Privacy Law Blog : Privacy Lawyers & Attorneys : Proskauer Rose Law Firm : CAN-SPAM, FCRA, FACTA

When Flash cookies (also known as a “Local Shared Objects”) were first flagged as a privacy issue back in 2005, a few savvy companies added a disclosure about Flash cookies into their web site privacy policies. Since then, we have not heard the issue raised again. Now this sleeper issue seems to have been awakened by a recent report by researchers at the University of California, Berkeley, entitled Flash Cookies and Privacy. 

Flash cookies, which utilize a little-known capability of Adobe’s Flash plug-in, are a method to store information about a user’s preferences. (Estimates suggest that Adobe’s Flash software is installed on some 98 percent of personal computers.) Flash cookies may be used to provide better functionality to the user by, for example, storing the user’s preferences about sound volume or caching a music file for smoother play-back over an unreliable network connection. Flash cookies may also be used as unique identifiers that enable advertisers to track user preferences and circumvent deletion of HTTP cookies. Because Flash cookies are stored in a different location than HTTP cookies on one’s personal computer, simply erasing HTTP cookies, clearing browser history, or deleting the cache does not remove Flash cookies.

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The popularity of crime dramas on primetime television schedules has made certain aspects of genetic testing commonplace and uncontroversial.  However, as science continues to advance at an exponential rate, and as technology and innovation have invaded the realm of individual privacy rights, individuals’ genetic make-up are likely the next frontier.

At least 32 states have genetic privacy laws on the books.  These states have taken steps to protect genetic information beyond the protections given to other types of health information.  This is referred to as “genetic exceptionalism,” which calls for special protections for genetic information due to its predictive, personal and familial nature and other unique characteristics.  Generally speaking, state genetic privacy laws restrict parties (such as insurers or employers) from taking a particular action without consent.  These laws cover a broad range of issues, including:

• Requiring personal access to genetic information;
• Requiring consent for performing tests, obtaining or accessing genetic information, retaining genetic information, and/or disclosing genetic information;
• Defining genetic information or DNA samples as personal property; and
• Providing for specific penalties for genetic privacy violations.

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The Financial Industry Regulatory Authority (FINRA) announced on April 28, 2009 that it had fined Centaurus Financial, Inc., of Anaheim, California, $175,000 for Centaurus’s failure to protect confidential customer information. FINRA also required Centaurus to send notifications to affected customers and their brokers, provide one year of credit monitoring at no cost to the affected customers, and certify to FINRA that its procedures and systems are in compliance with privacy requirements. See FINRA News Release (April 28, 2009).

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A new benchmark study released by the Ponemon Institute indicates that the costs associated with data breaches in the U.S. continue to rise. The Fourth Annual U.S. Cost of Data Breach Study (“Study”) found that the average cost of a data breach has risen to $202 per customer record lost or stolen, up from $138 per customer record lost of stolen in 2005, the first year that the study was conducted. According to the Privacy Rights Clearinghouse, since 2005, more than 250 million customer records containing confidential personal information have been lost or stolen.

The Study surveyed 43 U.S. companies that experienced a breach involving the loss or theft of customer or consumer data over the past year. The surveyed companies experienced breach events involving loss or theft of 4,200 to 113,000 records. The cost of individual breach incidents ranged from a minimum of $613,000 to a maximum of $32 million, and averaged $6.65 million per company. The Study concluded that the cost of a breach is proportional to the size of a breach in terms of the number of customer/consumer records lost or stolen. 

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A Nevada law requiring encryption of customer personal information goes into effect on October 1, 2008. See Nev. Rev. Stat. § 597.970 (2007). While the legislation is short in length, it is potentially wide-ranging in scope. In particular, the legislation requires any "business in this State" to encrypt an electronic transmission (other than via facsimile) of "any personal information of a customer" to "a person outside of the secure system of the business unless the business uses encryption to ensure the security of the electronic transmission." Id.

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