This document discusses how privacy regulation may impact businesses in 2012. It provides a brief history of US privacy law and discusses the rise of privacy legislation at both the federal and state levels. With legislative inaction at the federal level, the FTC has taken a more aggressive stance in privacy enforcement. The document analyzes several proposed privacy bills and regulations that may be enacted in 2012, including bills addressing data breach notification, do not track, geolocation privacy, and revisions to COPPA. Businesses are advised to prepare for increased privacy regulation by taking a "privacy by design" approach.

1. How Will Privacy Regulation Impact
Your Business In 2012?
Daniel T. Rockey, Esq., CIPP
Holme, Roberts & Owen LLP
San Francisco

2. Legal Disclaimer
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3. How Will Privacy Regulation Impact
Your Business In 2012?
I. Brief History of US Privacy Law
II. A Flurry of Proposed US Privacy
Legislation
III. Legislative Vacuum = More Aggressive
FTC
IV. New COPPA Rules: What To Expect
V. Privacy Litigation On The Rise
VI. How To Prepare: Privacy By Design

4. The Right to Privacy: US
• No Right of Privacy in US Constitution
• Nevertheless, a right has been implied from the 4th
Amendment and general protections for life, liberty, etc.
(Penumbral Theory)
• “The Right to Privacy,” Harvard Law Review, Brandeis
(1890)
– “The common law secures to each individual the right of
determining, ordinarily, to what extent his thoughts, sentiments,
and emotions shall be communicated to others.”
• Olmstead v. United States, 277 U.S. 438, 478-9 (1928)
(Brandeis, dissenting)
– Defined the right of privacy as the “right to be left alone.”

5. The Right to Privacy: US
• Historically, right to privacy = right to be free from
intrusion in one’s home
– Rowan v. United States Post Office Dep’t, 397 U.S. 728
(1970) (upholding Do Not Mail because ‘‘[t]o hold less
would tend to license a form of trespass and would make
hardly more sense than to say that a radio or television
viewer may not twist the dial to cut off an offensive...
communication... entering his home.’’)
– Mainstream Mktg. Servs. v. FTC, 358 F. 3d 1228, 1238
(10th Cir. 2004) (upholding Do Not Call: “the State’s
interest in protecting the well-being, tranquility, and
privacy of the home is certainly of the highest order in a
free and civilized society.”

6. Congress Begins to Recognize Right of
Privacy in Information
• Fair Credit Reporting Act of 1970 (granted limited right to
access, dispute and correct credit information; limits on
sharing of credit info)
• Electronic Communications Privacy Act of 1986 (restricts
intercepts of electronic communications, stored data)
• Video Privacy Protection Act of 1988 (prohibits video
service providers from disclosing rental or purchase info)
• Drivers Privacy Protection Act of 1994 (prohibits DMV
from sharing motor vehicle data with marketers w/o consent)

7. Targeted Approach: Health and Financial
Data
• HIPAA (1996) (requires express consent to share
health data other than for treatment, payment or
healthcare operations) (ARRA & HiTech)
• Gramm-Leach-Bliley (1999) (applies to financial
institutions; requires notice to share w/ affiliates; for
3rd parties, must allow opt-out)
• Fair and Accurate Credit Transactions Act of
2003 (added Affiliate Marketing Rule to FCRA-
requires notice and opt-out to share “eligibility
information,” including “personal characteristics or
mode of living”)

8. Regulation of Online Data Collection
• Children’s Online Privacy Protection Act
of 1998 (COPPA)
– Marks new era of privacy regulation
– For the first time, limits collection of online
data for marketing purposes
– Relatively non-controversial, but creates a
slippery slope

9. Following COPPA, Period of Legislative
Inactivity, Emphasis On Self-Regulation
• Tremendous technological growth, legislative
inactivity = marketing bad apples
• Direct marketing industry creates strong self-
regulatory model to stave off regulation
• DMA Guidelines for Ethical Business Practice
• IAB: Interactive Advertising Privacy Principles
• NAI: Self-Regulatory Code of Conduct and
Enforcement Procedure
• Third Party Certification Programs E.g.,

10. EU Adopts Comprehensive Privacy
Scheme
• EU jumps in head first
– EU Data Protection Directive (95/46/EC)
– EU Privacy Directive (2002/58/EC)
• Express recognition of right of privacy in personal data
• Comprehensive, rather than piecemeal approach
• But extremely burdensome restrictions on business,
marketing industry
– EU “Cookie Rules” (2009/136/EC)
• Prior consent for cookies

11. 2008 – 2010: Begins bi-partisan push
toward privacy legislation
• High profile privacy snafus (e.g. Facebook,
Rapleaf) lead to calls for Congressional action
• Handful of bills introduced, but garner little
traction (Boucher/Stearns)
• Self-regulatory efforts instrumental in keeping
legislation at bay
• But momentum builds in 2010

