Do Your Due Diligence-is the Forecast Cloudy or Clear?
Dave and I recently spoke with BNA's Daily Report for Executives about the importance of due diligence and planning for organizations entering into (or considering) enterprise cloud computing arrangements. The article is reproduced here with permission from Daily Report for Executives, 168 DER C-1 (Sept. 1, 2010). Copyright 2010 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com. You can find the article, ‘Cloud’ Customers Facing Contracts With Huge Liability Risks, Attorneys Say, here.
As you can probably tell, the attorneys of InfoLawGroup have been quite busy of late. We promise to bring you new posts very soon on recent developments in breach notification, cloud, and even ethics. Stay tuned.
European Reservations?
German state data protection authorities have recently criticized both cloud computing and the EU-US Safe Harbor Framework. From some of the reactions, you would think that both are in imminent danger of a European crackdown. That’s not likely, but the comments reflect some concerns with recent trends in outsourcing and transborder data flows that multinationals would be well advised to address in their planning and operations.
In April, the Düsseldorfer Kreis, an informal group of state data protection officials that attempts to coordinate approaches to international data transfers under Germany’s federal system, called on the US Federal Trade Commission to increase its monitoring and enforcement of Safe Harbor commitments by US companies handling European personal data. On July 23, Dr. Thilo Weichert, head of the data protection commission in the northernmost German state of Schleswig-Holstein (capital: Kiel), issued a press release provocatively titled “10th Anniversary of Safe Harbor – many reasons to act but none to celebrate.” Dr. Weichert cites an upcoming report by an Australian consultancy (Galexia) asserting that hundreds of American companies claiming to be part of the Safe Harbor program are not currently certified, and that many Safe Harbor companies fail to provide information to individuals on how to enforce their rights or refer them to costly self-regulatory dispute resolution programs. Dr. Weichert urges a radical solution: “From a privacy perspective there is only one conclusion to be drawn from the lessons learned – to terminate safe harbor immediately.”
Dr. Weichert also attracted international attention with another press release issued this summer, entitled (translating loosely) “Data protection in cloud computing? So far, nil!” The press release refers to his recently published opinion on “Cloud Computing und Datenschutz,” which is deeply skeptical about the ability of cloud customers to assure compliance with European data protection laws.
Do the New EU Processing Clauses Apply to You?
A new set of EU standard contract clauses (“SCCs” or “model contracts”) for processing European personal data abroad came into effect on May 15, 2010. Taken together with a recent opinion by the official EU “Article 29” working group on the concepts of “controller” and “processor” under the EU Data Protection Directive, this development suggests that it is time to review arrangements for business process outsourcing, software as a service (SaaS), cloud computing, and even interaffiliate support services, when they involve storing or processing personal data from Europe in the United States, India, and other common outsourcing locations.
Continue Reading...Information Security Standards and Certifications in Contracting
When organizations contract for outsourced IT services, they look for assurances that the vendor will provide adequate security, often in the form of a security schedule or annex to the contract, or by reference to a widely accepted information security standard. In some cases, the customer insists as well on a certification or audit by an expert third party.
Business managers and lawyers often have only the vaguest notions of what these schedules, standards, and certifications mean. They rely on the organization’s IT staff or consultants for “the technical stuff.” But in the end it is the business managers and lawyers who determine what the organization needs, operationally and contractually. To do that well, they should have at least a basic understanding of the more common information security standards and certifications.
Contracting for Cloud Computing Services
Nearly every day, businesses are entering into arrangements to save the enterprise what appear to be significant sums on information technology infrastructure by placing corporate data ‘‘in the cloud.’’ Win-win, right? Not so fast. If it seems too good to be true, it probably is. Many of these deals are negotiated quickly, or not negotiated at all, due to the perceived cost savings. Indeed, many are closed not in a conference room with signature blocks, ceremony, and champagne, but in a basement office with the click of a mouse. Unfortunately, with that single click, organizations may be putting the security of their sensitive data (personal information, trade secrets, intellectual property, and more) at risk, and may be overlooking critical compliance requirements of privacy and data security law (not to mention additional regulations). My article "Contracting for Cloud Computing Services: Privacy and Data Security Considerations," published this week in BNA's Privacy & Security Law Report, explores a number of contractual provisions that organizations should consider in purchasing cloud services. You can read the full article here, reprinted with the permission of BNA.
