Privacy & Information Security Law Blog : Privacy Lawyer & Attorney : Hunton & Williams Law Firm : Personal Data, Information Security

On August 18, 2010, a complaint was filed in the U.S. District Court for the Central District of California, alleging that Specific Media, Inc. violated the Computer Fraud and Abuse Act, as well as state privacy and computer security laws, by failing to provide adequate notice regarding its online tracking practices.  The suit, brought by six web users, seeks class action status and over $5 million in damages, and cites Specific Media’s use of Flash cookies to re-create deleted browser cookies as one of the offending practices.

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In the latest chapter of the Federal Trade Commission’s ongoing efforts to promote consumer privacy with respect to online behavioral advertising, FTC Chairman Jon Leibowitz has reportedly suggested that the FTC may propose a Do Not Track Registry.  The registry would be similar to the FTC’s popular Do Not Call Registry, which allows consumers to opt-out of many types of telemarketing calls, but registration on the Do Not Track Registry would not stop online advertisements.  Instead, it would prevent those advertisements from being targeted to users based on their prior online activity.  Mr. Leibowitz’s remarks came during a hearing on Consumer Online Privacy held yesterday by the U.S. Senate Committee on Commerce, Science, and Transportation.  Current industry self-regulatory initiatives for providing consumers with choice regarding behavioral advertising include the Network Advertising Initiative’s Opt-Out Tool, which has been criticized for relying on opt-out cookies that consumers may accidentally delete, and a related beta Firefox browser extension designed to remember consumers’ opt-out preferences even after cookies are deleted.

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On July 27, 2010, Senator John Kerry (D-Mass.) announced his intention to introduce an online privacy bill to regulate the collection and use of consumer data.  “Our counterparts in the House have introduced legislation and I intend to work with Senator Pryor and others to do the same on this side with the goal of passing legislation early in the next Congress,” Kerry said in a prepared statement.  Senator Kerry is the Chairman of the Commerce Subcommittee on Communications, Technology, and the Internet.  He indicated that his bill would go beyond the regulation of targeted advertising.  “Protecting the privacy of consumers online involves much more than the targeted advertising to which they are subjected,” Senator Kerry said. “Such advertising is just one result of the information that is routinely collected about us online.”

As we reported last week, Representative Bobby Rush (D-Ill.) introduced a bill regarding online data collection practices, which itself followed a similar bill proposed in May by Congressmen Boucher (D-VA) and Stearns (R-FL).  Also on Tuesday, FTC Chairman Jon Leibowitz testified before the U.S. Senate about FTC efforts to protect consumer privacy.

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On July 19, 2010, Representative Bobby Rush (D-Ill.) introduced a bill "to foster transparency about the commercial use of personal information" and "provide consumers with meaningful choice about the collection, use and disclosure of such information."  The bill, cleverly nicknamed the "BEST PRACTICES Act", presumably intends to set the standards for the use of consumer personal information by marketers.  A similar bill was introduced by Representatives Boucher and Stearns in early May.  Although both proposals would require opt-out consent for online behavioral advertising and express, affirmative consent for the collection or sharing of sensitive information, Rush's bill has a broader definition of "sensitive information" and includes several other key differences.  Perhaps most notably, unlike the earlier draft legislation, Rush's bill features a private right of action that would allow individuals to sue companies that violate the law for up to $1,000 in actual damages, plus punitive damages and costs and attorney's fees.  The bill contains a safe harbor from the private right of action for companies that participate in, and comply with, a self-regulatory "Choice Program" approved by the FTC.  In addition, the bill excludes from its definition of "covered information" any information collected from or about an employee by an employer "that directly relates to the employee-employer relationship."  A hearing on the proposed bill will be held on Thursday July 22, 2010.

Read the text of the bill. 

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In a recently published decision rendered on June 16, 2010, the Frankfurt am Main Higher Regional Court ruled that an Internet access provider may store IP addresses for seven days, and therefore, customers have no right to demand immediate deletion of their IP addresses.  The Court’s ruling upheld a decision originally rendered by the regional court of Darmstadt.

