2. How Will Privacy Regulation Impact Your Business In 2012? Daniel T. Rockey, Esq., CIPP Holme, Roberts & Owen LLP San Francisco

3. Legal Disclaimer This presentation is intended for general informational purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances, nor is it intended to address specific legal compliance issues that may arise in particular circumstances. Please consult counsel concerning your own situation and any specific legal questions you may have. The thoughts and opinionsexpressed in this presentation are those of the individual presenters and do not necessarily reflect the official or unofficial thoughts or opinions of their employers. For further information regarding this presentation, please contact the presenter(s) listed in the presentation. Unless otherwise noted, all original content in this presentation is licensed under the Creative Commons Attribution-Share Alike 3.0 United States License available at: http://creativecommons.org/licenses/by-sa/3.0/us.

4. How Will Privacy Regulation Impact Your Business In 2012? Brief History of US Privacy Law A Flurry of Proposed US Privacy Legislation Legislative Vacuum = More Aggressive FTC New COPPA Rules: What To Expect Privacy Litigation On The Rise How To Prepare: Privacy By Design

5. The Right to Privacy: US No Right of Privacy in US Constitution Nevertheless, a right has been implied from the 4th Amendment and general protections for life, liberty, etc. (Penumbral Theory) “The Right to Privacy,” Harvard Law Review, Brandeis (1890) “The common law secures to each individual the right of determining, ordinarily, to what extent his thoughts, sentiments, and emotions shall be communicated to others.” Olmstead v. United States, 277 U.S. 438, 478-9 (1928) (Brandeis, dissenting) Defined the right of privacy as the “right to be left alone.”

6. The Right to Privacy: US Historically, right to privacy = right to be free from intrusion in one’s home Rowan v. United States Post Office Dep’t, 397 U.S. 728 (1970) (upholding Do Not Mail because ‘‘[t]o hold less would tend to license a form of trespass and would make hardly more sense than to say that a radio or television viewer may not twist the dial to cut off an offensive... communication... entering his home.’’) Mainstream Mktg. Servs. v. FTC, 358 F. 3d 1228, 1238 (10th Cir. 2004) (upholding Do Not Call: “the State’s interest in protecting the well-being, tranquility, and privacy of the home is certainly of the highest order in a free and civilized society.”

7. Congress Begins to Recognize Right of Privacy in Information Fair Credit Reporting Act of 1970 (granted limited right to access, dispute and correct credit information; limits on sharing of credit info) Electronic Communications Privacy Act of 1986 (restricts intercepts of electronic communications, stored data) Video Privacy Protection Act of 1988 (prohibits video service providers from disclosing rental or purchase info) Drivers Privacy Protection Act of 1994 (prohibits DMV from sharing motor vehicle data with marketers w/o consent)

8. Targeted Approach: Health and Financial Data HIPAA (1996) (requires express consent to share health data other than for treatment, payment or healthcare operations) (ARRA & HiTech) Gramm-Leach-Bliley (1999) (applies to financial institutions; requires notice to share w/ affiliates; for 3rd parties, must allow opt-out) Fair and Accurate Credit Transactions Act of 2003 (added Affiliate Marketing Rule to FCRA- requires notice and opt-out to share “eligibility information,” including “personal characteristics or mode of living”)

9. Regulation of Online Data Collection Children’s Online Privacy Protection Act of 1998 (COPPA) Marks new era of privacy regulation For the first time, limits collection of online data for marketing purposes Relatively non-controversial, but creates a slippery slope

10. Following COPPA, Period of Legislative Inactivity, Emphasis On Self-Regulation Tremendous technological growth, legislative inactivity = marketing bad apples Direct marketing industry creates strong self-regulatory model to stave off regulation DMA Guidelines for Ethical Business Practice IAB: Interactive Advertising Privacy Principles NAI: Self-Regulatory Code of Conduct and Enforcement Procedure Third Party Certification Programs E.g.,

11. EU Adopts Comprehensive Privacy Scheme EU jumps in head first EU Data Protection Directive (95/46/EC) EU Privacy Directive (2002/58/EC) Express recognition of right of privacy in personal data Comprehensive, rather than piecemeal approach But extremely burdensome restrictions on business, marketing industry EU “Cookie Rules” (2009/136/EC) Prior consent for cookies

