United States: The Internet Of Toys: Legal And Privacy Issues With Connected Toys

Most people have heard of the Internet of Things, or IoT. With the holidays fast approaching, and with the onslaught of new smart and Internet-connected smart toys, for parents and toy manufacturers, at least for the next few weeks "IoT" means the Internet of Toys.

Smart toys first sparked interest in 2015 when Hello Barbie a connected-smart doll was introduced. Hello Barbie came equipped with a microphone, voice recognition software and artificial intelligence that allowed a call-and-response function between the child user and the doll (think how Siri works). The backlash and hacking concerns loomed so large Hello Barbie got its own Twitter hashtag, #HellNoBarbie.

Since 2015 the technology and legal implications regarding these types of toys has only grown as the market now includes smart toys, such as Talk-to-Me Mikey, SmartToy Monkey, and Kidizoon Smartwatch DX; connected toys, such as SelfieMic and Grush; and other connected smart toys such as Cognitoys' DINO, and My Friend Cayla. There is also a new crop of GPS-enabled wearables marketed as allowing parents to monitor and track their child's movements, including Kidizoom Smartwatch DX, a smart toy. For those keeping track, that's three separate types of toys: (1) smart toys; (2) connected toys; and (3) connected smart toys.

There are many reasons why these toys/wearables are problematic and the privacy issues for each are analyzed differently based on functionality. Some that function like the Amazon Echo, and unlike Smartphones, are always on, and blend into the background of their users' daily lives. They also collect a significant amount of personal information, some of it legally-protected, especially in the context of information about children and/or from children. Many are so sophisticated they are able to adapt to a child user's actions and process information from many sensors through the use of microphones, voice sensors, cameras, compasses, gyroscopes, radio transmitters, or Bluetooth. Connected toys connect to the Internet, which allows remote servers to collect data to power the toy's intelligence functionality.

The other ever-developing aspect of this technology is that the technology has expanded outside the home to schools, to assist with educational functions, and to health care settings, to help stabilize child/patients emotions or to manage anxiety.

With all that background, the next issue is, where is the law? There are a number of issues to consider when discussing smart toys marketed to and used by children: the Children's Online Privacy Protection Act (COPPA) and Federal Trade Commission (FTC) enforcement, the Family Educational Rights and Privacy Act (FERPA), the Health Information Portability and Accountability Act (HIPAA), state consent laws, constant connection, and, of course, privacy. Here is how it breaks down.

COPPA / FTC Enforcement

Of the three types of toys, connected toys are the most problematic as they present the greatest social and legal concerns. For starters, they can connect to Internet-based platforms and to other devices enabling data gathering, processing and sharing. They also can connect to each other and to the Internet through various means, WiFi routers, cellular data networks, and Bluetooth. There are four types of connected toys: Toys to Life, Robotics (e.g., WowWee's CHiP robotic dog and Sphero Star Wars BB-I companion robot), Wearables, and Learning Development Toys. Given the dangers, connected toys are the ones that trigger a number of U.S. privacy laws, including COPPA, which is the primary privacy law governing these toys.

Section 5 of the Federal Trade Commission Act directs the FTC to protect consumers from "unfair or deceptive acts or practices in or affecting commerce." This puts COPPA in the FTC's enforcement crosshairs.

COPPA applies to online services providers, i.e., websites, directed to children, or any operator that has actual knowledge that it is collecting or maintaining personal information from a child.

The definition of "personal information" under COPPA is quite broad and includes: names; addresses; online contact information; screen or user names; telephone numbers; Social Security numbers; persistent identifiers that can be used to recognize a user over time across different websites or online services; geo-location; and photographs, video, or audio containing the child's image or voice.

COPPA is designed to protect children under the age of 13 from certain online activity. The high level view of COPPA has five main components:

  1. Notice of Data Practices. This requires operators give direct notice to parents of its data collection practices. Certain statements are also required, including how consent is to be given, and that no personal information of a child will be collected, used or disclosed without parental consent. The operator also has to reveal the personal information that will be collected and link their privacy policy.
  2. Parental Consent (Verified). Verifiable parental consent must be given before an operator can collect personal information from a child. The consent has to take into account available technology and can include: (a) asking parents to sign and mail a hard-copy consent form; (b) allowing parents to use an online payment system to provide notification of each transaction to the primary account holder; (c) having parents provide consent via phone or video; or (d) checking government-issued identification.
  3. No Conditional Participation. Operators cannot condition a child being allowed to play a game or being allowed to win a prize on the child disclosing more personal information than "reasonably necessary" to participate in the game, prize, etc.
  4. Required Reasonable Security. Operators are also required to have and maintain reasonable security procedures to "protect the confidentiality, security, and integrity of the personal information collected from children." If any of the information is transferred to a third party, the operator must ensure the third party has taken similar steps to protect the protected data. See COPPA Rule in 2013.
  5. Data Collection. Operators can only keep personal information collected online from a child as long as reasonably necessary to fulfil the purpose for which it was collected for. When the personal information is no longer needed, the data must be deleted through reasonable measures.