The claimant had requested that Deutsche Telekom AG delete the dynamic IP address assigned and stored for each Internet session immediately upon disconnection by a user.  Up to that point, the Internet provider had been retaining IP addresses for 80 days after each billing cycle.  In June 2007, the lower court granted the claimant request, imposing a maximum retention period of seven days for IP addresses.  The Internet provider reduced its IP address retention period accordingly, based on an agreement with the German federal data protection authority.

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On July 7, 2010, the UK Information Commissioner’s Office published a new code of practice for the collection of personal data online.  Launching the new code at a data protection conference, UK Information Commissioner Christopher Graham said, “the benefits of the internet age are clear: the chance to make more contacts, quicker transactions and greater convenience.  But there are risks too.  A record of our online activity can reveal our most personal interests.  Get privacy right and you will retain the trust and confidence of your customers and users; mislead consumers or collect information you don’t need and you are likely to diminish customer trust and face enforcement action from the ICO.”

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On June 24, 2010, the Article 29 Working Party adopted Opinion 2/2010 (the “Opinion”) providing further clarification on online behavioral advertising.  The Working Party also issued a press release on this topic.  Although the scope of the Opinion is limited to online profiling, its interpretation of Article 5(3) of the amended e-Privacy Directive provides some useful clarifications regarding the legal framework applicable to online behavioral advertising and the use of cookies.  We provide a short analysis of the Opinion below.

Opt-in?  Browser setting as opt-in?  Opt-out?  The Opinion clarifies the Working Party’s interpretation of the new Article 5(3) and Recital 66 of the e-Privacy Directive.  According to the Working Party, Article 5(3) and Recital 66, along with the General Data Protection Directive (“Directive 95/46/EC”), require prior opt-in consent since “prior opt-in consent mechanisms are better suited to deliver informed consent.”

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On June 17, 2010, the French data protection authority (the “CNIL”) published its Annual Activity Report for 2009 (the “Report”) in which it outlines some of its priorities for the upcoming year.

In February 2009, the CNIL published a report on online targeted advertising. Among other things, the CNIL voiced its concern regarding online behavioral and advertising activities and analyzed the risks of increasing user profiling.  In 2010, the CNIL is expected to issue a joint opinion with the Article 29 Working Party on targeted advertising and behavioral analysis.  The CNIL also will open a dialogue with several stakeholders from the marketing sector to work on adopting a code of best practices.

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On May 4, 2010, Congressmen Rick Boucher (D-VA) and Cliff Stearns (R-FL) introduced draft legislation designed to protect the privacy of personal information both on the Internet and in offline contexts.  View drafts of the text of the bill and an executive summary of the proposed bill.

The legislation would apply to any “covered entity,” which is defined as “a person engaged in interstate commerce that collects data containing covered information.”  The term “covered information” is very broad and includes, but is not limited to, an individual’s first name or initial and last name, a postal address, a telephone number or an email address.  Government agencies and entities that collect covered information from fewer than 5,000 individuals in any 12-month period (and do not collect sensitive information) would not be considered “covered entities” for purposes of the law. 

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Today three advocacy organizations filed a complaint with the Federal Trade Commission (“FTC”), demanding that it investigate and impose drastic requirements on entities involved in online data analytics and behavioral advertising.  In their complaint, the U.S. Public Interest Research Group (“U.S. PIRG”), the Center for Digital Democracy and the World Privacy Forum target Google, Yahoo!, BlueKai, PubMatic, TARGUSinfo and others for allegedly participating in what the U.S. PIRG terms a “Wild West” of online collection and auctioning of data for marketing purposes.

