Author: Ashley Jacques

April 2nd, 2015

Robert Durst case; is there a privacy concern on his alleged confession?

By: Tomás Kubick

Panel 4

Robert Durst, a real state businessman and millionaire, is being charged with the murder of his friend Susan Berman. Those facts alone do not have special signification for privacy law. The twist on this case is that as the press has stated one key clue that led to Durst’s detention is an audio recording on which he allegedly confesses the murder. There may be a privacy concern of how that record.

HBO was filming the documentary “The Jinx: The life and Deaths of Robert Dusts” which investigated Durst’s life and his relation with three murders, included Susan Berman’s. On one interviewed conducted to prepare the documentary, Durst was faced with evidence that supposedly incriminated him, evidence that he denied. Shortly after, he went to the bathroom and on solitude he stated, “What the hell did I do? Killed them all, of course”.

Durst’s lawyers have announced that he will declare himself innocent and surely will try to exclude HBO’s recording from trial. One strategy to do so could involve raising privacy concerns issues. Defendant could argue a breach of his fourth amendments rights. To do so, they should characterize the recording as a search and somehow link it with a governmental investigation regarding with this case, which is unlikely to happen.

Notwithstanding, defense can argue that the recording breaches The Wiretap Act (18 U.S.C. §§ 2510-2522). In case that the recording was obtained with breach to the act, there is an exclusionary rule. The Wiretap Act does not apply if one of the parties of the communications consented. Under this premise defendant will try to argue that he consented to be recorded on the set but not outside of it, even though he agreed that any record of him could be used as HBO deemed reasonable. This issue will be the key issue because if it is found that his consent was just for “on stage”. If this is believed this way, it may be sustained that every person has a reasonable expectation of privacy if he is alone in a bathroom.

On the other side, it may be hard to argue that a person voluntarily wearing a microphone did not gave consent to be recorded. Even in such situation The Wiretap Act may not apply. For a communication to be deemed oral, the person involved on it must “[exhibit] an expectation that such communication is not subject to interception”. It can be sustained that a person wearing a microphone does not exhibit such expectancy.

As exposed, there are serious privacy law question on Mr. Durst’s case with arguments balancing on each side of the dispute. It will be the task of courts to answer them and to continue shaping the reaches of this topic on criminal procedures.

March 27th, 2015

Wyndham and the Unfairness Jurisdiction

By: Ajitha Pichaipillai

Panel 5

I would like to write to few paragraphs regarding the Article, “An Era of Rapid Change: The Abdication of Cash & the FTC’s Unfairness Authority”, 14 PGH. J. Tech. L. & Pol’y 351. This Article discusses about the ‘unfairness’ jurisdiction of FTC in the data-privacy enforcement context. It provides a good summary of the Wyndham case, in which the Wyndham hotel group challenged the FTC’s authority to regulate data-security breaches.

Interestingly, Wyndham’s challenge of the FTC’s unfairness authority is three pronged: (i) the FTC lacks authority to pursue unfair practices related to data security, (ii) the unfairness actions related to data security require rulemaking, and (iii) the injury resulting from these payment card breaches is insufficient to support a claim. The second pronged argument on the requirement of rule making seems highly persuasive. Wyndham argues that any authority of FTC to regulate data security would require establishment through administrative rulemaking. It also suggests that the data security standards mandated by FTC, ex post, through selective enforcement actions and imposition of such standards on Wyndham could raise “serious constitutional questions of fair notice and due process”.

Even though, the motion to dismiss filed by Wyndham against the FTC’s compliant was dismissed by the district court, the questions certified by it for appeal may turn out to be determinative of FTC’s ‘unfairness jurisdiction’ in the data -security and data-privacy enforcement context. The questions, on which the Third Circuit is currently hearing the appeal, are: (i) Whether the Federal Trade Commission can bring an unfairness claim involving data security under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a); and (2) Whether the Federal Trade Commission must formally promulgate regulations before bringing its unfairness claim under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a).