12. Meanwhile, Legislative Inactivity Leads to
Aggressive Enforcement by FTC
• High profile FTC enforcement
actions
– COPPA (Sony BMG; Mrs. Fields)
– Data security/data disposal (CVS; TJ Maxx)
– Deceptive data collection (Sears “My SHC”)
– FTC Endorsement/Blogger Rules (Ann Taylor)

13. Meanwhile, Legislative Inactivity Leads to
Aggressive Enforcement by FTC
• FTC Saber-Rattling (Leibowitz)
– 2007: "The marketplace alone may not be able to solve all
problems inherent in behavioral marketing.”
– 2010: "I think opt-in generally protects consumers' privacy
better than opt-out, under most circumstances. . . .
I don't think it undermines a company's ability to
get the information it needs to advertise back to
consumers.”
– 2010: Report on Online Behavioral Marketing
• Endorsed Do-Not-Track
• Opt-in for Sensitive Data
• Precise geolocation data

14. Federal Inactivity Also Leads to Patchwork of
State Data Security Laws
• Dozens of states enact data breach
legislation
• California enacts OPPA, require
privacy policy for any business
collecting data from Californians
• Mass., Minnesota, Nevada data
security laws (encryption, WISP)

15. 2011: Year of Federal Privacy Legislation?
• Building Effective Strategies To Promote Responsibility Accountability Choice
Transparency Innovation Consumer Expectations and Safeguards Act (“BEST
PRACTICES” Act) (H.R. 611) Rush (D-IL) (2/10/2011)
• The Do Not Track Me Online Act of 2011 (H.R. 654) Speier (D-CA) (2/11/2011)
• The Financial Information Privacy Act of 2011 (H.R. 653) Speier (D-CA)
(2/11/2011)
• Commercial Privacy Bill of Rights Act of 2011 (S. 799) John Kerry (D-MA) and
John McCain (R-AZ) (4/12/2011)
• Consumer Privacy Protection Act of 2011 (H.R. 1528) Stearns (R-FL) Matheson
(D-UT) (4/13/2011)
• Data Accountability and Trust Act (H.R. 1701) Bobby L. Rush (D-IL) (5/4/2011)
• Do-Not-Track Online Act of 2011 (S. 913) Rockefeller (D-WV) (5/9/2011)
• Data Accountability and Trust Act of 2011 (H.R. 1841) Stearns (R-FL) and
(5/11/2011)
• Do Not Track Kids Act of 2011 (H.R. 1895) Markey (D-MA) Barton (R-TX)
(5/13/2011)

16. 2011: Year of Data Privacy Legislation?
• Electronic Communications Privacy Act Amendments Act of 2011 (S. 1011) Leahy
(D-VT) (5/17/2011)
• Personal Data Privacy and Security Act of 2011 (S.1151) Leahy (D-VT), Franken
(D-Minn.) and Schumer (D-N.Y.) (5/17/2011)
• Geolocation Privacy and Surveillance ("GPS") Act (S. 1212) and (H.R.2168)
Wyden (D-OR) and Chaffetz (R-Utah) (6/15/2011)
• Data Security and Breach Notification Act (S. 1207) Pryor (D-AR) and Rockefeller
(D-WV) (6/15/2011)
• Location Privacy Protection Act of 2011 (S. 1223) Franken (D-MN) and
Blumenthal (D-CT) (6/16/2011)
• Secure and Fortify (SAFE) Data Act (H.R. 2577) Bono Mack (R-CA) (7/8/2011)
• Proposed amendment to Video Privacy Protection A ct (HR 2471) Goodlatte
(7/8/2011)
• Data Breach Notification Act of 2011 (S. 1408) Feinstein (D-CA) (7/22/2011)
• Protecting Children From Internet Pornographers Act of 2011 (H.R. 1981) Smith
(R-TX) (5/25/2011)
• Personal Data Protection and Breach Accountability Act of 2011 (S.1535)
Blumenthal (D-CT) (9/8/2011)

17. 2011: Year of Data Privacy
Legislation?
• Nineteen Bills introduced
• Partisan gridlock over budget
• Zero bills enacted into law
• What does this mean for marketers?