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Demos, an independent UK-based think tank, has published a report describing the views of a cross-section of British people on how their personal data are used by the public and private sectors.  Private Lives: A People’s Inquiry Into Personal Information (the “Report”) was researched in the context of the UK Information Commissioner’s Office’s consultation on the Personal Information Online Code of Practice.  The Information Commissioner called for industry and research groups to provide context for the new Code of Practice. “What emerges from the study is a fascinating picture of a public who certainly care about information rights, but who are by no means hysterical about perceived threats to liberty or privacy,” observed UK Information Commissioner Christopher Graham.

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The Federal Trade Commission’s second “Exploring Privacy” roundtable concluded Thursday, January 28, 2010.  The roundtable did not provide many firm conclusions, but it did help further refine some hard issues facing privacy protection.

Although Thursday’s hearing was intended to be devoted to technology issues, the role of regulation appeared to dominate the discussions.  “Everyone is dying to talk about regulation,” said Jessica Rich, Deputy Director of the Bureau of Consumer Protection, moderating a panel on Technology and Policy.

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On January 18, 2010, the Privacy Commissioner of Canada, Jennifer Stoddart, announced a public consultation to examine the privacy issues associated with online tracking, profiling and targeting of consumers.  The Commissioner noted that the consultation will “provide a forum for the exploration of the privacy implications related to this modern industry practice, and the protections that Canadians expect.”  The consultation marks the first in a series to review emerging technologies that are likely to have a considerable impact on consumer privacy.  The announcement of a second consultation on cloud computing is anticipated in the near future.

The Office of the Privacy Commissioner has put out a call for participation and written submissions by interested parties are due by March 15, 2010.  For further information on the consultation process, view the Office of the Privacy Commissioner's news release.

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In December 2009, the German data protection authorities (“DPAs”) for the private sector published a resolution on data protection compliance for website audience measurement (in German).  The resolution was adopted at the Düsseldorfer Kreis meeting on November 26-27, 2009.

Many website operators analyze users’ surfing behavior for advertising and market research purposes, or to adapt their websites to suit consumer preferences. To create user profiles, website operators often use software or other services that are offered by third party service providers (sometimes free of charge).

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A class action complaint filed on December 9, 2009, in Illinois federal court alleges that WideOpen West, Finance, LLC ("WOW"), an Internet service provider, violated its users' privacy by "installing spyware devices on its broadband networks."  Valentine v. WideOpen West (N.D. Ill., No. 1:09-cv-07653).  This action against WOW follows the October 6, 2009, dismissal by a district court in California of similar claims against six out-of-state ISP defendants (including WOW) filed in November 2008 by the same lead plaintiff.  The court in Valentine v. NebuAd, Inc. et al. (N.D. Cal., No. 3:08-cv-05113) found that the ISP defendants were not subject to personal jurisdiction in California, leaving the now-defunct NebuAd as the only defendant in that case.  Plaintiff Valentine has now brought this action against WOW in the Northern District of Illinois.

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On Monday, December 7, the Federal Trade Commission began a three-part series of roundtables collectively entitled "Exploring Privacy."  The conference opened with a presentation by Richard M. Smith featuring data flow charts he developed with FTC staff to illustrate the current “personal data ecosystem” and how personal information moves in various online and offline contexts.  The charts that served as the basis for his discussion (available here) offer a sense of the FTC’s understanding of today’s information marketplace.  Other panels covered topics such as consumer expectations, information brokers and online behavioral advertising.

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Maybe, but it's not that kind of "boxing"...think walls and a lid instead of a ring.  "Boxing is where a consumer’s vision and choices are limited by his or her digital history and the analytics that make judgments based on that digital history."  Government agencies are concerned with outcome-based analytics and its impact on consumer choice.  Read more on "Boxing and Concepts of Harm," written by Marty Abrams of the Centre for Information Policy Leadership, published in the September 2009 issue of Privacy and Data Security Law Journal.
 

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In its announcement that it would convene a series of public roundtables to address developing privacy issues, the Federal Trade Commission requested empirical data on consumer privacy expectations. In response to that request, researchers at the University of California at Berkeley and the University of Pennsylvania have released a study entitled "Americans Reject Tailored Advertising." Survey data reported in the study found that 66% of Americans reject targeted advertising online; 86% reject such ads when told they are made possible through online data collection. The study also makes the case that Americans would like much stricter laws governing the data collected online and higher penalties for failures to comply.

The study did not explore consumers' perceptions of the role played by targeted advertising in providing free content to users or their willingness to pay for content in the absence of that advertising support. The House Energy and Commerce Committee has announced its intent to address these issues in the current session of Congress. In the absence of alternative empirical data, this study will feature prominently in the policy debate about regulating behavioral targeting in the U.S. and Europe.

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On September 15, 2009, the Federal Trade Commission unveiled a series of public roundtables that will focus on the effect of modern technology and business practices on the privacy of consumer information.  The goal of the panels is to explore how to best balance the concerns for consumer privacy, beneficial use of consumer information and technological innovation.  The discussions will address myriad technologies and practices, such as social networking, cloud computing, behavioral marketing, mobile marketing and, generally, the collection of consumer information for various purposes.  The roundtables will also consider the adequacy of existing legal and self-regulatory frameworks.  Participants will include academics, privacy experts, consumer advocates, industry representatives, technology experts, legislators, and experts from outside the United States.  The Commission has asked individuals and organizations to submit requests to participate as panelists and suggest discussion topics.  The Commission also has asked interested parties to submit written comments and research on the issues of (i) risks, concerns and benefits associated with the collection and use of consumer information, (ii) consumer expectations of how their information is used, and (iii) the adequacy of existing legal requirements and self-regulatory regimes in protecting consumer privacy interests.

Click here for more information on the Commission’s news release.

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On September 9, 2009, the U.S. District Court for the District of Maine dismissed a lawsuit challenging the validity of the Act to Prevent Predatory Marketing Practices Against Minors (the “Act”), which is set to take effect on September 12, 2009.  The Act prohibits businesses from knowingly collecting or receiving a minor’s health-related information or personal information for marketing purposes without first obtaining verifiable parental consent.  Businesses are also prohibited from using any health-related information or personal information regarding a minor for the purpose of marketing a product or service to the minor.  In dismissing the claim, the Court acknowledged that the Plaintiffs had successfully established the likelihood of success on the merits that the Act is overbroad and violates the First Amendment.  Although the Plaintiffs met this burden, the Court recognized that the Attorney General has agreed not to enforce the Act, and the Maine Legislature is committed to reconsidering its scope in January 2010.  Accordingly, the Court, with the agreement of the parties, closed the lawsuit in a stipulated order of dismissal.

Click here for details regarding the scope and requirements of the Act.

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On July 2, 2009, five marketing industry associations jointly published a set of voluntary behavioral marketing guidelines entitled “Self-Regulatory Principles for Online Behavioral Advertising.” The American Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association, the Interactive Advertising Bureau and the Better Business Bureau developed the standards, which correspond to the self-regulatory principles proposed by the Federal Trade Commission (“FTC”).

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On June 4, 2009, the Federal Trade Commission (“FTC”) reported that Sears Holdings Management Corporation (“Sears”) agreed to enter into a settlement regarding the Commission’s allegations that the company violated Section 5 of the FTC Act in connection with a new online community application it had developed.  Participation in the community allowed Sears to track consumers’ online and, to some extent, offline activities.  The FTC’s action is notable as a potential precursor to future enforcement by the FTC in the areas of both transparency and tracking online behavior, the latter having been previously highlighted as an area of interest for the agency.  The settlement, discussed in more detail below, is notable in that its requirements make clear that substantial tracking of consumer behavior must be sufficiently transparent (not disclosed only in a lengthy privacy policy or agreement), consumers’ opt-in consent to such tracking must be obtained and, disclosures regarding the nature of the tracking must be made at a meaningfully early stage of the transaction.

