan, a psychology professor at the University of Cambridge, offered a personality quiz on Facebook. Approximately 270,000 users downloaded an app to take the quiz. In doing so, they gave permission for Kogan to access their Facebook profile as well as their friends’ profiles. In other words, if your friend took the quiz, your information was also shared with Kogan without you knowing.
While Kogan claimed that his app was for academic purposes, in actuality, Kogan was harvesting data for a company called Cambridge Analytica. Cambridge Analytica is a firm that does political, government and military work around the globe, including for Ted Cruz’s and Donald Trump’s election campaigns.
By getting a few hundred thousand Facebooks users to take his quiz, Kogan was able to access 50 million user profiles and he turned all this information over to Cambridge Analytica. Of those profiles, roughly 30 million contained enough information, including places of residence, that the company could match users to other records and build psychographic profiles. Those profiles were then used by the Trump campaign to try to influence voters.
What is especially noteworthy is that Kogan’s harvesting of user data and their friends’ data was permitted under Facebook’s developer application programming interface at the time. Facebook confirmed that the information was legitimately obtained in accordance with Facebook’s rules. In other words, this was not a “breach” in the sense that information was stolen or hacked. In fact, Facebook’s initial responses to reports were quite nonchalant. Facebook claimed that everyone “knowingly” provided their information and “gave their consent”. However, based on people’s reactions, it is clear that many users feel violated and had no idea their information would be shared in this manner.
The Cambridge Analytica revelations raise many questions, including whether Facebook broke any laws. Lawsuits have started to roll in, including a proposed class action of Facebook members and a lawsuit on behalf of Facebook investors. The FTC is apparently looking into this matter, as well as into whether this incident violates Facebook’s 2011 settlement with the FTC over privacy complaints. And Congress has begun demanding answers.
Investigators will likely look at whether Facebook adequately disclosed its information sharing practices to users and whether it took adequate steps to protect user data. Even if Facebook believes it was completely upfront with members (and based on people’s surprise that their information could be shared through friends, arguably this information sharing practice was not clearly and conspicuously disclosed), the scandal is not going away overnight and Facebook will need to justify their past behavior. The ultimate question may be whether users will be more circumspect about sharing information on the social media site going forward.
If you never appreciated it before, this scandal should drive home that every “click” you make on Facebook is saved and analyzed and every “harmless” survey you take is likely used to micro-target ads to you. And if you haven’t done so already, I encourage you to go to “Settings” and then “Apps” to see what apps you have authorized to interact with your Facebook account.
Recently, I counseled an employer regarding the termination of a high level HR employee. The termination wasn’t fun but the company’s termination process was followed. Unfortunately, that was the problem. The employer collected and turned off the exiting employee’s company badge. The employer took the same actions for the corporate credit card. The exiting employee’s laptop was collected and IT was informed to shut down the individual’s access to all systems immediately.
Semper Fidelis is the U.S. Marines’ motto – “always faithful.” Perhaps an ironic twist of phrase in the context of its recent and preventable data breach. Let’s recap. The Marine Forces Reserve recently announced that personal information of over 21,000 Marines, sailors, and civilians were “compromised.” The PI included social security numbers, bank account and routing numbers, card information, name, address and other contact information. In other words, PI which is a treasure trove for identity thieves. Some of the PI may have been redacted in part. How did this breach occur? The culprit was an e-mail incorrectly sent with an unencrypted attachment. The email was sent out by the Defense Travel System which manages travel itineraries and expense reimbursement. Obviously sensitive location information is also in play. Probably not a big thing for a travelling salesperson, but highly problematic for defense sector travel.
On February 27, 2018, the Supreme Court heard arguments in United States v. Microsoft Corp., a case that will decide whether a digital communications provider has to comply with a U.S. search warrant for user data that is stored outside of the U.S. U.S. v. Microsoft could have major consequences for digital privacy and international data sharing, especially for the cloud-computing industry.
It’s no longer optional for colleges and universities to report data breaches to the U.S. Department of Education — yet the agency has not clearly defined its expectations. Here’s what institutions should be aware of.