The oral arguments of the Wyndham’s appeal dated March, 3, 2015 (available at https://epic.org/amicus/ftc/wyndham/#interest), features interesting discussion on the origin and legislative reports of Section 45 (n) of the FTC Act and how far a negligent practice could be regarded as a ‘unfair practice’. Judges asks the FTC’s counsel to substantiate on the ‘adequacy of notice’ with respect to the standards purported to be imposed on Wyndham. The Judges also takes note of the FTC’s sparing use of its powers under Section 45(n) (according to the counsel, FTC’s has exercised its unfairness jurisdiction under Section 45 (n), in relation to data security breaches, only five times).

As EPIC notes, the decision of this appeal could have significant impact on FTC’s authority to regulate data security breaches and consumer’s privacy rights enforcement.

March 26, 2015

 TV Ads Delivered via Google Fiber:

Mad Men’s Dreams Come True at the Cost of Viewers’ Privacy?

By: Erin L. Bansal

http://www.wired.com/2015/03/google-fiber-ads/

http://www.adweek.com/news/television/google-fiber-may-have-created-game-changer-real-measurement-tv-ad-views-163604

 http://bits.blogs.nytimes.com/2015/03/23/google-plans-experiment-with-targeted-ads-for-television/

Google recently announced the trial of a new service in the Kansas City metro area through its Google Fiber Internet and television service that will allow it to personalize ads based on a viewer’s locality and viewing habits. This capability is “dynamic ad insertion” in marketing parlance. AdWeek described this capability more dramatically –as “advertising’s Holy Grail.” Likewise, The New York Times described Google’s service as a potential “sea change” in TV advertising. But while Madison Avenue and its Mad Men may embrace Google’s new service, what does it mean for the viewers watching television in the privacy of their own homes?

In simple terms, Google’s service will give it the ability to deliver more tailored ads and then to accurately monitor the viewing of those ads. Google will be able to insert an ad whenever it is timely, and they relay that viewing back to the marketer. As Google reported, the fiber TV ads will be “digitally delivered in real time and can be matched based on geography, the type of program being shown (sports, news, etc.), or viewing history.” Google can tailor the fiber TV ads to both live TV and DVRed programs. In addition, Google can give marketers a more accurate idea of how many people are watching an ad. Unlike Nielsen’s rating system that is based on old school sampling, each TV with Google’s service will report back to marketers.

For TV viewers, this new service raises some old concerns. While some have suggested that this service is no different than Google tracking a user’s browser history in the online world, the thought that Google can now monitor what shows a viewer is watching raises concerns. Wired remarked that this is “yet another way for Google to collect even more data about you.” It further noted that Americans are “not used to the idea that the shows we watch will be logged and turned into advertising fodder.”

At this point, Google is sensitive to privacy concerns. AdWeek reports that “a source familiar with the deal” explained that “Google is trying to be extra cautious with user privacy on this initiative.” Google asserts that viewers can opt out of being shown ads based on their viewing history. However, AdWeek points out that Google has not specified what it means by “viewing history” or how the opt-out process might work. And although users of Google’s web services can similarly opt out of ads based on their browsing history, few users choose to do so.

While Google’s trial of fiber ads is limited to a small number of viewers in a limited geographic area at this time, it is not difficult to image Google growing to become a ubiquitous force in the TV world given its dominance in online search and the functionality its Internet service offers (its Fiber Internet service is reportedly 100 times faster than the standard broadband connection). Perhaps Google will be able to design the privacy settings in Google Fiber and its TV service so that viewers feel that they can control their private information. But with opt-out as the standard default, a viewer is no more likely to take control while flipping channels on TV than she is while surfing the Internet.

March 26th, 2015

Consumer Privacy Bill and the role of FTC

By: Jyotsana Sinha

Panel 5

http://www.washingtonpost.com/blogs/the-switch/wp/2015/03/23/the-ftc-beefs-up-technology-investigations-with-new-office/

http://www.hldataprotection.com/2015/03/articles/consumer-privacy/insights-on-the-consumer-privacy-bill-of-rights-act-of-2015/

While the government is ready to take the next step by enacting a consumer privacy bill, the bill has increasingly drawn criticism from various actors, ranging from privacy advocates, the Federal Trade Commission (FTC) and even some members of the Congress.

FTC currently acts as the watchdog of consumer privacy in US. It regards the use or dissemination of personal information in a manner contrary to a posted privacy policy is a deceptive practice under the FTC Act, 15 U.S.C. § 45. FTC, however, does not possess actual rule making power. It merely enforces the policies established by the companies, however lax they are. Inspite of being the default enforcement authority, FTC lacks the necessary teeth to ensure proper enforcement.