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Following numerous complaints about the use of behavioral advertising technology by internet service providers, the European Commission (the “Commission”) launched infringement proceedings against the United Kingdom for an alleged failure to keep people’s online details confidential. The EU Telecoms Commissioner, Viviane Reding, has called upon the UK to change its national laws to ensure the confidentiality of communications by prohibiting interception and surveillance without the user's consent. If the UK does not comply, the Commission can issue a final warning before taking the UK to the European Court of Justice.

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Various authorities, both at a European and a national level, are currently addressing the issue of online behavioral advertising. On March 31, 2009, Meglena Kuneva, the European Commissioner for Consumer Affairs, gave a keynote address in Brussels in which she raised the issue of online behavioral advertising and addressed the need to enhance consumer protection related to the practice. While recognizing the numerous beneficial applications for consumers made possible by the Internet, Kuneva expressed her concern that the World Wide Web could become the “world wide west” and called for a better balance between the interests of businesses and consumers. The full text of Ms. Kuneva’s address is available here.

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Behavioral targeting on the Internet has recently come under the scrutiny of lawmakers and privacy advocates.  This increased interest has been triggered in part by Facebook’s and Google’s recent adoption of targeted advertising practices.  In response to growing concerns over behavioral tracking, three U.S. congressmen are preparing a draft bill that would mandate the disclosure of monitoring practices for advertising purposes.  The goal of the bill is to increase transparency and provide individuals with the opportunity to learn what information is being collected about them, by whom and how the information will be used.  At present, there are suggested best practices set forth in the Federal Trade Commission’s (“FTC’s”) Staff Report on Self-Regulatory Principles for Online Behavioral Advertising.  These Self-Regulatory Principles are designed to encourage industry self regulation for the protection of consumer privacy in online advertising activities.  The FTC is in the process of reviewing the privacy issues raised by online behavioral advertising over the course of the last decade.  An FTC Town Hall meeting to address behavioral advertising practices was hosted in November 2007.  In response to the comments received at the Town Hall meeting, the FTC issued Self-Regulatory Principles to promote industry self-regulation.  If enacted, the proposed bill would frustrate industry’s nascent efforts to self-regulate in this area.

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On March 11, 2009, the operators of Germany's leading social networks, which include "schuelerVZ," "studiVZ,"  "lokalisten" and "wer-kennt-wen," signed a 17-page Code of Conduct by the Association for Voluntary Self-Regulation of Multimedia Service Providers (the “Code”) in order to protect children and young people. The Code of Conduct aims to improve data protection and consumer protection in social networks and, in particular, to protect young people against harassment. The Code requires that a privacy notice be displayed directly after the registration process and that restrictive default settings be enabled for users under the age of 14. In addition, it must be possible to lock user profiles from search engines, and to block communication with other users. At prominent locations of the sites, features should be implemented to allow users to report irregular behavior and illegal content. The Code also states that sites may only use personal data for marketing and behavioral advertising if the user has been informed of this use of their data and has consented. Furthermore, any advertising material has to be clearly marked as such in accordance with the principle of separation of advertisement and content. The Code also contains a rule on blacklists and provisions regarding disclosure of data in response to law enforcement requests. The companies operating the aforementioned sites, studiVZ Ltd., Lokalisten Media GmbH and lemon line media Ltd. (wer-kennt-wen.de), have agreed to comply with the Code by the end of July 2009. The Code calls upon other social networks to sign it as well. The full text of the Code (in German) can be found here

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As part of its ongoing efforts to examine evolving internet marketing practices, earlier today the Federal Trade Commission released a report on self-regulation of online behavioral advertising.  This report analyzes the comments received from interested parties in response to proposed self-regulatory principles issued by the Commission in December 2007.  It covers a wide range of issues including the increasingly blurred line between personally identifiable information and non-personally identifiable information and the applicability of regulations to "first party" versus contextual advertising.
 
Links to the report and the concurring statements of Commissioners Harbour and Leibowitz, as well as FTC Congressional testimony on behavioral advertising, can be found here. 

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