Canada: Highly Confidential Data—A Cybersecurity Risk For Cannabis Related Businesses

Last Updated: April 21 2017
Article by Ruth Promislow, Hugo M. Alves and David Cassin

Cybersecurity is a significant business risk for any organization that collects personal data. The greater the amount of personal data collected by an organization, the greater the risk that it will be targeted by cybercriminals. It is now widely accepted that it is not a matter of if there will be an attack but rather when an attack will occur. Cyberattacks are occurring more frequently, and loss or exposure of sensitive information is on the rise. Licensed producers of cannabis and other cannabis related businesses (collectively, CRBs) face increased risks associated with data breaches given the highly confidential nature and large volume of data collected from their customers.

Data typically stored by organizations in the medical cannabis industry includes:

  • Personal data: full name; credit card number, expiry date and security code; personal email; home address; age; gender; date of birth; social insurance number; provincial health insurance number; and, in some instances, occupation.
  • Private health information: health assessments; current and historical medical conditions and diagnoses; prescriptions and order history; and names of doctors and designated caregivers.

In the last year, there have been data leaks involving organizations in the medical cannabis industry, including dispensaries in Ottawa and Vancouver. There has yet to be any high-profile attack in this industry but the absence of one should not lull anyone into a false sense of comfort.

Reliance on Third-party Service Providers

As the sophistication and proliferation of cyberattacks grow, many businesses have increased their reliance on specialized third-party providers to manage confidential data, rather than managing the data in-house. CRBs are cautioned that contracting with third-party providers will not absolve their business from liability should a data breach against the third-party service provider occur. The CRB may be ultimately responsible for ensuring that its third-party provider employs adequate security measures in handling customer information. Accordingly, when retaining third-party service providers cybersecurity counsel should be engaged to help the CRB structure and implement risk mitigation strategies relating to a potential cyber-attack on the third-party provider.

Litigation Exposure

A data breach against a CRB could give rise to significant exposure. Aside from the reputational harm and immediate business consequences, including negative publicity and loss of customers, there is also a significant risk of litigation from victims of a data breach.

Victims whose data has been compromised or misappropriated are likely litigants against companies and their directors. In seeking damages against a company or directors, a victim need not prove specific damages arising from the data breach. The Ontario Court of Appeal has held that intrusion upon seclusion is a tort for which damages may be awarded up to $20,000.1 Given the potential number of customers whose data could be compromised from a cyberattack, this exposure can be significant. Other potential claims include breach of contract, negligence and breach of Charter rights. Further, there are additional damages which may be claimed against the organization that was responsible for storing the personal information, such as costs associated with identity theft, reputational harm, and mental anguish.

Given that cyberattacks generally involve a large number of victims, cybersecurity class actions have become increasingly prevalent and may pose major litigation exposure to CRBs who suffer a data breach. As an example of the scope of a potential class action claim, Yahoo! Inc. is facing a proposed $50-million class action in Canada arising from recently discovered cyberattacks on its network which occurred in 2014 and 2013.2

Regulatory Risks

A data breach against a CRB also gives rise to regulatory scrutiny. Given that some CRBs, such as licensed producers, generally hold both personal and private health information of their clients, and such clients may be located across the country, there are several regulatory requirements to which they may be subject. For instance, CRBs may be covered by (among other things) requirements under the federal Personal Information Protection and Electronic Documents Act,3 Alberta's Personal Information Protection Act,4 and various provincial acts covering health information specifically.5

PIPEDA functions to regulate "commercial organizations" that collect, use, or disclose "personal information".6 PIPEDA was recently amended by the Digital Privacy Act.7 Under the Digital Privacy Act, certain new provisions (which are not yet in force) will require organizations to notify individuals and other organizations of breaches that create a "real risk of significant harm", and report such breaches to the Privacy Commissioner. Under these new provisions, organizations that fail to report a breach to the Privacy Commissioner, or fail to notify individuals as required, could face fines of up to $100,000 per breach. It is not clear whether the new regulations will impose fines of $100,000 per incident, or per individual whose information has been compromised. The mandatory breach notification requirements are expected to be in force shortly.