Due to COPPA's requirements, any smart or connected toy that collects personal information from a child could trigger COPPA's requirements. COPPA fines range from $16,000 to $40,000 per violation though the FTC has not taken any action against a connected toy operator. . .yet.

The issues as to how toy manufacturers technically comply with COPPA given the functionality of the toys are complicated. For example, some smart toys will not need parental permission if there is no collection of personal information. Non-personal data that would not trigger COPPA would include achievement levels in games, a user's keypress responses, etc. Parental consent would also not be required for connected toys that collect and use a persistent identifier, which would include information such as an IP address or toy/device ID. The exception would apply if the persistent identifier is used to support the internal operation of the service being provided, such as in maintaining/analyzing the service, personalizing content, and performing network communications. Toys that align with these functions with a persistent identifier can be provided to the child user "out of the box," meaning without any registration process that might include parental consent and disclosures.

Other connected toys also work out of the box, but allow for additional features that would require consent and proper disclosures as they would be asking for non-personal and personal information that would trigger COPPA, and only allow for the additional functionality once COPPA requirements are met.

On October 23, 2017, the FTC attempted to address some of the issues with connected toys and released its Enforcement Policy Statement Regarding the Applicability of the COPPA Rule to the Collection and Use of Voice Recordings. The release, however, was limited and only addressed the collection of and use of voice recordings and provided:

The FTC will not take an enforcement action against an operator for not obtaining parental consent before collecting the audio file with a child's voice when it is collected solely as a replacement of written words, such as to perform a search or to fulfill a verbal instruction or request – as long as it is held for a brief time and only for that purpose.

The FTC noted the policy would not apply in cases where an operator requested information via voice that would otherwise be considered personal information, such as a name. In addition, an operator is still required to provide clear notice of its deletion and privacy policies, and of its collection and use of audio files. An operator is also prohibited from making any other use of an audio file before it is destroyed. Lastly, the policy does not affect the operator's COPPA compliance requirements in any other way. As such, the FTC's new guidance is extremely limited, but it does provide manufacturers and operators some relief regarding enforcement.

State Consent Laws

The issues with IoT toys transcend COPPA. One issue with toys that record audio and those that have interaction functionality, meaning the child asks the toy a question and it responds with an answer (think Siri or GoogleNow).

One issue with recording is that there are state law issues (which our HR blog addressed here). In the United States there are two different types of laws governing recording. One-party consent states, which only require consent of one of the parties to the conversation being recorded, and all-party consent states, which require the consent of everybody involved in a conversation before the conversation can be recorded. One-party consent states make up the majority. There are only eleven all-party consent states: California, Florida, Illinois, Maryland, Michigan, Montana, Nevada, New Hampshire, Pennsylvania, and Washington.

The consent requirements in all-party consent states are triggered when the owner of the toy submits a voice recording and, to the extent, the child plays with another child and that child's voice is recorded, consent would be required from that child as well. The issue then becomes, how do manufacturers or operators obtain the required consent in these states?

Privacy

The overarching issue to all of this is child privacy. There have been a number of cases where connected toy manufacturers failed to ensure the security of the information they collected. Take for instance the 2015 matter where VTech Electronics North America, LLC (VTech), a company that sold connected tablets marketing for children, suffered a breach that exposed the personal protected data of over 6 million children and 4 million adults, including their names, genders, dates of birth, and, worse, photographs.

Child information is particularly susceptible because they are largely a blank canvas that can be fraudulently used for a long period of time without detection as most parents do not actively monitor their children's information.

In September 2017 the FBI got involved and warned parents their children's new internet-connected toy could be secretly spying on them. Specifically, the FBI warned:

These toys typically contain sensors, microphones, cameras, data storage components, and other multimedia capabilities – including speech recognition and GPS options.

The FBI's release went on:

The potential misuse of sensitive data such as GPS location information, visual identifiers from pictures or videos, and known interests to garner trust from a child could present exploitation risks". The FBI further encouraged consumers to consider "cyber security" prior to introducing smart, interactive, internet-connected toys into their homes ...

