United States: California Bill Mandates Privacy By Design For IoT Devices

The bill, introduced in the state Senate earlier this month, would require Web-connected device manufacturers to equip devices with reasonable security features and obtain consent to use consumer information.

Manufacturers of Internet-connected devices (better known as the Internet of Things) should be following a new California bill closely because it would create a mandate under California law that all IoT devices have built-in security features appropriate to the device and information collected. California Senate Bill 327, amended in March, is the latest in a trend of legislative and regulatory efforts by state and federal authorities to hold IoT device makers more accountable for consumer data security. The California bill was introduced at nearly the same time the FTC brought an enforcement complaint in federal court in California against a computer networking equipment manufacturer for failing to take reasonable steps to secure its products from hackers.

California's Senate Bill 327 would go much further than the FTC has in "encouraging" manufacturers to adopt industry best practices for device security by codifying the State of California's ability to bring enforcement complaints against those companies that do not build adequate security safeguards into their devices. It could be the first legislative mandate for IoT device manufacturers to proactively implement "security by design" (that is, at an early stage, and built into the product development process, rather than added reactively later as a "patch" or as an optional or voluntary industry best practice). Consequently, the requirements under this bill could have a significant R&D and budgetary impact on IoT device development, making what was once a manufacturer's afterthought a key component at the design and production stages of any IoT device that is produced for sale to consumers in the U.S. market.

If enacted as currently written, the bill would require a manufacturer that sells or offers a connected device "capable of connecting to the Internet, directly or indirectly, or to another connected device" to:

  • equip the device with reasonable security features appropriate to the nature of the device and the information it collects, contains or transmits
  • design the device to indicate to the consumer when it is collecting information
  • obtain consumer consent (presumably through some form of user interface) before the device collects or transmits information
  • provide an explicit privacy notification to the consumer about what data is collected by the device
  • directly notify consumers of security patches and updates intended to make the device more secure on an ongoing basis

The bill would also require retailers to provide a short, plainly-written notice of the device's information collection functions at the point of sale. That notice would need to include statements indicating whether "the device is capable of collecting audio, video, location, biometric, health, or other personal or sensitive consumer information" and where a consumer can find the privacy policy applicable to the device.

A law based on California's Senate Bill 327 could significantly impact the entire IoT industry and not merely the largest players and products such as the Amazon Echo and Google Home, or connected cars and wearables. For one thing, California is perhaps the largest commercial market for emerging technology and IoT products and a leading test bed for them, so any California state law governing the security of IoT products will likely be the starting point for security of IoT products sold throughout the U.S. (i.e., the designed security features for the home router sold in California will likely be the same for an identical make/model home router sold in Ohio whatever the differences that may exist under state law). And pressure on the issue is not just coming from California lawmakers.

As we reported recently, the FTC has demonstrated its concern about the security of end users' use of emerging-market Internet-connected devices, and last month, Google began removing mobile applications that do not meet its User Data Policy mandating adequate privacy and data security policies. In the case of the FTC acting on IoT security, the FTC brought a January 2017 enforcement complaint against a computer networking equipment manufacturer for failing to undertake what the FTC considers reasonable steps needed to secure wireless routers or IP cameras from "widely known and reasonably foreseeable" risks of unauthorized access by failing to proactively address "well-known and easily preventable security flaws." But the FTC has no rulemaking procedures to set minimum security practices when enforcing promises made by manufacturers to consumers in product brochures, advertising and other public statements. Instead, FTC enforcement actions alleging unfair and deceptive practices under Section 5 of the FTC Act rely on guidance published by the Commission in "Careful Connections: Building Security in the Internet of Things," as well as industry standards such as those found in the Open Web Application Security Project and those published by the National Institute of Standards and Technology (NIST).

The future of California Senate Bill 327 remains uncertain. Regulatory scrutiny and legislative action addressing the data security of IoT devices, however, is likely to continue to grow, and it is essential that businesses manufacturing or using these IoT devices be prepared for these developments, including being ahead of the curve in implementing reasonable security protections to avoid disruptions to their product sales.

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
Similar Articles
Relevancy Powered by MondaqAI
Womble Carlyle Sandridge & Rice
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Womble Carlyle Sandridge & Rice
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions