Cybersecurity

'Patchwork' of state laws complicates data breach response

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After recent high-profile data breaches at several retailers, Congress is reacting with a revived push to pass laws addressing data breach investigation and notification. Industry might like to see a national standard replace a patchwork of state laws, but there is less agreement about how to define personally identifiable information and how much new regulatory authority to create.

Lawmakers have introduced several bills in the first weeks of 2014, including a fifth go-around for Vermont Democratic Sen. Patrick Leahy's Personal Data Privacy and Security Act and the Data Security and Breach Notification Act from Sens. Dianne Feinstein (D-Calif.) and Jay Rockefeller (D-W.Va.). Both look to the Federal Trade Commission to set standards that would supersede an assortment of state laws.

Those state-to-state variations make responding to data breaches and notifying victims more complicated than a single federal law would, according to congressional sources.

"States take very different approaches to the rules for when a company has been breached," said Graham Dufault, counsel in the office of Rep. Lee Terry (R-Neb.), at the TechVoice DC Fly-In on Feb. 11. "From the very beginning of the conversation, [questions arise about] the definition of personal information. It matters because the only time you're going to notify anyone is if their personally identifiable information was accessed. Just from that point, you have a huge amount of disagreement."

The discrepancies further complicate an already complex process for investigating public or private data breaches, including examining networks to determine where breaches occurred, what information was accessed and who needs to be notified. Currently, there is not much in the way of a standard for that activity and, perhaps more importantly, no timeline for when the work needs to be completed.

"We need to identify a reporting time frame," said Kim Peretti, a partner in Alston and Bird's White Collar Crime Group and a former senior litigator in the Justice Department's Computer Crime and Intellectual Property Section. "There is always a push for a short time frame to notify, but those of us in the incident response community know that's not always possible. Different complex breaches and complex malware take time to investigate, and there's complex infrastructure on top of that. There's a patchwork of data breach notification statutes, and they're sufficiently different and nuanced. There is a general sense of how most of them work, but they all need to be reviewed carefully in the event of a breach to make sure you're meeting all the requirements."

Some of the legislative sticking points center on FTC authorities, including whether they go far enough and what agencies and companies are under their jurisdiction.

"I think the opportunity is to standardize," Dufault said. "In the last hearing, the consensus seemed to be that it would be nice if there was one standard, one set of requirements. There was disagreement on whether or not we need a federal data security law, which is a little different. Out of the folks who want the data security standard, some are perfectly fine with the way the FTC goes after companies with its unfair business practices authority or whether there needs to be more authority, including a description of activities under the guidance."

Experts at Washington law firm Wiley Rein predict that the FTC's precedent of bringing more than 50 enforcement actions against businesses for data breaches and the recently released federal cybersecurity framework will have an impact on any forthcoming legal activities.

"Whatever happens with legislation or regulation, companies and regulators may look to the framework to inform case-by-case enforcement," Wiley Rein executives wrote in an article published on Feb. 13. "The implementation of the framework -- depending on how it is deployed -- could influence how courts, legislators and regulators evaluate cybersecurity practices going forward."

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