Currently, Alberta is the only province that has mandatory reporting obligations in the wake of a data breach. Alberta's PIPA requires an organization whose clients' personal information is breached to notify the Privacy Commissioner without unreasonable delay. The threshold to notify the Privacy Commissioner of a breach is where a "reasonable person would consider that there exists a real risk of significant harm to an individual as a result of the loss or unauthorized access or disclosure."8

Costs of Data Breach

From a corporate perspective, the costs associated with lawsuits and liability as a result of a data breach can be material. For example, the average cost of a data breach is approximately $6 million according to a June 2016 Report sponsored by IBM. Target has estimated that its recent data breach will cost approximately US$252 million. Of note, IBM's report found that businesses operating in the healthcare sector "have the most costly data breaches".

Steps to Take

Implementing a Cyber Plan

CRBs must have a plan in place designed to prevent cyberattacks. While it is not possible to entirely prevent a cyberattack, organizations are expected to take all reasonable steps to do so. A cyber plan can help mitigate the potential harm of a data breach, and lessen the risk of liability should the organization be targeted. In addition to exposure for the CRB, failure to have an appropriate strategy in place may give rise to director liability.

Recent decisions in the United States in In Re The Home Depot, Inc., Wyndham v Holmes and Davis v Target Corporation, as well as a Joint Report from the Canadian and Australian Privacy Commissioners on the Ashley Madison data breach are instructive to boards of directors in establishing the standards they must follow to mitigate or avoid personal liability due to a data breach. Given the principles gleaned from prior decisions, boards are advised to:

  • Be actively engaged in cybersecurity issues (including prior to a cyberattack) at a board level, which includes attending regular meetings and seminars on cybersecurity developments;
  • Develop internal cybersecurity policies and reporting obligations, including a documented risk management framework with specific measures to take when faced with a cyberattack;
  • Ensure there are sufficient cybersecurity safeguards in place;
  • Undertake regular assessments of potential cybersecurity threats via internal or external audits and evaluations; and
  • Ensure all staff (including directors and officers) are regularly trained on general privacy and security issues.

Responding to an Attack

Where a CRB has suffered a cyberattack, it is imperative to retain experienced advisors in order to develop an immediate strategy to mitigate damages, advise necessary regulatory authorities, report to affected individuals, and control and contain the data breach. Legal counsel is especially important in this process and should be engaged to oversee the process so that privilege can be asserted over the investigation.

The above update provides a brief overview of some of the issues relating to data protection and cyberattacks in the cannabis industry. It is important to remember that cannabis law is both complex and rapidly evolving. At Bennett Jones LLP, we have a team of industry-leading professional advisors that can provide legal and strategic guidance to all industry participants as the Canadian cannabis industry continues to advance.

For further information on how to manage your cybersecurity risk exposure, the Bennett Jones Cybersecurity team can assist you.

With thanks to Katherine Rusk, Articling Student

Footnotes

  1. Jones v Tsige, 2012 ONCA 32.
  2. Karasik v Yahoo! Inc. and Yahoo! Canada Co., Court File No. CV-16-566248-00CP.
  3. Personal Information Protection and Electronic Documents Act, SC 2000, c 5 (PIPEDA).
  4. Personal Information Protection Act, SA 2003, c P-6.5, s 34.1 (PIPA).
  5. Personal Health Information Protection Act, 2004, SO 2004, c 3 (PHIPA); See also New Brunswick's Personal Health Information Privacy and Access Act, SNB 2009, c P-7.05, s 49(c) and Newfoundland and Labrador's Personal Health Information Act, SNL 2008, c P-7.01, s 15(3).
  6. PIPEDA at s 2(a), under which "personal information" is defined as "information about an identifiable individual".
  7. Digital Privacy Act, SC 2015, c 32.
  8. PIPA at s 34.1.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Ruth Promislow
David Cassin
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.