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The FTC has pursued enforcement actions against more than 50 companies for inadequate data security, and to date only two, Wyndham Hotels and LabMD, have pushed back. On the heels of a Third Circuit victory in its Wyndham litigation, the FTC recently suffered a blow when its administrative complaint against LabMD was dismissed – by an FTC administrative judge, no less.

As the FTC pursues an appeal to its commissioners, are there lessons to be learned? First, reports of the death of the FTC’s Section 5 data security enforcement authority have, once again, been greatly exaggerated – the FTC will remain in the data security enforcer role post-LabMD, as strong as ever. And second, the real lesson of LabMD is what it teaches us about grey hat security firm tactics, and how businesses need to trust their gut and do their homework.
Continue Reading FTC v. LabMD – 50 shades of white hat

While data breaches have become a common occurrence, the epic breach of the Office of Personal Management (“OPM”) records stands out for many reasons. The hackers obtained PII on at least 21.5 million people and accessed highly confidential background check and security clearance information, including personal details such as fingerprint data and financial history. But what is most shocking is that the federal government was aware of security flaws within OPM’s computer system for years before the breach, yet never addressed those vulnerabilities.
Continue Reading Failing to fix is fixing to fail (or get hacked)

It may still be September, but to countless retailers, Halloween is already here. Passing by displays of spooky items while shopping, the ’80s haunted-house music video “Somebody’s Watching Me” comes to mind: “I always feel like somebody’s watching me, and I have no privacy” (yes, Rockwell has attribution, but Michael rocks the chorus).

The paranoid fellow in the video was worried about the IRS and the mailman – how quaint. In today’s world, high on many consumers’ “creepy stuff” lists is the use of mobile technologies by a growing number of retailers to track customers’ movements in their stores.
Continue Reading Somebody’s watching your privacy policy

At DEF CON you’ll often hear that “every company is receiving penetration testing, but some companies pay for the pleasure.” My take is that every company pays for penetration testing – some companies pay in planned expenditures, but others pay in response costs, reputation loss, business interruption, legal liability, and increased insurance premiums. Or as Claus Moser observed, “Education costs money, but then so does ignorance.”

Last week’s DEF CON post shared insights from DEF CON 23 presenters on the fast-moving threat environment. Below are post-DEF CON observations on strengthening an organization’s cyber risk management strategy.
Continue Reading DEF CON 23—Part II: cyber risk management strategy

Faces lit by computers, the hackers’ objectives were clear — attack and defend. At this year’s DEF CON, the largest hacker convention in the United States, pre-qualified teams of hackers from around the globe faced-off in a network-security simulation that combined network sniffing, cryptanalysis, programming, reverse-engineering, and other tactics that would make Lisbeth Salander blush. Back in 1993, the first DEF CON had roughly 100 participants. This year, badges dangled from the necks of nearly 20,000 attendees, including hackers, lawyers, academics, journalists, and government officials.

DEF CON has an edgy narrative — it’s notorious for criminal exploits, wild parties, and Mohawk-fitted outcasts. But that story line is much too simple. And “too simple” is what security researchers—or hackers, depending on your sensibilities—proclaim after they expose the vulnerabilities in products and infrastructure we rely on daily.

Below are highlights and insights from presentations at DEF CON 23 that illustrate the evolving cyber risks and policy dilemmas facing governments, individuals, and the private sector.
Continue Reading DEF CON 23—Part I: Hackers highlight evolving cyber threats

“Sorry.” Music service Spotify joins the club as the latest company to apologize to its customers for proposed privacy policy changes. When it comes to bad press, it would be tough to beat Minecraft-founder Markus Persson’s tweet about Spotify: “Hello. As a consumer, I’ve always loved your service. You’re the reason I stopped pirating music. Please consider not being evil.” Spotify promptly threw itself on the mercy of its customers in a short written apology.

While the scope of Spotify’s policy exceeds the scope of data that most companies seek to obtain, it’s a good reminder for all companies to review their own privacy policies. As a company reviews its privacy policy, it should consider these key questions:
Continue Reading Sorry seems to be the hardest word – updating your privacy policy

In 2012, the Federal Trade Commission filed suit in federal court against hotelier Wyndham and its various subsidiaries (“Wyndham”), claiming that Wyndham’s allegedly unreasonable data security practices allowed hackers to steal personal information and payment data of Wyndham’s customers. The FTC’s claims were not unusual – by 2012 the FTC had spent a decade pursuing companies for unreasonable data security in administrative actions under Section 5 of the FTC Act, which forbids unfair or deceptive acts or practices in or affecting commerce.  In each of these prior enforcement actions the company settled with the FTC, agreeing to comprehensive data security controls, program monitoring, and reporting, usually extending for 20 years.

But Wyndham’s response was highly unusual – it pushed back, and continues to do so, challenging the FTC’s authority to enforce “reasonable” data security under the FTC Act.

In its motion to dismiss, Wyndham argued that the unfairness prong of FTC Act Section 5 does not empower the FTC to regulate cybersecurity, and also that the FTC has not provided constitutionally adequate notice of what cybersecurity practices are required to satisfy a “reasonableness” standard.

The federal district court denied Wyndham’s motion to dismiss, but later allowed an interlocutory appeal on Wyndham’s arguments. The stage is now set for the Third Circuit Court of Appeals, in a case of first impression, to decide whether the FTC has authority under the unfairness prong of FTC Act Section 5 to enforce reasonable data security. Will the Third Circuit resolve this issue, or will it dodge the question?
Continue Reading FTC v. Wyndham: the battleground for reasonable data security