California Disclosure Law Has National Reach

[David Farber <farber () tmail com>]

-----Original Message-----
From: ghamilton(contr-ato) <ghamilton () snap org>
To: IAIPT <IAIPT () archive ia isotic org>
Subject: California Disclosure Law Has National Reach
Date: Wed, 8 Jan 2003 17:19:45 -0500

California Disclosure Law Has National Reach
from SecurityFocus on Wednesday, January 08, 2003

A new California law requiring companies to notify their customers of
computer security breaches applies to any online business that counts
Californians as customers, even if the company isn't based in the 
Golden
State.
So warned Scott Pink, deputy chair of the American Bar Association's
Cybersecurity Task Force, in a conference call Monday organized by an
industry trade group and attended by approximately 50 representatives 
of
technology companies and law firms concerned about the scope of the new 
law,
which will take effect on July 1st of this year.
"If you are selling products or providing services to residents of
California, it would probably be determined that you're conducting 
business
in California under this law," said Pink. "This is something that has
captured the attention of many corporate counsel and many IT managers 
around
the United States, as they try to understand what the law requires and 
how
it impacts them."
The law, called "SB 1386," is intended to combat identity theft. It 
passed
last September in the wake of a high-profile computer intrusion into a
California state government system that housed payroll information on
200,000 state workers, in which the victim employees were not warned 
that
their personal information was stolen until weeks after the incident. 
The
law passed over strong objections from industry groups.
To trigger the law, a breach must expose certain type of information:
specifically, customers' names in association with their social 
security
number, drivers license number, or a credit card or bank account 
number.
After such an intrusion, the company must notify the effected customers 
in
"the most expedient time possible and without unreasonable delay."
Other types of information are not covered, and the disclosure only 
needs to
be made to California residents. But as a practical matter, Pink said,
online businesses may find it easier to notify everyone impacted by a
breach, rather than trying to cherry-pick Californians for special
treatment.
"Many, many companies outside California are likely to be governed by 
this
law," said Pink. "The question for them is to what extent do they find 
it
convenient to only notify California residents, and do they find it 
easier
to just notify everybody?"
Companies that ignore the law face potential exposure to class action
lawsuits.
The law addresses a chronic problem in e-commerce - companies that are
hacked are often reluctant to go public for fear of bad publicity or 
civil
liability. But in forcing companies to come clean, the California law 
takes
the opposite approach of the Bush administration's emerging cyber 
security
policies, which encourage secret disclosure to government officials, 
rather
than public warnings.
In Monday's talk, organized by the Information Technology Association 
Of
America, Pink called the law "revolutionary," and said he believes 
that
other states will follow California's lead. But he also pointed out 
some
ambiguities in the law's language that are still waiting to be 
resolved.:
The ROT13 loophole? An exception in the law says companies don't have 
to
disclose a breach if the stolen data was stored in an encrypted form. 
But it
doesn't say the encryption has to be strong. "If someone were to hack 
into
the system... obtain the encrypted contents, and are able to unencrypt 
them,
does that trigger the disclosure requirements?," asks Pink. "As I read 
the
legislation, that' s not entirely clear."
Willful Ignorance. Disclosure isn't just triggered by drop-dead,
caught-'em-red-handed intrusions, but by any incident in which customer 
data
is "reasonably believed" to have been compromised. That's a vague term 
that
leaves much room for legal wrangling, Pink says. And what constitutes
knowledge, anyway? "If a lower level IT person notices some 
unauthorized
activity... is that knowledge of the company as a whole, and does that
trigger disclosure?"
Law enforcement investigations. Companies are permitted to delay 
disclosure
to meet "the legitimate needs of law enforcement," a provision intended 
to
keep the law from acting as an early warning system for cyber crooks 
who've
fallen under police scrutiny. But who decides what a legitimate need 
is?
That last provision means that law enforcement officials effectively 
hold
the power to grant a stay of execution on disclosure, giving a company 
time
to examine its liability and plan a public relations strategy. That 
could
mean a boost in the number of intrusions companies report to police,
something the law enforcement community has been trying to achieve for
years. As one participant in Monday's conference call -- an executive at 
a
large Silicon Valley software company -- put it, reporting the crime 
would
be a way of "buying time." ("II'm not trying to get around the law," 
the
exec added).
Pink suggested that any company relying on the law enforcement 
exception
first get an explicit request from officials to delay disclosure. And 
resist
the temptation to notify a local traffic cop and consider the matter 
closed.
"The agency you're reporting it to should at least have jurisdiction," 
said
Pink.
Copyright (c) 1999-2003 SecurityFocus

****************************************************************************
***********************************************************

Jerry Hamilton
DARPA IA Operational Experimentation SETA
Schafer Corporation
703-526-1782
Fax: 703-516-8779
Cell: 703-582-9624
ghamilton () schafercorp-ballston com
ghamilton () snap org
ghamilton () darpa smil mil
ghamilton () darpa ic gov
-- Dave

-------------------------------------
You are subscribed as interesting-people () lists elistx com
To unsubscribe or update your address, click
 http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/