Information Governance
When it comes to creating policies for handling personal data in an organization, who decides? How are those policy decisions made and kept up to date?
These are questions of governance – I would call it “information governance.” Most large enterprises have established responsibilities and procedures for information technology governance and specifically for IT security policies, procedures, procurement, management, and training. In many cases, however, these have not been fully mapped to personal data compliance and risk management requirements, which should be defined and monitored by a somewhat different group of people, from departments beyond IT and security. Unless privacy issues are visible in the internal governance process, the organization – and the individuals that deal with it -- may be exposed to some nasty surprises.
My Notes from the IAPP Global Privacy Summit 2010
As some of you know, I tweeted my notes from the IAPP Global Privacy Summit 2010 yesterday and today (@Forsheit for those of you on Twitter). Since many of our readers are not on Twitter, I thought I would provide you with those notes here (minus the usual Twitter hashtags and abbreviations). Please note that there were multiple sessions, and this reflects only those I was able to attend, and only the information I could quickly record, putting virtual pen to paper. These are not direct quotes, unless specifically designated as such. Overall, I think it was a great conference, a wonderful opportunity to reconnect with other lawyers and privacy professionals, and to meet students, lawyers, and others looking to learn more about this constantly evolving legal and compliance space. For me, the conference highlight was Viktor Mayer-Schonberger's keynote this morning on The Virtue of Forgetting in the Digital Age. Without further ado, here are my notes. Would love to hear your thoughts/reactions.
Continue Reading...Live from the IAPP Global Privacy Summit in Washington, DC, It's Monday Afternoon
This week, I will be providing short updates from the IAPP Global Privacy Summit in Washington, DC. The conference will be in full swing tomorrow, and I will report on various panels and topics of interest. In the meantime, as I prepare to see old and new friends at the Welcome Reception this evening, a few thoughts on what I expect to see and hear a lot over the next few days:
- How can we harmonize the EU Data Protection Directive and EU member country privacy laws with the flow of data in today's global economy? It is unfortunate that a number of IAPP participants from the EU will not make it to DC for the Summit this year due to the Icelandic volcano. Nonetheless, I expect active dialogue regarding cross-border data transfers, safe harbor v. standard contractual clauses v. binding corporate rules, and, in particular, the impact of the growth of cloud computing and other outsourcing arrangements (or, at least, the growth of the hype around cloud computing). It would also be nice to hear more about the EU Cookie Consent law - there is a panel scheduled to take place, but unknown if that will happen in light of the volcano debacle.
- HIPAA/HITECH and Medical Identity Theft: Health care privacy topics are hotter than ever, especially with the growing number of reported security breaches affecting more than 500 individuals under the new HHS breach notification rules promulgated pursuant to the HITECH Act.
- "Reasonable Security": What does Massachusetts think? What does the FTC think? What in the world is it and how in the world can organizations comply?
- On a related note, FTC Enforcement, with a focus on behavioral marketing issues and evolving notions of notice and consent. What trends will we see over the next several years, particularly with the growth of social media and online behavioral advertising?
- Social media: how it affects the workplace, corporate policies and procedures, and "reasonable expectations" of privacy.
- The forecast for federal legislation - not just on breach notification, but security requirements, online behavioral marketing and, getting lots of media attention these days, potential revisions to ECPA (being driven, once again, by the cloud computing explosion).
- Breaches, breaches, and more breaches. Of course.
A few things that appear to be missing from this year's agenda - the FTC's current review of the rules under the Children's Online Privacy Protection Act (COPPA), enforcement of the Red Flags Rule (the FTC will start enforcing the Rule June 1), and the growing number of state laws (Washington, Nevada, Minnesota) requiring compliance with the PCI Standard.
Stay tuned, I will endeavor to post developments on a daily basis.
