Canada: Bad Security Has Bad Consequences

Last Updated: February 15 2017
Article by Lisa R. Lifshitz

In the 2002 thriller Minority Report, the pre-crime unit of the Washington police force could lawfully arrest suspects for future criminal activity based on the foreknowledge of certain psychic "pre-cogs" prior to any crime actually being committed.

I couldn't help thinking about this movie when I read that on Jan. 5, the U.S. Federal Trade Commission filed a complaint in the Northern District of California against Taiwan-based computer networking equipment manufacturer D-Link Corp. and its U.S. subsidiary, D-Link Systems, for failure to take reasonable steps to secure its wireless routers and Internet protocol cameras, potentially compromising sensitive consumer information, including live video and audio feeds from D-Link IP cameras. The FTC accused D-Link of having shoddy Internet of Things security practices, engaging in unfair or deceptive acts/practices in violation of the Federal Trade Commission Act and manufacturing, marketing and selling devices with known security vulnerabilities, failing to properly secure its products and leaving them open to hackers and putting U.S. consumers' privacy at risk.

What's fascinating about this case is that, to date, there have been no known data breaches or cyberattacks actually involving D-Link products and no consumers have experienced any damages arising from these alleged technical security vulnerabilities. Instead, the FTC proactively sued D-Link because of the potential exposure of sensitive consumer/personal information, including live video and audio feeds from D-Link IP cameras caused by D-Link's poor security designs, spurred by D-Link's allegedly untrue advertising statements touting D-Link's superior security practices.

According to the FTC's complaint, D-Link had (falsely) promoted the security of its routers in a wide range of materials available on the company's website, including its user manual and promotional brochures, which included content headlined "EASY TO SECURE," "ADVANCED NETWORK SECURITY" and "INTERACTIVE SECURITY FEATURES" in connection with its routers.

Additionally, from (approximately) December 2013 until early September 2015, D-Link had posted a "security event response policy" on its product support webpage under a bolded heading "D-Link's commitment to Product Security." The policy promised that D-Link "prohibits at all times . . . any intentional product features or behaviors which allow unauthorized access to the device or network, including but not limited to undocumented account credentials, covert communication channels, 'backdoors' or undocumented traffic diversion. All such features and behaviors are considered serious and will be given the highest priority."

Despite the security claims made by D-Link, the FTC alleged the company had failed to take reasonable steps to address well-known and easily preventable security flaws to protect their routers and IP cameras from widely known and reasonably foreseeable risks of unauthorized access, including flaws that the Open Web Application Security Project has ranked among the most critical and widespread web application vulnerabilities since at least 2007.

These included:

  • Repeatedly failing to take reasonable software testing and remediation measures to protect their routers and IP cameras against well-known and easily preventable software security flaws, including "hard-coded" user login credentials integrated into D-Link camera software (with usernames and passwords like "guest") that could allow unauthorized access to the camera's live feed;
  • Failing to remedy a software flaw known as "command injection" that could enable remote attackers to take control of consumers' routers by sending them unauthorized commands over the Internet;
  • Failing to take reasonable steps to maintain the confidentiality of the private key code used to sign in to the D-Link software, which was openly available on a public website for approximately six months; and
  • Leaving users' login credentials for D-Link's mobile app unsecured in clear, readable text on their mobile devices, even though there is free software, available since 2008, to secure the information.

Even though no compromises have actually occurred, the FTC asserted the risk that attackers would exploit these vulnerabilities to harm consumers was significant and that by creating these vulnerabilities, D-Link put consumers at significant risk of harm. For example, a hacker could compromise a consumer's router, thereby obtaining unauthorized access to sensitive personal information. Cybercriminals could re-direct consumers seeking a legitimate financial site to a spoofed website, where they would unknowingly provide the attacker with sensitive financial account information. Using a compromised router, the cybercriminal could obtain consumers' tax returns or other files stored on the router's attached storage device or could use the router to attack other devices on the local network, such as computers, smartphones, IP cameras or connected appliances.

Similarly, a cybercriminal could compromise a purchaser's IP camera, covertly monitoring their whereabouts to target them for theft or other criminal activity or to observe and record over the Internet their personal activities and conversations or those of their children. During the time D-Link's private key was available on a public website, consumers seeking to download legitimate D-Link software were at significant risk of downloading malware made available via D-Link's private key.

The FTC is not the only entity concerned about D-Link. In July, ZDNet reported that the security company Senrio had found serious security flaws in D-Link's home Wi-Fi cameras allowing hackers to overwrite administrator passwords, placing users at risk of being spied upon. The remote execution flaw not only allows attackers to set their own custom password to access devices but also add new users with admin access to the interface, download malicious firmware or reconfigure products, adding only a single line of code to compromise a device. Senrio claimed that approximately 415,000 devices are open to the web and vulnerable to attack, with more than 120 products that are recorded as open, including routers, modems, access points and storage products.

The FTC chastised D-Link on several fronts, including failure to take reasonable steps to secure the software for their routers and IP cameras ("unfair acts or practices in or affecting commerce"), engaging in "deceptive acts or practices" for security event response policy misrepresentations, IP camera promotional misrepresentations and router GUI/IP camera GUI misrepresentations (for failing to take reasonable steps to secure their products from unauthorized access). The FTC also asked for injunctive relief to prevent consumer injury and requested a permanent injunction to prevent future violations of the FTC Act by D-Link, costs and whatever additional relief the court may determine to be just and proper.

D-Link denies these allegations and on Jan. 31 moved to dismiss the case on a variety of grounds, including the fact that there is no evidence of actual or likely consumer injury, and that liability cannot be based on "unspecified and hypothetical" risk of future harm.

What are the messages for Canadian manufacturers that export IoT products into the U.S.? Several, including the fact that the FTC has IoT on its radar and has a past history of investigating security vulnerabilities in IoT devices and acting against violators (including prior actions against TRENDnet, a marketer of video cameras, and ASUS, a computer hardware manufacturer).

Any Canadian IoT device manufacturer that intends to engage in cross-border business must engage in "security by design" during all phases of product development (planning/design, implementation, testing and deployment). Also, if a company finds any security flaws during the manufacturing/development process, it should be immediately remedied rather than ignored (as alleged against D-Link). Clearly, companies that do business in the U.S. are expected to anticipate widely known threats and take reasonable steps to mitigate or avoid them. Arguably, the D-Link suit puts all lax IoT device makers on notice — potentially holding them accountable for security holes that leave businesses and consumers vulnerable to attacks. Canadian entities that do business in this space should also carefully oversee and, if necessary, reign in their sales and marketing teams so that they avoid making inaccurate, overly robust statements (or inaccurate promises) regarding the strength of the company's security measures and overall security practices.

Originally published by Canadian Lawyer Online - IT Girl Column.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Lisa R. Lifshitz
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