It’s been awhile since last we published for our firm blog Media & Privacy Risk Report, and one thing is largely to blame: ransomware attacks on our clients have been keeping us very busy. We’ve learned many lessons from these attacks that we plan to share over the coming months with our readers. But the focus of this post is recent guidance from the Office of Civil Rights of the Department of Health and Human Services (OCR) indicating that any ransomware attack involving protected health information PHI) could be a data breach with Health Insurance Portability and Accountability Act (HIPAA) reporting obligations.

Often in ransomware matters, a hacker encrypts data and demands that a ransom be paid (usually in Bitcoin) before the hacker will decrypt the data and make it once again accessible to the data owner (or covered entity) or maintainer (or business associate). But just because a hacker has frozen your data, does that mean that the hacker has accessed, acquired or exfiltrated your data? Isn’t it possible that a hacker could freeze your data without accessing, acquiring or exfiltrating it? By analogy, couldn’t someone render the locks on your house unusable (and thus your house inaccessible to you without a forced break-in) without actually accessing your house, acquiring anything within your house, or taking anything out of your house? It would seem that the answer would be yes. But if the OCR is asked that question, the presumption is that the answer is no, at least in the realm of ransomware attacks. Continue Reading OCR: Ransomware Attack Often Is a Data Breach

As published in State Bar of Michigan Health Care Law Section

“In recent years, the likelihood of suffering a data breach has risen significantly for American companies across numerous industries. Health care providers, in particular, have been targeted due to the value of the sensitive information they hold regarding their patients and employees, including birth dates and Social Security numbers. Health care providers that suffer data breaches risk incurring significant fines, settlement amounts, legal fees, negative publicity and increased scrutiny from regulatory authorities …”

To read the publication in its entirety, please click here.

Last week, the European Commission unveiled the latest documentation related to the EU-U.S. Privacy Shield intended to restore trust in transatlantic data transfer and establish a mechanism for U.S. companies to once again transfer data from the EU with confidence. We wrote last month about the initial announcement of the Privacy Shield but expressed caution about whether the European Union and the United States would be able to iron out the details of the complicated agreement before the February 29, 2016 deadline set by the Article 29 Working Party (“WP29”).  But it appears that the two sides were able to make significant progress in the month of February, and the European Commission released more than 120 pages of documentation setting forth the new Privacy Shield requirements.

There are many details in the documentation released last week, but following are the key points:

  • Participating organizations will be required to follow rules related to consent, relevance, proportionality, access and correction.
  • Arbitration will be available for disputes.
  • Participating organizations will be required to provide additional information to data subjects at the point of consent.
  • Participating organizations must implement stronger controls on data transfers to third-party data processors and controllers.
  • Participating organizations must commit to address EU member complaints “expeditiously” through the FTC.
  • The FTC will verify self-certification.

It remains to be seen whether this will be enough to satisfy key stakeholders in the EU.  WP39 has announced that it will provide its opinion on the level of protection afforded by the Privacy Shield on April 13, 2016.  We will continue to monitor these developments and keep you apprised.

In a February 19th speech at the annual SEC Speaks conference, Stephanie Avakian, Deputy Director of the SEC’s Division of Enforcement, explained what the SEC expects of entities that experience a cyber intrusion and how the SEC decides whether to investigate such entities.

With respect to responding to cyber intrusion, the SEC’s stated expectations are high level and axiomatic. Entities are expected to (1) assess the situation, (2) address the problem and (3) minimize the damage. Ms. Avakian emphasized the importance of quickly involving authorities such as the FBI or Department of Homeland Security.

Ms. Avakian also expressed awareness of the practical impediments to self-reporting cyber intrusions to the SEC. Specifically, entities may be hesitant to do so for fear of triggering an investigation and enforcement action regarding their policies/procedures and implementation thereof. To assuage this concern, Ms. Avakian noted that the SEC’s goals in the cybersecurity area are to prevent hacking, protect customer data and ensure the smooth operation of America’s financial system. In other words, the SEC—at least from a priority standpoint—is on the same side as the entities that may fall prey to a cyber intrusion. In the case of registrants, when investigating cyber intrusions the SEC will focus on whether a registrant had policies and procedures reasonably designed to protect customer data and related remediation action plans. In the case of public companies, the SEC is not looking to second-guess good-faith decisions regarding data privacy, and would likely not bring an enforcement action against a cyber intrusion victim absent a “significant” disclosure issue. Ms. Avakian also pointed out that entities who self-disclose cyber intrusions will be rewarded with cooperation credit.   Continue Reading SEC Speaks: How the SEC Decides Whether to Investigate Breached Entities

Politicians in both the European Union and United States touted Tuesday’s agreement on a new “Privacy Shield” for EU-U.S. data transfers as a resolution to the data transfer quagmire that has faced companies since the EU-U.S. Safe Harbor was invalidated in October. While this new deal is a promising step in the right direction for companies that transfer data from the EU to the United States, there are still many questions about exactly what the requirements of the new Privacy Shield will be, how an American company can ensure compliance with those requirements and (perhaps most importantly) whether the European Court of Justice will validate the new rules.