Thoughts from the RSA Conference
As the partners of InfoLawGroup make our way through the sensory overload of the RSA Conference this week, I am reminded (and feel guilty) that it has been a while since I posted here. I have good excuses - have simply been too busy with work - but after spending several days in the thought-provoking environment that is RSA, I had to break down and write something. A few observations, from a lawyer's perspective, based on some pervasive themes:
- We all need to work together, and we can. Legal, Information Security, Privacy, Compliance, IT, and the affected business units. Now more than ever, it is essential that ALL the stakeholders join forces, as early as possible, to address security and privacy risks, assess and vet business deals, and put in place appropriate procedures - RFPs, due diligence, contract negotiation - to address the risks.
- Cloud, cloud, cloud, yada, yada, yada. Hold up - the technology is not new - but usage and the business model have changed dramatically. I have been having this argument with my information security and technology friends for months. OK, I get it. "Cloud" technology in some form or another has been around for 30 or 40 years. What is new is the massive scale, availability and changes in usage and the business model - in part driven by the economics. Guess what? Those business model changes make the legal risks even more pervasive. Going back to (1) above, all of the stakeholders need to be in the room (or on the phone or videoconference) discussing the issues BEFORE the decision is made to enter into a cloud arrangement. ANY cloud arrangement. Not after the RFP is issued. Not after IS does its due diligence. Not after the contract negotiations have begun. And not after the contract is inked. The same due diligence and attention to risks that would apply in a traditional outsourcing/offshoring relationship must be applied here, too. The cost savings are illusory if the short-term and/or long-term risks are significant. Think about the kind of data at issue. What are the risks? Evidence preservation, data security, breach response, enforcement rights, indemnification. And before we even get to those - can the data be transferred across borders in the first place? Think about it early. And then talk about it before decisions are made.
More after the jump.
Continue Reading...Developing an Information Security and Privacy Schedule for Service Provider Transactions (Part Two)
In Part One of this blog series, we looked at the proactive nature of a data security and privacy schedule ("Schedule"), and considered the compliance function of a Schedule. Part Two of this series discusses security incident response contract terms that should be considered for a Schedule. In addition, we look at more traditional "risk of loss" contract terms and how data security and privacy risks impact those terms.
Continue Reading...Developing an Information Security and Privacy Schedule for Service Provider Transactions
It is a very interesting time for information security and privacy lawyers. Information technology and the processing, storage and transmitting of sensitive and personal information is ubiquitous. At the same time (and likely as a result of this ubiquity) the legal risk and regulatory compliance environment poses increased threats and potential for significant liability. Finally, whether through cloud computing providers or traditional outsourcing of information technology functions (e.g. ASP, hosting and storage), to stay competitive and efficient, companies of all shapes and sizes are outsourcing their information technology functions to third party service providers. It is likely that adoption of these practices will increase at an increasingly faster rate.
This reality poses significant information security, privacy and legal challenges. Internal security and privacy professionals find themselves ceding control of significant decisions to third parties (“Service Providers”) concerning the implementation, maintenance, enhancement and enforcement of information security and privacy measures. Unfortunately, an organization’s legal risk and compliance obligations do not follow – in most cases they remain with the organization that chooses to outsource (the “Customer”). Of course on the Service Provider side, the main motivation is as follows: (1) secure revenue; and (2) void liability. These motivations often counter-oppose the goals of the company seeking to outsource.
These tensions play themselves out during the contract negotiations with Service Providers. It is at this juncture that the role of the Customer’s information security and privacy attorney, working closely with the Customer’s internal security and privacy professions, becomes increasingly important. To navigate these waters legal experience in the areas of data security and privacy law, contract drafting, litigation risk and negotiation tactics is crucial. However, as important, is a solid understanding of technology and substantive security and privacy matters, and how they relate to and interplay with the law. The net result is intense negotiations around the data security and privacy contract terms, which are often in the form of an information security and privacy schedule or exhibit (“InfoSec-Privacy Schedule” or “Schedule”).
In this two-part post, we explore the function and purpose of these Schedules and discuss how they might be drafted and used. Part One discusses the proactive nature of a Schedule and how it should be viewed as compliance document. Part Two details security incident response provisions that should be considered in a Schedule, and contract terms allocating risk of loss between the Customer and Service Provider.
Continue Reading...
