Inside 1to1:Privacy

Cookie conundrums: A recipe for litigation?

December 9, 2010

By Jennifer L. Saunders

Flash cookies, not so long ago, were virtually unheard of in discussions of behavioral targeting and online tracking. Time has passed, and in this past year alone, multiple companies--many involving online marketers and some of their well-known clients--are facing litigation related to their use of Flash Player local storage, which is often referred to as "Flash Cookies" in the public and sometimes confused with Web browser cookies.

Flash Player local storage can be used as a means to undermine users' preferences by replacing a deleted cookie with a new cookie holding the same or similar values. The lawsuits are largely based on a study released by the University of California at Berkeley in 2009.

While users have been able to create privacy settings that govern how traditional Web cookies are either saved or deleted on their computers, Flash Player local storage has come to the attention of regulators and privacy advocates because of the potential to continue to track users online--whether or not they have purged browser cookies from their computers.

"When we use the term 'Flash cookies,' we're talking about rogue, unauthorized uses of Adobe Flash technology," explains David Stampley, CIPP, partner at KamberLaw LLC, one of the firms representing plaintiffs that has brought actions related to the use of the technology for online tracking.

Stampley notes, "The few choices users can make about cookies gives them at least some ability to implement privacy and security controls. Even for users who rely on browser defaults today, those users may want to exercise their choices tomorrow. In short, circumventing users' controls with Flash cookies negates privacy and security choices users have made and preempts their ability to make choices in the future."

Like Stampley, Jules Polonetsky, CIPP, of the Future of Privacy Forum, also describes the issue as going beyond the technology itself.

"Folks should realize that Flash cookies are only one method of saving data on a user's computer," Polonetksy says. "DOM storage can be misused in a similar manner and, with the advent of HTML 5, even more data can be stored on a computer and retrieved by third parties."

Back in January, MediaPost highlighted a study by media audit company BPA Worldwide that suggested the use of Flash Player local storage--or local shared objects--could have significant implications for online companies and advertisers.

"With the attention given to consumer privacy on the Internet at both individual and governmental levels, we believe that companies making inappropriate or irresponsible use of the Flash technology are very likely asking for trouble," the study's author, Eric Peterson, is quoted as stating in the report.

Charles Curran of the Network Advertising Initiative notes that, also in January, the NAI adopted a policy for its members limiting the use of Flash cookies and other locally shared objects.

That same month, the Federal Trade Commission (FTC) discussed the privacy issues around the use of Flash Player local storage during its roundtable series.

The FTC's David Vladeck said during one of the roundtable events in January that the commission was "examining practices that undermine the tools that consumers can use to opt out of behavioral advertising," with an eye toward announcing potential additional action this year.

In October, Manatt Phelps & Phillips LLP highlighted recent cases brought against companies using such technology to track consumers online.

"Although similar suits were dismissed in 2001 and 2003, the new suits argue that both technology and the law have changed and that the holdings should not be applied to new, more sophisticated tracking technology," the report states, noting that online tracking has not only become the focus of such class-action litigation but also for legislators.

Recent draft legislation presented in the U.S. House of Representatives, for example, seeks to limit such online tracking practices.

Adobe, one of the vendors whose local storage technology has received attention in this debate, has publicly stated that the company "proactively encourages customers, including developers and content producers, to use all Adobe products in responsible, ethical ways."

MeMe Jacobs Rasmussen, CIPP, chief privacy officer at Adobe, notes that Adobe does "not support the use of our products in ways that intentionally ignore the user's expressed intentions."

"While the nature of providing tools for an open platform means that we cannot, in practice and on principle, control how developers and content producers use our products, the vast majority of Web sites, developers and content producers use local storage capabilities to provide a better user experience," Jacobs Rasmussen says.

Due to concerns about the reported misuses of Flash Player local storage, the company recently commissioned a study to follow up on the findings reported in the University of California-Berkeley study, Adobe officials told Inside 1to1: Privacy, noting that the new study is being performed by a university and a nonprofit privacy organization and is designed to determine how prevalent the use of Flash Player local storage to respawn browser cookies is in light of the publicity on this topic over the past year.

Preliminary results from the study, which is expected to be released before the end of the year, "are promising and show that respawning is negligible on the Web today," Jacobs Rasmussen says.

When it comes to the risks that companies using local storage capabilities for tracking purposes may face, Stampley says it is essential that privacy compliance professionals know how the technology is being used.

"Reports indicate that much of the Flash cookie activity originates from entities that provide online advertising and Web analytics services," he explains. "If you put yourself in the position of a privacy compliance professional in a company that utilizes, and maybe even relies on online advertising and analytics, here are some of the questions you might be asking yourself about Flash cookies: 

  • Is the use of the technology consistent with our company's privacy policy? If reconciling the technology uses with our privacy policy means providing greater transparency and choice, do we know what notices and choices to provide, and is it feasible to do so? Are consumers better or worse off than before; i.e., can these notices and choices restore the degree of control our users had before the deployment of this technology?
  • Have the companies deploying these technologies vetted potential new avenues of security vulnerabilities affecting consumers? Do we know what information about visitors to our site is being collected and transferred onward and to whom?
  • How is the stability of our marketing or advertising revenue affected if the companies delivering advertisements for me, or on my site, are relying on their ability to repurpose another vendor's technology? Can they continue to use the technology that way? If not, what changes will our company have to make on its Web site and in its business reporting?
  • What internal controls can we implement to vet the technologies third parties are deploying on our site in the current, dynamic advertising environment? What influence do we have with providers of underlying technology and in industry groups that promote standards?"

Privacy advocates have also been recommending that when it comes to the use of local storage technologies for tracking purposes, companies make sure to alert via their privacy policies and provide simple tools to opt out.

Chris Hoofnagle, who co-authored the University of California-Berkeley study on the issue, is among those who have spoken in favor of addressing local storage issues, stating in a recent report that the class-action suits are a step in the right direction.

"Consumer privacy actions have largely failed," Hoofnagle told The New York Times, noting that lawsuits "actually are moving the policy ball forward in the ways that activists are not."

Going forward, Polonetsky says, "The concern shouldn't be the technology, which has valid uses, but rather whether a consumer is being treated in a deceptive manner."