Privacy Advisor

Legal evolution: Firms focus on privacy challenges

December 1, 2012

Schwartz_MathewBy Mathew J. Schwartz

Many law firms have recently been creating or adding to their privacy and data security practices. The impetus is simple: Businesses are facing an increasing number of privacy challenges, and the fallout from a single misstep can be severe.

Accordingly, the privacy agenda at law firms is to help chief privacy officers not just put the right policies and procedures in place but avoid related operational missteps.

Before leaving the Department of Homeland Security (DHS), where she served as chief privacy officer, attorney Mary Ellen Callahan, CIPP/US, said she spoke to numerous firms—with and without existing privacy practices and ranging in size from boutiques to large, international law firms—and heard this constant refrain: Privacy is now a clear and present business concern.

“The vision was consistent among them that this is a support that clients are going to need—even if they don't realize it yet—and this has got to be part of a 21st-century law firm…Information is the new intellectual property—whether it be your customer's information, your proprietary information or statements that people are making about your product online, and knowing about that and being able to react to that," said Callahan, who chairs the new privacy and data protection group at Jenner & Block.

She emphasized that privacy practices must be intrinsically linked with data security.

"You can't think about information sharing without thinking about what you're protecting," she said.

Privacy pro mobility delivers benefits

Without a doubt, the privacy challenges facing businesses are increasing. But with more firms creating privacy practices, will that rob government agencies of their privacy expertise? Interestingly, Callahan—who recently departed DHS—argues otherwise, saying leading privacy experts continue to move in multiple directions, which is beneficial for all concerned.

“There definitely are some people coming out of the government, but what's really interesting to me is the trend of people coming out of companies and going to law firms, and the converse, which is people going from law firms to companies,” she said.

As an example, she highlights Harriet Pearson, CIPP/US, who in June joined the privacy and information management practice at Hogan Lovells after having been the security counsel, vice president and chief privacy officer at IBM, and Erin Egan, who previously co-chaired Covington & Burling's global privacy and data security practice group, and in August became Facebook's new chief privacy officer. Another example is J. Beckwith ("Becky") Burr, CIPP/US, an FTC and National Telecommunications & Information Administration veteran, who in 2000 left to join DC law firm Wilmer Cutler Pickering Hale and Dorr. She recently became the chief privacy officer of information aggregator and analytics firm Neustar.

Callahan said gaining more varied experience helps privacy professionals see all sides of the privacy equation.

“One of the skills that translates for me is, I really have a lot more empathy for the chief privacy officer in companies,” she said. “I used to think, being outside counsel is really tough, and that's true, but at the end of the day, I never had to make the decision; the client always did.”

Once she took charge of privacy at DHS, however, she found that acting on legal privacy advice—gathering allies, working within policies and procedures, putting the right systems in place—involved even more levels of complexity.

Privacy risks evolving rapidly

Privacy, of course, isn't a new legal discipline. Regulations such as HIPAA and GLBA have been holding healthcare and financial institutions accountable for their data security and privacy protections, and firms such as Covington & Burling, Hogan Lovells and Venable have long had privacy practices. But in recent years, with the explosion both in data generated and stored by businesses, as well as the ubiquity of employee-owned devices in the workplace, the privacy picture has grown much more complex and difficult to navigate.

Further challenges are on the way. With President Barack Obama's reelection, privacy watchers expect the White House to again press for public-private cybersecurity information-sharing legislation or a related executive order. Also expected are increased Federal Trade Commission enforcement of privacy regulations as well as growing consumer wariness about how personal data gets bought and sold and online activities get tracked.

Another issue is "bring your own device" (BYOD) and the accompanying legal questions over the extent to which businesses can manage, monitor or control employee-owned devices.

“BYOD is a reflection of a larger movement...of the ubiquity of the devices and the ubiquity of data," Reed Smith attorney Tim Nagle recently told The Washington Post.

Thanks to BYOD, corporate data now resides on employees' devices—which may get lost, stolen or accompany them to new jobs—and businesses must watch where that information goes.

Tales of high-profile businesses that handle privacy poorly, and face class-action lawsuits as a result, are often prefigured by corporate data security missteps. For example, Sony last year saw its corporate websites get breached more than a dozen times, in part by the hacktivist group LulzSec, which in one instance claimed to have stolen passwords for one million Sony website users. Sony had not only failed to encrypt the passwords but laid off many information security personnel just months prior.

Sharing a clear vision with consumers of what data is being collected, and why, is fast becoming mandatory. Last year, software developer Carrier IQ failed to respond in a rapid and forthright manner to an independent researcher who demonstrated how the company's cell phone monitoring software, installed by telecommunications carriers on their handsets to help maintain call quality, could be used to spy on subscribers. Carrier IQ faced mounting consumer outrage, customer defections, class-action lawsuits and Congressional inquiries, all of which could arguably have been avoided.

Regulators increase enforcement actions

The price for mishandling customer data has also been increasing, thanks to increased FTC enforcement as well as states' data breach notification laws and class-action lawsuits.

Breach litigation involves “not just…what happens when a breach occurs but how companies are using technology to collect data," said Christopher G. Cwalina, CIPP/US, partner at Holland & Knight and co-chair of its data privacy and security group. "Plaintiffs' lawyers are just starting to get active with class actions when it comes to the use of cookies or data collection practices."

Steven B. Roosa, a partner at Holland & Knight and co-chair of its data privacy and security group, said that many businesses' legal departments don't know how or if their websites or mobile apps are tracking consumers or what their related data security or privacy posture may be.

“The client at first will say, we're completely buttoned up on privacy as well as security; we do all this complex pen-testing, yada yada yada,” he said, adding, “in some cases, we'll find instances where the most basic security or privacy precautions are not being adhered to.”

Going forward, law firms want make that privacy picture seem less complex for businesses while mitigating the accompanying risks, which include not just increased regulatory enforcement and navigating BYOD but also tracking changing consumer perceptions.

“There have been the articles in The Wall Street Journal; the IAPP has quadrupled its membership—certainly the sensitivity to this is increasing,” said Holland & Knight's Cwalina. “But I don't think there's been the watershed defining event yet for privacy online, or mobile privacy, which really awakens the public consciousness on this.”

Mathew Schwartz reports on information security and privacy issues for InformationWeek, The Privacy Advisor and Inside 1 to 1: Privacy.

Read more by Mathew Schwartz:

Elections could impact U.S. and European privacy rights
Consumer privacy education: Who’s in charge?
Privacy worries surround UN Internet regulations
Online piracy eradication efforts spark privacy concerns