Although the draft of Consumer Privacy Bill aims at empowering the consumer to take charge of their own data, the bill does not establish any mandatory standard to be followed by the companies. Neither does it enhance the authority of the FTC. While it is argued that adopting a business friendly and lenient approach towards the industry will be beneficial in gaining industry support, and self-regulation with minimal supervision by FTC will yield the desired result, the reality is quite the opposite. Giving the industries a free go on one hand and crippling the FTC on the other merely increases the risk to consumer privacy. The FTC has also expressed its disappointment at absence of any expansion or upgrading in the FTC’s role as a regulator.

The draft bill, while criticised by the privacy advocates, has been appreciated by the technology industry related groups. Highlighting the importance of benefit and risk assessment, the draft bill proposes establishment of Privacy Review Boards to counter the overreaching effect of law on beneficial use of data. It is important to note that the courts have continued to look up to the FTC as the crucial regulator of privacy policies and protector of consumer data and have rejected challenges to the scope of FTC’s power. With this support from the judiciary encouraging the FTC to ‘exercise [their] powers more robustly’ and ‘take more of a leadership role,’ it might not be surprising if FTC wishes to emerge as the supreme authority on consumer data privacy concerns. Lack of technical expertise and resource constrains are often cited as the reasons against empowering the FTC. But, the recent initiative by the FTC to establish BCP’s Office of Technology Research and Investigation to evaluate and address the effects of technological advancement in consumer privacy issues appears to be a step forward towards this goal. Amidst the criticism attracted by the draft bill and efforts of FTC to expand their authority, it now remains to be seen if any substantial development takes place effectually providing consumers the option and power to control their data.

March 26th, 2015

FTC AND CONSUMER PRIVACY

RadioShack’s bankruptcy and Auctioning off Customer Data- A violation of Privacy Policy

By: Vasundhara Apte

http://www.computerworld.com/article/2901691/new-york-threatens-action-if-radioshack-sells-customer-data.html

http://www.bloomberg.com/news/articles/2015-03-24/radioshack-s-bankruptcy-could-give-your-customer-data-to-the-highest-bidder

http://www.pcworld.com/article/2902472/about-25-us-states-oppose-sale-of-radioshacks-customer-data.html

RadioShack is a leading national retailer of technology products and services as well as products related to personal and home technology and power supply needs. RadioShack filed for Chapter 11 Bankruptcy on February 5^th, 2015 after striking a deal to sell up to 2400 of its stores to the wireless service provider Sprint and a hedge fund that is its biggest shareholder.

On 23^rd March, 2015 RadioShack commenced the auction of its assets which include its name and intellectual property, trademarks, patents, leases and the names, email addresses and phone numbers of its customers. According to a Bloomberg Report it is estimated that RadioShack is offering more than 13 million email addresses and 65 million physical addresses to the highest bidder.

Standard General, a hedge fund which is one of RadioShack’s creditors emerged the winner of the auction.Salus Capital Partners claims it did not get a fair hearing at the auction on a bid it made which was materially superior. The Attorney General of Texas Ken Paxton filed a challenge arguing that RadioShack made an explicit promise to its customers that it would not sell their personal data. He brought attention to the fact that it was a breach of the company’s statement wherein RadioShack clearly stated that they prided themselves on not selling their private mailing list. Hilco Streambank a subsidiary of RadioShack also remarked that the deals may not be approved by the bankruptcy court and there have already been two legal filings in attempts to block the sale of consumer data.

There have been several oppositions to the sale of customer data by RadioShack. The State Law in Texas prohibits companies from selling personally identifiable information which violates their own privacy policies. At present the states of Oregon, Texas, Pennsylvania and Tennessee are challenging RadioShack’s attempt to sell its customer data which includes personal information like their names, email addresses and phone numbers. AT&T is also trying to stop the sale of customer information as AT&T believes that RadioShack does not have the ownership of the data which it contends rightfully belongs to AT&T. AT&T claims that AT&T helped RadioShack to market phones and in the process allowed RadioShack to amass information which included among other things a list of AT&T customers. AT&T is concerned as one of the bidders plans to co-brand some of the RadioShack stores as Sprint stores and thus AT&T is concerned that this could lead to giving information to its competitor.