18. What’s a Marketer to Do?

19. 2011: Year of Data Privacy
Legislation?
• Continued uncertainty
• But some trends are clear

20. Legislation to Watch: Data Privacy
• Consumer Privacy Protection Act of 2011
(H.R. 1528) Stearns (R-FL) Matheson (D-UT)
– PII includes IP address plus traditional PII
– Prior notice/opt-out required for use “unrelated to
a transaction” or upon material change to policy
– Allows FTC approved safe harbors
– No private right of action/no state AG
– Preempts state law

21. Legislation to Watch: Data Privacy
• Commercial Privacy Bill of Rights Act of 2011 (S.
799) John Kerry (D-MA) and John McCain (R-AZ)
– PII includes unique identifiers, biometric and precise
geolocation
– Notice and Opt-out/Opt-in for sensitive data/third party
transfer if material change
– 1st party marketing/site optimization not unauthorized use
– FTC security rules
– No private right of action
– Federal preemption of state laws
– Safe harbors

22. Legislation to Watch: Data Breach
• Personal Data Privacy and Security Act of 2011
(S.1151) Leahy (D-VT), Franken (D-Minn.) and
Schumer (D-N.Y.)
– Data security/accuracy requirements for data
brokers (PII on 10,000 persons, excludes
FCRA/HIPAA/GLB regulated entities)
– Breach notification w/ FTC safe harbor exemption
– Preempts state law
– No Private Right of Action
– Scraping safe harbor (amends CFAA)

23. Legislation to Watch: Data Breach
• Data Breach Notification Act of 2011 (S.
1408) Feinstein (D-CA)
– Narrow focus on data breach notification
– Safe harbor exemption from notification
requirement if company conducts risk assessment
and is able to demonstrate to the Federal Trade
Commission that there is no significant risk of
harm to individuals affected by a security breach
– No private right of action

24. Legislation to Watch: Do Not Track
• The Do Not Track Me Online Act of 2011
(H.R. 654) Speier
– Requires FTC to create Do Not Track rules
– Includes IP address and persistent identifiers
– Doesn’t preempt tougher state laws
• Do-Not-Track Online Act of 2011 (S. 913)
Rockefeller
– Requires FTC to create Do Not Track
– Leaves to FTC to determine covered info
– No state law preemption

25. Legislation to Watch: Geolocation
• Geolocation Privacy and Surveillance ("GPS") Act
(S. 1212) and (H.R.2168) Wyden (D-OR) and
Chaffetz (R-Utah)
– Prohibits interception of geolocation info without
prior consent (parental exception)
– Creates private right of action for damages/profits
• Location Privacy Protection Act of 2011 (S. 1223)
Franken (D-MN) and Blumenthal (D-CT)
– Prohibits collection of geolocation info w/o
express affirmative consent
– Private right of action for damages/punitives

26. Legislation to Watch in 2012
• Do Not Track Kids Act of 2011 (H.R. 1895) Markey
(D-MA) Barton (R-TX)
– Expressly extends COPPA to mobile applications
– Prohibits site, mobile app from “using, disclosing or
compiling” data on children or minors (13 to 17 yrs) for
targeted marketing purposes or geolocation w/o express
affirmative consent
– No collection of any data from minors without adopting
Digital Marketing Bill of Rights for Teens
• Fair Information Practices Principles established by this Act;
• “balances the ability of minors to participate in the digital media
culture with the governmental and industry obligation to ensure that
such operators do not subject minors to unfair and deceptive
surveillance, data collection, or behavioral profiling.”

27. Legislation to Watch: VPPA
• Amendment to Video Privacy Protection Act
(HR 2471) Goodlatte
– Netflix/Facebook exemption from VPPA
– Authorizes one-time durable consent to share data
re videos

28. What to expect in 2012: Supercookies
• Chairs of Bi-Partisan House Privacy Caucus request
FTC investigation into “supercookies” (9/27/2011)
– Barton (R-TX) and Markey (D-Mass) call for investigation,
say violates § 5 of FTC Act
– Barton: “I think supercookies should be outlawed because
their existence eats away at consumer choice and privacy.”

29. What to expect in 2012: COPPA Rules
• FTC announces proposed revisions to COPPA
Rules (9/15/2011)
– Definitions
– Notice
– Parental consent
– Confidentiality and Security of Children’s
Personal Information
– Safe Harbor Programs
• Data minimization requirement

30. What to expect in 2012: Revision to
COPPA Rules
• Definitions
– Expands definition of “personal information” to include:
• IP addresses
• customer numbers held in cookies, and
• geolocation information.

31. What to expect in 2012: Revision to
COPPA Rules
• Notice
– Streamlines notice content requirement (moves away from
more disclosure is better mantra)
• 3 defined categories of information
– Requires all operators of an online service or website to
provide contact information
• Ad networks
• Analytics providers
• Other content providers

32. What to expect in 2012: Revision to
COPPA Rules
• Parental Consent
– Proposes eliminating the “email plus” method of
obtaining parental consent.
– Website operators could seek FTC approval of
alternate consent mechanisms.
– Goal: allow for new forms of consent as the
technology evolves, and encourage innovation in
obtaining verifiable consent (e.g. text message;
scanned parental signature, credit card)

33. What to expect in 2012: Revision to
COPPA Rules
• Confidentiality and security of
children’s personal information
– Must ensure that service providers/third parties
have reasonable procedures to maintain the
confidentiality, security and integrity of such
personal information.