12. 2008 – 2010: Begins bi-partisan push toward privacy legislation High profile privacy snafus (e.g. Facebook, Rapleaf) lead to calls for Congressional action Handful of bills introduced, but garner little traction (Boucher/Stearns) Self-regulatory efforts instrumental in keeping legislation at bay But momentum builds in 2010

13. Meanwhile, Legislative Inactivity Leads to Aggressive Enforcement by FTC High profile FTC enforcement actions COPPA (Sony BMG; Mrs. Fields) Data security/data disposal (CVS; TJ Maxx) Deceptive data collection (Sears “My SHC”) FTC Endorsement/Blogger Rules (Ann Taylor)

14. Meanwhile, Legislative Inactivity Leads to Aggressive Enforcement by FTC FTC Saber-Rattling (Leibowitz) 2007: "The marketplace alone may not be able to solve all problems inherent in behavioral marketing.” 2010: "I think opt-in generally protects consumers' privacy better than opt-out, under most circumstances. . . . I don't think it undermines a company's ability to get the information it needs to advertise back to consumers.” 2010: Report on Online Behavioral Marketing Endorsed Do-Not-Track Opt-in for Sensitive Data Precise geolocation data

15. Federal Inactivity Also Leads to Patchwork of State Data Security Laws Dozens of states enact data breach legislation California enacts OPPA, require privacy policy for any business collecting data from Californians Mass., Minnesota, Nevada data security laws (encryption, WISP)

16. 2011: Year of Federal Privacy Legislation? Building Effective Strategies To Promote Responsibility Accountability Choice Transparency Innovation Consumer Expectations and Safeguards Act (“BEST PRACTICES” Act) (H.R. 611) Rush (D-IL) (2/10/2011) The Do Not Track Me Online Act of 2011 (H.R. 654) Speier (D-CA) (2/11/2011) The Financial Information Privacy Act of 2011 (H.R. 653) Speier (D-CA) (2/11/2011) Commercial Privacy Bill of Rights Act of 2011 (S. 799) John Kerry (D-MA) and John McCain (R-AZ) (4/12/2011) Consumer Privacy Protection Act of 2011 (H.R. 1528) Stearns (R-FL) Matheson (D-UT) (4/13/2011) Data Accountability and Trust Act (H.R. 1701) Bobby L. Rush (D-IL) (5/4/2011) Do-Not-Track Online Act of 2011 (S. 913) Rockefeller (D-WV) (5/9/2011) Data Accountability and Trust Act of 2011 (H.R. 1841) Stearns (R-FL) and (5/11/2011) Do Not Track Kids Act of 2011 (H.R. 1895) Markey (D-MA) Barton (R-TX) (5/13/2011)

17. 2011: Year of Data Privacy Legislation? Electronic Communications Privacy Act Amendments Act of 2011 (S. 1011) Leahy (D-VT) (5/17/2011) Personal Data Privacy and Security Act of 2011 (S.1151) Leahy (D-VT), Franken (D-Minn.) and Schumer (D-N.Y.) (5/17/2011) Geolocation Privacy and Surveillance ("GPS") Act (S. 1212) and (H.R.2168) Wyden (D-OR) and Chaffetz (R-Utah) (6/15/2011) Data Security and Breach Notification Act (S. 1207) Pryor (D-AR) and Rockefeller (D-WV) (6/15/2011) Location Privacy Protection Act of 2011 (S. 1223) Franken (D-MN) and Blumenthal (D-CT) (6/16/2011) Secure and Fortify (SAFE) Data Act (H.R. 2577) Bono Mack (R-CA) (7/8/2011) Proposed amendment to Video Privacy Protection A ct (HR 2471) Goodlatte (7/8/2011) Data Breach Notification Act of 2011 (S. 1408) Feinstein (D-CA) (7/22/2011) Protecting Children From Internet Pornographers Act of 2011 (H.R. 1981) Smith (R-TX) (5/25/2011) Personal Data Protection and Breach Accountability Act of 2011 (S.1535) Blumenthal (D-CT) (9/8/2011)

18. 2011: Year of Data Privacy Legislation? Nineteen Bills introduced Partisan gridlock over budget Zero bills enacted into law What does this mean for marketers?