One of the first legal challenges to the sale of customer information was in the FTC V TOYSMART.COM case. FTC sued to prevent Toysmart from engaging in the sale of its customer information as part of a bankruptcy auction. The company’s privacy policy said that personal information of its customers would in no circumstances be shared with a third party and thus the sale of its customer’s information as part of the bankruptcy auction was a clear violation of its privacy policy. The customer data was the company’s most valuable asset in bankruptcy. Toysmart did eventually destroy the information and the case resulted in a federal legislation that imposed a restriction on the sale of assets in bankruptcy.

While addressing the Bankruptcy of Borders, a bookstore chain the FTC realized that bankruptcy was a special case and consented to allowing the sale of personal data with certain conditions. The data could not be sold as a stand-alone asset it would have to be sold in connection with its goodwill, the buyer would have to be in the same line of business as the seller and the buyer must abide by the same privacy policy as the seller. The FTC went on to add that if any changes were made to the privacy policy the consent of the customers would have to be obtained.

The RadioShack bankruptcy filing and sale of its assets particularly consumer information has been a major concern. RadioShack promised its online customers that it would not sell their personally identifiable information to anyone at any time. The signs at RadioShack’s sentiment also sent out the same message that a customer’s information would be treated with respect and dignity and that RadioShack prided itself in not selling its private mailing list. However despite these promises to its customers RadioShack has done just the contrary. A customer’s data has vast market power and is of great economic value but adequate precaution must be taken to ensure that a company does not go back on its word and violate its own privacy policy.

There has been widespread opposition against RadioShack’s plans of selling its customer data. The State of Texas said it had received support from 21 governmental consumer protection entities to its objection of RadioShack’s planned sale of personally identifiable information (PII) of 117 million RadioShack customers. Although New York has not signed on the Texas challenge the the Attorney General Eric. T. Schneiderman said that New York would take appropriate action to protect New York customers if RadioShack violated its customer privacy policy and went ahead with the sale of its customer data.

Approval of the deal is expected to come on Thursday (26^TH March, 2015 when the bankruptcy court is scheduled to rule on the case.

March 26^th 2015

Marketing Drones now flying over Los Angeles Area for Cellphone Location Data

By: Sofia Grafanaki

Panel 5

http://venturebeat.com/2015/02/23/drones-over-head-in-las-valley-are-tracking-mobile-devices-locations/

http://www.popsci.com/marketing-drones-scanned-la-cellphone-location-data

http://www.forbes.com/sites/frankbi/2015/02/23/drones-are-already-intercepting-cell-phone-signals-in-l-a/

A Singapore based marketing company proudly announced last month that it started using drones in order to detect cell phone signal strength and WiFi transmission of cell phone users over part of Los Angeles. Using cell phone triangulation and other such methods, allows them not only to determine specific location data per device, but also their users movements and travel patterns. They can then target consumers with very specific ads, based on their route and what is around them, which coffee shop they are walking by etc.

This practice is not that new, the same company has been previously doing it using bikes, cars and trains in the past, but with the use of drones the scale changed drastically, raising even more privacy concerns relating to their use. While the company claims that it does not collect any personally identifiable data such as names or phone numbers, it does identify each user through the device ID in order to track them. And while the company is trying to use this distinction to respond to privacy concerns, it is widely accepted that the disctinction between PII and non-PII is not as efficient as it was once thought to be when the goal is to protect privacy, as the combination of non-PII from several sources can very often reveal a lot more information about an individual than one would expect.

In the case of this use of drones, there is also an issue with “consent”. Concepts of notice, choice and consent are criticized as weak protectors of privacy in the light of new technologies, but here it is not clear at all when they come into play, even in their weak form. At no point does a user have an option to not be tracked by these drones, like he would (at least theoretically) when using a website that places cookies on his computer. It seems that cellphone users don’t even need to have location services on their smartphones turned on for the tracking to happen, all that needs to be happening is the user to have an app open that is transmitting any kind of data through cell service or WiFi.

