On May 12, 2011, the Obama Administration released its legislative proposal concerning cybersecurity. The proposal comes almost two years after the President identified cyber threats and protecting our digital infrastructure as “one of the most serious economic and national security challenges we face as a nation” in his Cyberspace Policy Review. The Administration’s legislative proposal includes a number of proposals to update existing federal cybersecurity laws and regulations in order to protect the Nation against cyber threats. The stated focus of the proposal is to shore up cybersecurity measures to protect the American people, the Nation’s critical infrastructure, and the Federal Government’s networks and computers while providing a framework for safeguarding individual privacy and civil liberties.

The Administration’s proposal sets forth two principal “consumer-facing” updates to the current cybersecurity landscape: (1) a federal information security breach notification requirement and (2) enhanced penalties for cyber criminals.

  • Data Breach Notification. The proposal calls for the implementation of a federal notification standard to displace the approximately forty-seven such laws at the state level, which generally require notification to individuals (and others) when the security of their personal information is compromised. The data breach notification proposal borrows extensively from the various state-level laws, for example, with respect to the acceptable forms of notice to individuals and the content of such notices, but sets a higher bar for breach notification than many states by introducing a risk of harm threshold for notification. Specifically, the proposal recommends a safe harbor from notification in the event the breached entity’s risk assessment demonstrates that there is no reasonable risk of harm to the affected individuals. The breached entity is required to report the results of any such risk assessment to the Federal Trade Commission (“FTC”) within 45 days. In addition to reporting to individuals, the proposal requires that breached entities report a breach to the Department of Homeland Security (“DHS”), which will in turn report the same to the U.S. Secret Service, the Federal Bureau of Investigation, and the FTC. Perhaps not surprisingly, the proposal identifies the FTC as the primary agency in charge of enforcing compliance with the law’s requirements. The proposal expressly states that the federal breach notification law would supersede any state or local law except to the extent such laws require notifications to include information about victim assistance available from the state.
  • Punishments for Cyber Crimes. The proposal also seeks to expand the scope of existing criminal laws pertaining to computer-based offenses and provide more severe penalties for violations of such laws. For example, the proposal creates a mandatory minimum penalty for cyber attacks under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, which currently gives courts considerable latitude to impose substantial penalties (or no penalty at all) for certain attacks on the confidentiality, integrity, or availability of computers. In the Administration’s view, the mandatory minimum penalty eliminates some of that discretion for the sake of deterring attacks that may not actually cause substantial disruption (e.g., because they are thwarted before they are completed), but still pose a serious threat to critical computer systems or networks. For much the same reason, the proposal also makes clear that both conspiracy and attempt to commit a computer hacking offense are subject to the same penalties as completed offenses.

For purposes of protecting the Nation’s critical infrastructure, the proposal identifies three key areas where legislation is needed: (1) laws that facilitate Federal Government assistance to the private-sector as well as state and local governments, (2) laws that pave the way for stakeholders in the private and public sectors to share information about cyber threats, incidents, and preventative measures, and (3) the identification of so-called “critical-infrastructure operators” so that resources (and regulations) can be appropriately directed toward such operators.

  • Voluntary Government Assistance. While the Federal Government is often asked to be involved in responses to cyber attacks on others’ computers and networks, there is currently no clear statutory framework for providing such assistance to the private-sector or state and local governments. The Administration’s proposal would change this by authorizing the Secretary of DHS (and his or her designees) to intervene in the event of a cyber attack and offer assistance prior to an identified cyber attack. The proposal specifies the types of assistance that may, or shall, be provided by the Federal Government, including, among other things, the potential establishment of a consolidated intrusion prevention system to protect federal systems from cyber threats, risk assessment tools and testing, and on-site technical support to federal system owners and operators.
  • Information Sharing. Protecting America’s digital infrastructure is a shared responsibility among the public and private sectors. The Administration’s proposal acknowledges this, and makes clear that cooperation and information sharing among the various stakeholders, including Federal Government agencies, industry, academia, and our international partners, is an important (and permissible) component of the country’s cybersecurity program. To that end, the proposal encourages sharing by and among stakeholders through, for example, establishing certain immunities for those who agree to provide information to the government. Information obtained for purposes of defending against cyber threats must, however, generally be used and retained for this limited purpose in order to protect individuals’ privacy and civil liberties. In this regard, the Secretary of DHS is required to, among other things, develop and periodically review, with input from the Attorney General and privacy and civil liberties experts, standards relating to the acquisition, interception, retention, use and disclosure of the information obtained in furtherance of this objective.
  • Critical Infrastructure Defense. The proposal outlines a system for identifying and protecting the nation’s “critical infrastructure.” The proposal, in many respects, calls upon the operators of identified critical infrastructure to satisfy heightened cybersecurity standards, and authorizes DHS and other federal regulators to review these operators’ cybersecurity plans, monitor compliance with such plans, and take other actions to ensure that critical infrastructure operators are sufficiently addressing identified cybersecurity risks. The proposal also authorizes DHS, through rulemaking, to require annual certifications (in SEC filings or otherwise) of compliance by covered critical infrastructure operators and public disclosure of certain information about the operators’ cybersecurity efforts. The proposal does, however, provide exemptions from public disclosure for certain security and vulnerability information developed or collected in furtherance of the agencies’ covered critical infrastructure reviews.

The Administration’s proposal acknowledges that the Federal Government itself is heavily reliant on computers and computer networks (its own and those of its many civilian contractors) – computers and networks that are continually at risk of cyber attack. For this reason, the proposal highlights three areas for improving the security of Federal Government systems: (1) formalizing DHS’s role as manager of cybersecurity for the Federal Government’s computers and networks, (2) recruitment and retention of cybersecurity professionals to help shrink the government’s learning curve in this critical area, and (3) adopting standards to promote the use of cloud computing vendors where appropriate to meet the government’s needs.

  • Cybersecurity Management. The proposal formally establishes DHS as the agency responsible for executive branch information security. Such responsibility includes the authority to implement binding policies and directives relating to information security, review compliance with such policies and directives, and designate an entity to receive reports about cyber threats, incidents, and vulnerabilities.
  • Recruitment and Retention of Cybersecurity Professionals. The proposal gives DHS the authority to establish cybersecurity-related positions and set up a scholarship program to ensure that these positions are filled with top-flight talent that is well-schooled in the field of cybersecurity.
  • Data Center Locations. Except where expressly authorized by federal law, the proposal bars U.S. states from requiring that private-sector data centers be located in that state as a condition of doing business.

Like the recent spate of privacy and information security related enforcement actions by the FTC and others, the release of the Administration’s legislative proposal underscores the need to be proactive about privacy and information security. There is no question that this is a hot topic for the Administration and the Congress.