19. What’s a Marketer to Do?

20. 2011: Year of Data Privacy Legislation? Continued uncertainty But some trends are clear

21. Legislation to Watch: Data Privacy Consumer Privacy Protection Act of 2011 (H.R. 1528) Stearns (R-FL) Matheson (D-UT) PII includes IP address plus traditional PII Prior notice/opt-out required for use “unrelated to a transaction” or upon material change to policy Allows FTC approved safe harbors No private right of action/no state AG Preempts state law

22. Legislation to Watch: Data Privacy Commercial Privacy Bill of Rights Act of 2011 (S. 799) John Kerry (D-MA) and John McCain (R-AZ) PII includes unique identifiers, biometric and precise geolocation Notice and Opt-out/Opt-in for sensitive data/third party transfer if material change 1st party marketing/site optimization not unauthorized use FTC security rules No private right of action Federal preemption of state laws Safe harbors

23. Legislation to Watch: Data Breach Personal Data Privacy and Security Act of 2011 (S.1151) Leahy (D-VT), Franken (D-Minn.) and Schumer (D-N.Y.) Data security/accuracy requirements for data brokers (PII on 10,000 persons, excludes FCRA/HIPAA/GLB regulated entities) Breach notification w/ FTC safe harbor exemption Preempts state law No Private Right of Action Scraping safe harbor (amends CFAA)

24. Legislation to Watch: Data Breach Data Breach Notification Act of 2011 (S. 1408) Feinstein (D-CA) Narrow focus on data breach notification Safe harbor exemption from notification requirement if company conducts risk assessment and is able to demonstrate to the Federal Trade Commission that there is no significant risk of harm to individuals affected by a security breach No private right of action

25. Legislation to Watch: Do Not Track The Do Not Track Me Online Act of 2011 (H.R. 654) Speier Requires FTC to create Do Not Track rules Includes IP address and persistent identifiers Doesn’t preempt tougher state laws Do-Not-Track Online Act of 2011 (S. 913) Rockefeller Requires FTC to create Do Not Track Leaves to FTC to determine covered info No state law preemption

26. Legislation to Watch: Geolocation Geolocation Privacy and Surveillance ("GPS") Act (S. 1212) and (H.R.2168) Wyden (D-OR) and Chaffetz (R-Utah) Prohibits interception of geolocation info without prior consent (parental exception) Creates private right of action for damages/profits Location Privacy Protection Act of 2011 (S. 1223) Franken (D-MN) and Blumenthal (D-CT) Prohibits collection of geolocation info w/o express affirmative consent Private right of action for damages/punitives

27. Legislation to Watch in 2012 Do Not Track Kids Act of 2011 (H.R. 1895) Markey (D-MA) Barton (R-TX) Expressly extends COPPA to mobile applications Prohibits site, mobile app from “using, disclosing or compiling” data on children or minors (13 to 17 yrs) for targeted marketing purposes or geolocation w/o express affirmative consent No collection of any data from minors without adopting Digital Marketing Bill of Rights for Teens Fair Information Practices Principles established by this Act; “balances the ability of minors to participate in the digital media culture with the governmental and industry obligation to ensure that such operators do not subject minors to unfair and deceptive surveillance, data collection, or behavioral profiling.”

28. Legislation to Watch: VPPA Amendment to Video Privacy Protection Act (HR 2471) Goodlatte Netflix/Facebook exemption from VPPA Authorizes one-time durable consent to share data re videos

29. What to expect in 2012: Supercookies Chairs of Bi-Partisan House Privacy Caucus request FTC investigation into “supercookies” (9/27/2011) Barton (R-TX) and Markey (D-Mass) call for investigation, say violates § 5 of FTC Act Barton: “I think supercookies should be outlawed because their existence eats away at consumer choice and privacy.”

30. What to expect in 2012: COPPA Rules FTC announces proposed revisions to COPPA Rules (9/15/2011) Definitions Notice Parental consent Confidentiality and Security of Children’s Personal Information Safe Harbor Programs Data minimization requirement

31. What to expect in 2012: Revision to COPPA Rules Definitions Expands definition of “personal information” to include: IP addresses customer numbers held in cookies, and geolocation information.

32. What to expect in 2012: Revision to COPPA Rules Notice Streamlines notice content requirement (moves away from more disclosure is better mantra) 3 defined categories of information Requires all operators of an online service or website to provide contact information Ad networks Analytics providers Other content providers

33. What to expect in 2012: Revision to COPPA Rules Parental Consent Proposes eliminating the “email plus” method of obtaining parental consent. Website operators could seek FTC approval of alternate consent mechanisms. Goal: allow for new forms of consent as the technology evolves, and encourage innovation in obtaining verifiable consent (e.g. text message; scanned parental signature, credit card)

34. What to expect in 2012: Revision to COPPA Rules Confidentiality and security of children’s personal information Must ensure that service providers/third parties have reasonable procedures to maintain the confidentiality, security and integrity of such personal information.