March 12th, 2015

The Privacy of Regulators

http://www.nytimes.com/2015/03/12/us/politics/storing-emails-from-these-senators-will-be-easy-if-they-ever-send-one.html

By Emily Naphtal

Recently, the New York Times interviewed the “flip phone caucus”, a group of Senators that barely uses email. For many of these Senators, such as Charles Schumer (D, New York), Lindsey Graham (R, North Carolina), John McCain (R, Arizona), and Orrin Hatch, (R, Utah), this may just be a habit formed over many years of operating in the political world without email. However, the article concludes by lauding the foresight of these Senators – stating that not using email is “a very smart way to avoid embarrassment and possibly jail.”

This suggestion that individuals should “just opt out” of various trappings of modern technology if they want to maintain their privacy has been frequently advanced in discussions on U.S. consumer protection. For example, if a certain service provider such as Facebook updates its privacy policy, users theoretically have a choice to continue using the service or to discontinue their use. However, opt out is not a straight-forward policy for most consumers to understand or implement in a world of interconnected marketing agencies, data collection, and usage. The flip phone caucus Senators have aides to handle their various necessary electronic communications. Most Americans do not enjoy this privilege and must use the internet to fulfill their occupations as well as carry out personal commercial transactions and research.

Companies record and store information about individuals’ movements from webpage to webpage as they browse the internet. Some industry self regulating agencies such as the Network Advertising Initiative (NAI) offer the option to opt out of their customizing advertisement infrastructure. Just by visiting the NAI website, I discovered that 93 different NAI members currently track my internet usage through cookies in order to provide me with targeted advertising. While I can opt out of  “internet advertising delivered to [my] device via HTTP cookies,” my opt out through their trade organization covers neither non NAI members, nor the use of other technologies besides http cookies by NAI members. NAI states that a mechanism for opting out of these other tracking devices is in development. Also, critical to note, opting out of NAI members’ tracking does not affect the storing and sharing of information by various social networking or email services with which I elect to share how I am feeling, where I am going, and the identities of my friends.

A Time journalist recently discovered that opting out of online data collection required behavior that made her appear anti-social and even criminal. The goal of her experiment was to hide her pregnancy from the data collection “bots” on the internet. To accomplish this, she only paid for purchases with cash and prepaid gift cards, only visited baby related websites through Tor, a private browser that routes an individual’s traffic through foreign servers, and she attempted to convince all her acquaintances not to mention the pregnancy on social networking sites. She says this quest forced her into increasingly awkward interactions with family members and the wider world. She deleted an uncle from facebook after he mentioned her pregnancy in a message (which he mistakenly thought was private). And the corner store put her on a watch list for her abnormal purchasing behavior.

Lest consumers become too alarmed they should know that the law does adequately protect information about personal movie rentals. In 1987, a member of the media obtained Robert Bork’s video rental records and they surfaced as part of his contentious and ultimately unsuccessful Supreme Court nomination hearing. In response, Congress made it a crime to disclose video, DVD, and video game rentals without specific consumer consent. 18 U.S.C. § 2710. Companies such as Netflix are still fighting to change this law in order to integrate their products with social media websites.

Perhaps this strangely specific law sheds light on what must happen in order to safeguard the internet privacy of ordinary Americans. Members of Congress must feel that the current dragnet data collection regime threatens their own privacy, their own reputations, and their own jobs, just as they did with respect to movie rental information following the Bork hearing. Until that fated day arrives, Americans who value their privacy can attempt to follow the lead of the Senate’s flip-phone caucus.

March 12th, 2015

The Mosaic Theory, Riley, and the Legacy of Jones

USA v. Timothy Carpenter (Amicus Brief), Brennan Center for Justice, http://www.brennancenter.org/legal-work/usa-v-timothy-carpenter-amicus-brief

“EFF Fights Government’s Effort to Get Cell Location Records Without a Warrant,” Electronic Frontier Foundation,” https://www.eff.org/deeplinks/2014/11/new-eff-brief-explains-why-cell-phone-location-records-are-private-and-government

“The Mosaic Theory of the Fourth Amendment,” Orin S. Kerr, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2032821

By: David G. Krone

In U.S. v. Jones, five U.S. Supreme Court justices signed or joined concurring opinions indicating they would support a “mosaic theory” of the Fourth Amendment whereby the aggregation of locational information would have amounted to a search. As Justice Alito wrote, “relatively short-term monitoring of a person’s movements on public streets accords with expectations of privacy that our society has recognized as reasonable. But the use of longer term GPS monitoring in investigations of most offenses impinges on expectations of privacy.” In that case, the Supreme Court ultimately ruled in favor of the appellant based on a theory of physical trespass on the appellant’s car. Since that case, organizations such as the Brennan Center for Justice at NYU the Electronic Frontier Foundation (EFF) and the American Civil Liberties Union (ACLU) have pushed courts to recognize the privacy Interest in cell tower through amicus briefs filed in cases involving convictions based on the data. In particular, they have cited the Supreme Court’s ruling in California v. Riley, relating the privacy interest that the Court found in the type and quantity of data on a cell phone to the interest a defendant would have in cell tower data that is just as potentially invasive.

Most recently, an amicus brief signed by all three organizations the specifically addresses USA v. Timothy Carpenter in the 6^th Circuit. In Carpenter, the defendant is appealing his conviction of robbery charges based of evidence that “included five months of cell site data procured without a warrant.” The amicae argue, firstly, that, much like the GPS surveillance information in Jones, the cell site location information (CSLI) acquires reveals invasive and precise information about the defendant’s locations. The amicae note that, during that five month period, the CSLI records the defendant’s location at the beginning and end of each phone call—revealing, in addition to his proximity to the robbery, when he was at church, at home and when he slept away from home. Secondly, the amicus brief argues that the CSLI record was a Fourth Amendment search requiring a warrant by citing both the Alito and Sotomayor concurrences in Jones, as well as the Court’s assessment of the of cell phone data in Riley. As the brief states, “The expectation that a cell phone will not be tracked is even more acute than is the expectation that cars will not be tracked because individuals are in their cars for discrete (and typically brief) periods of time, but carry their cell phones with them wherever they go.” In fact there is potentially greater privacy interest in the here than in in Jones because, because CSLI may include information recorded while in the defendant’s home. Finally, the brief also argues that the third-party doctrine (as articulated in Smith v. Maryland) should not apply, because people, “do not input or knowingly input their location information to their wireless carrier” (emphasis added).

The 6^th Circuit has yet to hear oral arguments in USA v. Carpenter. However, other circuits have remained conflicted. In 2013, the EFF and the ACLU submitted an amicus brief in the 11^th Circuit case, United States v. Davis, similarly basing their argument on the quantitative and qualitative differences in CSLI. In June 2014, the Court sided with the amicae, but later elected to rehear the case en banc, seeking further arguments on whether the CSLI acquisition violated the Fourth Amendment. Courts do face considerable concerns in adopting a “mosaic theory” approach to Fourth Amendment searches. As Georgetown Washington Law Professor Orin Kerr points out in his seminal article on “The Mosaic Theory of the Fourth Amendment,” adopting this approach would require future courts to tackle issues in applying the standard. For instance, Courts would have to determine what standard should apply and whether data collection alone would meet the threshold, or whether post-collection analysis or use would also be required. The Courts would also have to decide the scope of the mosaic theory not only in terms of duration and scale but which surveillance methods count. Finally, the Courts will also have to address issues of constitutional reasonableness and whether remedies such as the exclusionary rule will apply.

Nevertheless, as Kerr himself notes, Courts are accustomed to dealing with ambiguity in defining Fourth Amendment protections. The Supreme Court has consistently recognized in cases ranging from Kyllo to Riley the need to shape the law in anticipation of the persistent march of technology. For better or for worse, the bulk, machine-readable data is gaining an increasingly prominent role in society, from our cell phones to Facebook. As Justice Roberts colorfully pointed out in the unanimous Riley opinion, comparing cell phone data to the evidence found in a physical object like a wallet, “is like saying a ride on horseback is materially indistinguishable from a flight to the moon. Both are ways of getting from point A to point B, but little else justifies lumping them together.”

March 12th, 2015

“Smart” Cars – In the Fast Lane to Government Regulation

By: Thomas A. Warns

https://www.lexology.com/library/detail.aspx?g=57d1ca69-4db8-42eb-a56c-c9d198547db3

Last month, Senators Ed Markey (D-Mass.) and Richard Blumenthal (D-Conn.) announced legislation aimed at establishing federal data security and privacy standards for Internet-connected automobiles, generally referred to as “smart cars.” This development was novel in many respects worthy of mention.