Indeed, the deal heralded by politicians on both sides of the Atlantic appears to be only a high-level agreement—they expect to document the actual terms over the next few weeks (the Article 29 Working Party (WP29), the body made up of representatives of individual European Member States’ data protection authorities, has called for it to be fully documented by the end of February). Thus, we anticipate quite a bit more negotiation on the precise scope and language of the requirements. Meanwhile, WP29, which had been assessing data transfer mechanisms like standard contractual clauses and model contracts for possible flaws that would lead to enforcement actions, announced that it will not take enforcement actions based on its concerns about these mechanisms while it awaits the details of the new transfer deal. Continue Reading Privacy Shield Offers Hope on EU-U.S. Data Transfer—For Now

On July 20, 2015, the Seventh Circuit reinstated a data breach class action in Remijas v. Neiman Marcus Group, LLC, No. 14-3122, after a 2013 malware attack on Neiman Marcus’s computer systems that resulted in the theft of customers’ credit and debit card information. The plaintiffs argued that they had constitutional standing to pursue their claims against the retailer based on an alleged increased risk of future fraudulent charges and greater susceptibility to identity theft. This decision is troubling and could have a potentially significant and wide-ranging impact on pending and future class actions brought in the wake of similar data breaches. In fact, plaintiffs’ lawyers already are citing the decision in other data breach class actions facing Rule 12 standing challenges. See, e.g., In re Barnes & Noble Pin Pad Litigation, No. 12-08617, U.S. Northern District of Illinois. Continue Reading Seventh Circuit Resurrects Data Breach Class Action and Stymies Standing Challenge

A familiar refrain of some corporate clients discussing data breaches is: “We’re not a health care company. We also don’t process customer credit card transactions. We really don’t collect protected health information or personally identifiable information from customers in any way. Do we need to be worried about data breaches?” A June 15, 2015 decision from the U.S. Central District of California reaffirms that the answer is a resounding, unqualified YES for any company that has employees, which means almost any company of any kind, regardless of whether it provides health-care-related services or processes customer credit card transactions. Continue Reading Data Breach Case Survives Rule 12 – Sony Employee Negligence Claims Still Kicking

As we reach the midpoint of 2015, it is a good time to check in on the progress of the Data Breach and Security Notification Act of 2015 that is making its way through Congress. Most privacy experts and data breach practitioners agree that a single nationwide data breach notification statute would be superior to the current state-by-state regime—it would certainly make data breach response much easier and more cost-effective—but there is considerable debate about what that statute should say.  Continue Reading Checking In On the Federal Data Breach Notification Law

The National Labor Relations Board (NLRB) may be yet another new sheriff in town (in addition to all the other sheriffs such as the FTC, FCC, SEC, OCR, OIG, state AGs, etc.), poised to box the ears of data breach “scofflaws” with expensive, time-consuming, conflicting and perhaps impossible-to-comply-with requirements related to computer security incidents. Continue Reading NLRB Steps into the Data Breach

PCI DSS. If your company deals with credit cards and you don’t know what those letters stand for, you should. While the public relations nightmares, response costs and expensive class action defense fees associated with major data breaches garner most of the headlines in the mainstream media, many companies that are victims of data breaches also face significant compliance costs, penalties and fines as a result of contractual relationships with credit card companies, credit card processors and banks. These all stem from a company’s failure to comply with PCI DSS.

So what is PCI DSS? It’s the Payment Card Industry Data Security Standard, which is the proprietary information security standard for organizations that handle branded credit cards from the major card brands, including Visa, MasterCard, American Express and Discover. PCI DSS compliance is an ongoing process and is far too complicated to discuss in detail here. For an overview of PCI DSS and the complete requirements, you can go here. But for our purposes, we will just focus on the risks of not complying. Continue Reading PCI DSS Compliance: A Difficult Task Worth Doing