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Legal developments in data, privacy, cybersecurity, and other emerging technology issues

As part of a larger trend of legal developments with respect to cybersecurity throughout the United States, the SEC recently proposed certain rules intended to increase and standardize a public company’s reporting and disclosure requirements regarding cybersecurity incidents and risk management (the “Proposed Rules”). Generally, the Proposed Rules require the disclosure of information related to a company’s: (i) material cybersecurity incidents; (ii) cybersecurity risk management and strategy; (iii) cybersecurity governance; and (iv) board member and management cybersecurity expertise. Specifically, and as more fully set forth in the discussion below, the Proposed Rules seek to amend Forms 6-K, 8-K, 10-K, 10-Q, 20-F, and Items 106 and 407 of Regulation S-K. Below, we have provided a brief summary of each of the Proposed Rules and the impact the reporting and disclosure requirements under such Rules would have on a public company.

Topics: SEC

As 2023 approaches, organizations must again address new and modified laws governing Data Subject Requests (DSRs). Of course, the rollout of additional privacy regulations has become almost routine. But as the growing number of jurisdictions empower individuals with the right to opt out of more types of processing and access, rectify, or delete personal data, the legal and operational challenges of these laws continue to accelerate. Organizations – especially those with lean privacy and legal ops functions – will need to be strategic in addressing the expanding regulatory burden.

With that in mind, we offer a few issues to address as you map out your next steps when it comes to DSRs.

The FTC issued a policy statement yesterday notifying education technology companies that the agency is committed to ensuring that ed tech tools comply with the Children’s Online Privacy Protection Act (“COPPA”).  COPPA requires that websites or services covered under COPPA obtain a parent’s – or in some cases, a school’s – consent before collecting personal information from children under 13.  COPPA also limits how long companies may keep children’s personal information and requires that companies properly safeguard information.  The policy statement signals that the FTC will be scrutinizing COPPA compliance by providers of ed tech and other covered online services. 

Topics: COPPA, Education

On March 24, 2022, Utah joined California, Virginia and Colorado to become the fourth state to enact a comprehensive consumer privacy law. The Utah Consumer Privacy Act (the “UCPA”) has similarities to the existing privacy laws enacted by California (the “CCPA”), Virginia (the “VCDPA”) and Colorado (the “CPA”). Certain aspects of the UCPA’s approach, however, are distinct from those other privacy laws. Generally, the UCPA applies to a more narrow scope of businesses, and more categories of data fall outside of the UCPA’s definition of “personal data” -- thereby imposing less of a burden on businesses. Below we’ve provided a high-level summary of the UCPA’s general requirements and certain of its differences and similarities to consumer privacy laws enacted by other states.

The increase in cyber breaches and hacks has resulted in litigation, some involving policy interpretation, and some involving new theories of liability. The two cases described below are illustrations of the types of issues that businesses, insureds and insurers continue to face as result of cyber liability. In the first case, the court found that a traditional general liability policy could provide coverage for a cyber breach, a result likely not anticipated by the insurance carrier, nor possibly by the insured. The second case involves injury and death, allegedly caused by a hospital’s inability to use monitoring equipment during a birth because the equipment was inoperable due to a ransomware attack, that likely would be covered under a traditional medical malpractice policy despite the fact that it was a cyber attack that gave rise to the claim for injury and medical negligence.

On March 25, 2022, the United States and the European Union announced they agreed in principle to a new data privacy framework for cross-border data transfers. Although specific details of this new data privacy framework have not yet been provided, the new framework is meant to replace the former EU-U.S. Privacy Shield (the “Privacy Shield”), an arrangement that allowed companies to transfer the personal data of European data subjects to the United States. The Privacy Shield was invalidated in July of 2020 by the Court of Justice of the European Union on the basis that the Privacy Shield did not protect European data from U.S. surveillance.

Topics: GDPR

This is a follow-up to the June 23, 2021 Litigation Trends Analysis Alert, “How the IWCA Impacts BIPA Claims.” As noted there, the question before the Supreme Court of Illinois in McDonald was whether claims of injury under the Illinois Biometric Information Privacy Act (BIPA) fall under the scope of the Illinois Workers’ Compensation Act (IWCA). The Court ruled last month that the BIPA is not preempted by the IWCA.

Topics: BIPA

Last week, the New York Attorney General’s office offered guidance regarding credential stuffing, a common and costly attack on businesses and consumers, in which threat actors repeatedly attempt to log in to online accounts using usernames and passwords stolen from other online services.  Credential stuffing takes advantage of three aspects of the online ecosystem:  (1) most online accounts utilize usernames and passwords; (2) a steady flow of data breaches has resulted in billions of stolen credentials being leaked onto the dark web for other threat actors to exploit; and (3) consumers tend to reuse the same passwords across multiple online services. 

Corporate policyholders, insurers and courts continue to grapple with the question of whether traditional “non-cyber” business insurance policies provide coverage for losses from cyberattacks.  The most recent decision addressing this “silent cyber” issue came last month in EMOI Services, LLC v. Owners Insurance Company, 2021 -Ohio- 3942, 2021 WL 5144828 (Ohio App. 2 Dist., Nov. 5, 2021).  In EMOI Services, an Ohio Court of Appeals panel reversed a trial court’s grant of summary judgment in favor of an insurer that found no coverage for a ransomware attack under a property insurance policy.   

Last week, the Federal Bureau of Investigation issued a private industry notification warning that “ransomware actors are very likely using significant financial events, such as mergers and acquisitions, to target and leverage victim companies for ransomware infections.” The FBI cautioned that ransomware attackers research publicly available information and target companies involved in significant, time-sensitive financial dealings such as M&A and other transactions. This initial reconnaissance, according to the FBI, is later followed by a ransomware attack and a subsequent threat that unless the victim pays the ransom, the attackers will disclose the information publicly, causing potential investor backlash and affecting the victim’s stock value.

Topics: M&A, Ransomware
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