The GPS functionality in some toys is especially disconcerting because, if breached, it could allow a hacker to know the exact location of a child or to access privately-recorded conversations. This was an issue in February 2017 when Germany banned My Friend Cayla, a smart doll. Germany's telecomm regulator found that the toy could be hacked to record private conversations that were transmitted via the toy's Bluetooth connection.

The Electronic Privacy Information Center, which is known as a U.S. privacy watchdog, also got involved with My Friend Cayla toy and sent a complaint to the FTC regarding the toy's security risks. While the doll has not been banned in the United States, the findings of a congressional inquiry were that the toy indeed recorded private conversations of children 12 and under without parental consent and in violation of COPPA.

Another issue surfaced with CloudPets, a connected stuffed animal that was marketed as allowing parents and their children to exchange cute messages through the toy. While cute in theory, in reality the manufacturer was storing the personal account information and voice recordings online, and in an easily-hackable database. The result was that approximately two million personal recordings from the CloudPets were leaked.

Constant Connection

The constant connection issue also poses privacy threats and new vulnerabilities, which are similar to those concerning related devices such as Amazon's Echo and Google Home; however, these issues are heightened because the user is usually a child.

Amazon Echo and Google Home, and other devices that had Alexa and Google Assistant, however, took steps to protect users, and it would seem that toy manufacturers could take similar steps. In those devices, while the microphone to the device is always on, the devices do not start recording until specific words, referred to as "Wake Words" are said, such as "Alexa" or "OK Google". Once recorded, the recordings are stored in the cloud. Users can review their requests through app/device settings and delete them through the "Setting > History" function (in Amazon) or mass purge via "Your Devices > Echo Dot > Manage voice records." In Google Assistant, it is a function through myactivity.google.com. For more information, check out this Wired article.

Expanding the notion of constant connection and the imagination just ever so slightly forward, it is easy to foresee a situation where a child's toy is subpoenaed or seized pursuant to a search warrant because it possibly recorded relevant evidence.

Takeaways:

As usual, the law is behind the technology. While some old laws may apply to some of these issues, most instances are a new frontier. This means that manufacturers have to think proactively and protect consumers from potential issues related to their technology-based products. It also means that parents buying these toys for their children should be aware that these issues are not fully taken care of and they should remain hypervigilant in reviewing the toys they buy and actively monitoring their children's activities and communications with the toys. This may mean playing with the toy in advance and learning its settings and security features to ensure safe use.

Toys warranting additional scrutiny include, toys that connect directly to the Internet via WiFi; toys that connect via Bluetooth to a device that is connected to the Internet; toys that contain speakers, microphones, recording devices, cameras, wireless transmitters and receivers; toys that have GPS capability or speech recognition capability; toys that connect to a mobile app; toys that request information, such as a name, address, date of birth of other personal information when registering; toys that store information internally; toys that have cloud connection functions; toys that remain connected to the cloud even when they are turned "off".

Here are other tips:

  1. Look for the seal! The FTC has a certification program that allows manufacturers to get a seal to put on their packaging or website if their toy has been reviewed and found in compliance with children privacy requirements, including KidSAFE.
  2. Research. Before buying a connected toy, conduct online research to determine if there have been negative reports concerning privacy or other issues with the toy.
  3. Read the fine print. Manufacturers have to issue certain disclosures regarding the collection, retention, and use of collected information. It is important to read these disclosures, even though they can be quite boring, because they will (or should) tell you what information is collected, where it is stored, whether it is provided to third-parties, and what they can or will do with the collective information.
  4. Use securely. Just as you would with an online purchase, only use toys when you can verify that the connection is through a secure WiFi connection. While this may mean that your child cannot use the toy in a restaurant that has an open WiFi, the easy alternative is to provide the child a secure hotspot through your own smartphone and lock down the transfer of data.
  5. Require PINs. If the toy is Bluetooth-connected, ensure it requires the use of PINs or passwords before pairing with connected devices.
  6. Encryption is always a good idea. If the toy transmits data to a WiFi access point, a server or the cloud, make sure the transfer is encrypted, meaning the information would be unreadable without the encryption key.
  7. Patch. If the toy can receive software updates or patches, ensure that toy is kept up to date with such updates or patches. However, prior to installing a patch or update, research to ensure there are no issues with the actual update or patch.

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
 
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
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 you may opt out by clicking here

    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.

    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.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    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.

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