First, the report comes on the heels of an FTC report in January which recommended a technology-neutral data security approach to the “Internet of Things.” That report suggested general standards for all internet connected objects; instead, the Senate bill for smart cars continues to general trend of “sectoral” data privacy legislation. In contrast with practices typical in the EU, the United States generally legislates on an industry by industry basis when it comes to data privacy, rather than creating one standard for all. Many businesses praise this approach because it allows for flexibility in approaching the different nuances of industries with different practices; consumer advocates warn that the lack of any statutory privacy baseline leaves consumers unable or unwilling to effectively wade through the different privacy standards in each field.

The Senators’ bill is based on a report that examined the data privacy practices of sixteen car companies, and found that these manufacturers collected driver and passenger data but had “alarmingly incomplete or inconsistent” privacy and data security practices. The bill alleviates these problems by demanding certain testing of wireless security, making consumers explicitly aware of when information is collected, giving them the option to allow the collection, prohibiting manufacturers from using the information for advertising purposes, and creating a new security rating to be displayed on vehicles, much like fuel economy information is also included on new cars.

This broaches several relevant issues in the regulatory sphere. First, it is a massive deviation from the self-regulation that persists in the U.S. automobile industry prior to the legislation. Some will question the wisdom of this decision. Industry leaders often prefer self-regulation because it allows companies to innovate in a rapidly changing technological field; Congressional laws take so long to pass, and are so difficult to amend, that they may become outdated rather quickly, and only serve to stifle development in important fields. Likewise, they would argue that regulation will impede the efficient allocation of privacy that has already been achieved by the market. While consumers may express opinions that data privacy and security have value to them, they often assign a very low value to it when they are confronted with voluntary transactions that trade information for a product or application. Perhaps consumers believe that the collection of data by companies to target advertising is completely benign, or perhaps will even enhance their welfare, since they are given more relevant advertisements. The companies want this information because it lowers the costs of advertising for them, potentially creating a socially desirable outcome. If some consumers do truly value their privacy at a higher value than many others, then companies can compete to deliver the most data-secure smart cars.

That picture, however, may be challenged on several grounds. Consumers may not be able to fully comprehend the “cost” of surrendering their personal information. For one, it is almost impossible to quantify the information into a monetary value, like we do with most other transactions. For another, consumers aren’t even sure what data collection means. Privacy policies may spell out some of the terms of use, but it is often unclear how long the collection will last, what exactly will be collected, who the information is shared with, and whether it will be stored and aggregated with other information from other sources indefinitely. If consumers are unable to understand the cost when deciding to surrender their personal information, a top-down command and control style regulation may be the optimal solution.

One of the virtues of this bill then, is that it attempts to combat the information gap that may lead to a widespread market failure. The bill lets customers explicitly know when their information is being collected, and forbids the information from being shared for advertising purposes. Knowing when their data is being collected may make the “cost” more salient and encourage more drivers to opt-out of the data collection; the flip-side of this argument, however, is that drivers may not opt-out when informed of later data collection out of a sense that all hope is lost, and that they have already lost control over their data. Likewise, the complete prohibition on sharing info for advertising purposes may cut off a revenue stream for car companies, and force price hikes onto the backs of consumers who may otherwise prioritize a price discount over data privacy.

This Senate bill will undoubtedly improve personal data privacy for drivers, but it may do so at the expensive of socially good data collection and use by car companies. Perhaps a better alternative would be co-regulation, which has had demonstrated success in the field of environmental law. Co-regulation involves placing the regulator, the regulated, and interested third parties in a position to negotiate directly with each other over regulations, rather than indirectly through notice and comment rulemaking. This allows each stakeholder to make tradeoffs and over concessions in ways that best reflect their own priorities.

As Professor Ira Rubinstein notes, co-regulation tends to succeed because there is greater legitimacy and industry “buy-in” when the industry has a hand in creating its own rules. The effect of this is likely a decrease in litigation, as there are fewer court battles over the interpretation of an agency’s regulation when the regulated parties and interested citizen groups participated in writing it. One criticism to this approach is that it places too much weight in the hands of interested private parties, as opposed to disinterested government agencies working towards the public good. Anyone who has studied administrative law, however, knows that agencies are already subject to capture by special interests. Further, as long as the agency involved ensures equal participation by industry and consumers, and is the ultimate arbiter of any regulation, fairness can be protected. While this co-regulatory approach would be intelligent, smart car regulation is likely destined to drive down a road towards traditional agency regulation with notice and comment rulemaking.