35. What to expect in 2012: Revision to COPPA Rules Safe harbor programs Additional detail required for safe harbors Would require approved safe harbor programs to report on oversight of operators Annual audits of members

36. Common Threads National data breach legislation likely Privacy legislation less likely but possible Likely to be just-in-time notice and opt-out Opt-in/express affirmative consent for sensitive data Likely self-regulatory safe harbors May prohibit supercookies (flash cookies, HTML5) Likely to adopt simplified disclosure regime Unlikely to adopt Do Not Track

37. FTC Enforcement Actions: Mobile FTC announces first privacy enforcement action involving mobile apps Broken Thumbs developed iPhone apps targeted to “younger girls,” “nostalgic adults” (Emily’s Girls World, Emily’s Dress Up) Apps encouraged girls to email “Emily” their comments, submit “shout outs” to friends and family, ask Emil’s advice, and share “embarrassing” “blush” stories Allowed children to publicly post information on message boards BT also collected thousands of email addresses from children

38. FTC Enforcement Actions: Mobile FTC alleged violations of COPPA Rule (16 C.F.R. Part 312) despite App Store TOS Sued both BT and President/56% owner Failed to provide notice in app as to what info they collect, how they use it, disclosure practices Failed to provide required “direct notice” to parents Failed to obtain “verifiable parental consent” before collecting persona information from children

39. FTC Enforcement Actions: Mobile Consent Judgment $50,000 civil penalty Deletion of all previously collected data Injunction against further violations Compliance reporting, record-keeping requirements

40. FTC Enforcement Actions: Google FTC v. Google, Inc. FTC charged that by auto enrolling in Google Buzz, Google treated data inconsistently with prior promises, privacy policy Also, failed to comply with EU safe harbor Consent judgment: Compliance program Self-audits and reporting (20 years)

41. FTC Enforcement Actions: Text Messages FTC v. Phil Flora (9/29/2011) Defendant sent thousands of unsolicited text messages FTC did not bring under TCPA (not using “automatic telephone dialing system?) Instead, alleged that SMS messages are subject to CAN-SPAM Consent judgment

42. Litigation Developments IMS Health v. Sorrell (6/23/2011): Vermont law prohibited pharmacies from providing doctor prescribing data to pharmceutical companies for detailing SCT held law unconstitutional Law was a content-based and speaker-based restraint on free speech, requiring “heightened” constitutional scrutiny

43. IMS Health v. Sorrell: Deathknell for Do Not Track? Probably Not: Vermont law concerned commercial speech (not patient privacy) Permitted data sharing for purposes other than marketing (sought to limit disfavored opinions) Speculative benefit Do Not Track seeks to regulate personal privacy Arguably content/opinion neutral Precedent: COPPA, HIPAA, FCRA

44. What to Expect in 2012: EU Cookie Rules EU to begin Enforcing 2009 Cookie Rules Require prior notice and consent France: browser settings not enough. Consent without reference to specific use ineffective Browser finger printing?

45. Privacy Litigation: Lots of it but little to show for it In re Google Buzz User Privacy Litigation, Case No. 5:10-CV-00672-JW (N.D. Cal.) (Sept. 03, 2010) Google sets aside $8.5 million for privacy organizations Google makes changes "to the Google Buzz user interface that clarify Google Buzz's operation and users' options regarding Google Buzz" Google agrees to disseminate "wider public education about the privacy aspects of Google Buzz."

46. Privacy Litigation In re Apple iPhone litigation (9/20/2011) Class alleged that Apple permitted apps developers to collect/disseiminate for marketing purposes data from users without notice/consent Judge Koh held that class had not alleged injury-in-fact; i.e. actual damages (Article III standing)

47. How to Prepare for 2012 Don’t Wait and See: Privacy by Design Must analyze data inflows and use at outset of project Secure personal data (encryption for mobile devices and in transmission Say what you do and do what you say Participate in safe harbor Stay tuned

48. How Will Privacy Regulation Impact Your Business In 2012? Daniel T. Rockey, Esq., CIPP Holme, Roberts & Owen LLP San Francisco

49. How Will Privacy Regulation Impact Your Business In 2012? Daniel T. Rockey, Esq., CIPP Holme, Roberts & Owen LLP San Francisco