Read the story, “Smart Car Legislation Suggests a Different Approach to the Internet of Things Regulation”, at https://www.lexology.com/library/detail.aspx?g=57d1ca69-4db8-42eb-a56c-c9d198547db3

March 12, 2015

Digital Advertising and the Apple Watch

By: Daniel Lin

This blog post discusses how the material for our March 12, 2015 class, appertaining to models of digital advertising, might be pertinent with regards to the potential widespread public adaptation of increasingly personalized tech items such as the upcoming Apple Watch. (Link to relevant article: http://www.theatlantic.com/technology/archive/2015/03/if-apple-watch-isnt-a-watch-what-is-it/387067/)

Apple has established a reputation for (and fortune by) making complicated technology simple to use for the “regular” consumer. In her article “If Apple Watch Isn’t a Watch, What Is It?” Adrienne LaFrance subscribes to the notion that Apple Watch as “the most personal product [Apple has] ever made” in part because of its tracking capabilities (right down to the number of “times your heart beats in a day”!). LaFrance posits that the Watch will be a “device that saves you the trouble of pulling out your phone” (the logic being that user will customize on their Watch what phone notifications are most important to her/him, such that they will only go to their phone if the notification meets such idiosyncratic, personalized criteria). The ultimate postulation of LaFrance’s article is that the Watch will be greatly revelatory as to the user’s most unique and intimate preferences. How will users be affected by the increasingly personalized third party applications that will crop up in response to the Watch’s greater user personalization abilities? Without question, third party application creators, subscribing to the behavioral advertising model, must be salivating at such a notion.

Professor Strandburg, in her article “Free Fall: The Online Market’s Consumer Preference Disconnect,” outlines three “broadcast advertising business models,” which include: (1) the broadcast advertising model [generic advertisements, geared towards the broadest swath of the consuming public possible]; (2) the online contextual advertising business model [more specialized advertising, which assumes a relation between site visit and interest], and (3) the behavioral advertising business model [the most specialized form of advertising, which also entails the most data collection].

As articulated in Professor Strandburg’s article, an adverse consequence to the consumer of the behavioral advertising model is a sort of information dissonance, in that the user will not be able to accurately anticipate the effects of his interaction with a digital output, and thus adapt her/his behavior according to a manner that best reflects his consuming and personal preferences. If it is a valid assumption that few users first read a software application’s privacy strictures before interacting with it, then the fact that Apple products rely so heavily on third party application creators (a major selling point of Apple products over Android and other products is the Apple’s extensive application ecosystem) the behavioral advertising problem, as described by Professor Strandburg, is exacerbated (the logic being a glut of third party applications means a glut of independent privacy outlines, which is more off-putting to a user focused on convenience and efficiency).

In practical terms, the user faces the daily (or however often he interacts with an application) “one-or-the-other” decision of whether to make use of the convenience of an app (the reason why you purchased an Apple product in the first place!), or whether to take hours and read the each application’s publicly proffered privacy programs (and thus lose the benefit/purpose for which you purchased the Apple product). One can easily grasp the ramifications of this mindset transposed from an app ecosystem primarily offering contextual advertising (as currently appears to be the case) into one portended by the increased personalization offered by the Apple Watch, wherein behavioral advertising appears imminent, if the third party should so choose to offer this information to support their “free” applications.

Perhaps the user’s interaction with his Watch will be no more personal than his interaction with his iPhone. But if indeed LaFrance’s position is accurate, that use of the Watch and the iPhone will not only be coterminous (one cannot use the Watch without the iPhone), but also complementary, and users do end up using the Watch as means of personalizing their iPhone and broader digital experience even further, then the privacy implications are great, because then advertisers will have before them not just data regarding the user’s personal information and personal activity, but data regarding the user’s attitudes towards this information and activity (a second piece to the puzzle for advertisers, as alluded to in Professor Strandburg’s article)!