34. What to expect in 2012: Revision to
COPPA Rules
• Safe harbor programs
– Additional detail required for safe harbors
– Would require approved safe harbor programs to
report on oversight of operators
– Annual audits of members

35. Common Threads
• National data breach legislation likely
• Privacy legislation less likely but possible
– Likely to be just-in-time notice and opt-out
– Opt-in/express affirmative consent for sensitive
data
– Likely self-regulatory safe harbors
– May prohibit supercookies (flash cookies,
HTML5)
– Likely to adopt simplified disclosure regime
– Unlikely to adopt Do Not Track

36. FTC Enforcement Actions: Mobile
• FTC announces first privacy enforcement
action involving mobile apps
– Broken Thumbs developed iPhone apps targeted to
“younger girls,” “nostalgic adults” (Emily’s Girls World,
Emily’s Dress Up)
– Apps encouraged girls to email “Emily” their comments,
submit “shout outs” to friends and family, ask Emil’s
advice, and share “embarrassing” “blush” stories
– Allowed children to publicly post information on message
boards
– BT also collected thousands of email addresses from
children

37. FTC Enforcement Actions: Mobile
• FTC alleged violations of COPPA Rule (16
C.F.R. Part 312) despite App Store TOS
– Sued both BT and President/56% owner
– Failed to provide notice in app as to what info
they collect, how they use it, disclosure practices
– Failed to provide required “direct notice” to
parents
– Failed to obtain “verifiable parental consent”
before collecting persona information from
children

38. FTC Enforcement Actions: Mobile
• Consent Judgment
– $50,000 civil penalty
– Deletion of all previously collected data
– Injunction against further violations
– Compliance reporting, record-keeping
requirements

39. FTC Enforcement Actions: Google
FTC v. Google, Inc.
– FTC charged that by auto enrolling in Google
Buzz, Google treated data inconsistently with prior
promises, privacy policy
– Also, failed to comply with EU safe harbor
– Consent judgment:
• Compliance program
• Self-audits and reporting (20 years)

40. FTC Enforcement Actions: Text Messages
• FTC v. Phil Flora (9/29/2011)
– Defendant sent thousands of unsolicited text
messages
– FTC did not bring under TCPA (not using
“automatic telephone dialing system?)
– Instead, alleged that SMS messages are subject to
CAN-SPAM
– Consent judgment

41. Litigation Developments
IMS Health v. Sorrell (6/23/2011):
• Vermont law prohibited pharmacies from providing doctor
prescribing data to pharmceutical companies for detailing
• SCT held law unconstitutional
• Law was a content-based and speaker-based restraint on free
speech, requiring “heightened” constitutional scrutiny

42. IMS Health v. Sorrell: Deathknell for Do
Not Track?
Probably Not:
– Vermont law concerned commercial speech (not patient
privacy)
– Permitted data sharing for purposes other than marketing
(sought to limit disfavored opinions)
– Speculative benefit
• Do Not Track seeks to regulate personal privacy
• Arguably content/opinion neutral
• Precedent: COPPA, HIPAA, FCRA

43. What to Expect in 2012: EU Cookie Rules
EU to begin Enforcing 2009 Cookie
Rules
– Require prior notice and consent
– France: browser settings not enough. Consent
without reference to specific use ineffective
• Browser finger printing?

44. Privacy Litigation: Lots of it but little to
show for it
In re Google Buzz User Privacy Litigation, Case No.
5:10-CV-00672-JW (N.D. Cal.) (Sept. 03, 2010)
– Google sets aside $8.5 million for privacy organizations
– Google makes changes "to the Google Buzz user interface
that clarify Google Buzz's operation and users' options
regarding Google Buzz"
– Google agrees to disseminate "wider public education
about the privacy aspects of Google Buzz."

45. Privacy Litigation
In re Apple iPhone litigation (9/20/2011)
– Class alleged that Apple permitted apps developers
to collect/disseiminate for marketing purposes data
from users without notice/consent
– Judge Koh held that class had not alleged injury-
in-fact; i.e. actual damages (Article III standing)

46. How to Prepare for 2012
Don’t Wait and See:
– Privacy by Design
• Must analyze data inflows and use at outset of project
• Secure personal data (encryption for mobile devices and
in transmission
– Say what you do and do what you say
– Participate in safe harbor
– Stay tuned

47. How Will Privacy Regulation Impact
Your Business In 2012?
Daniel T. Rockey, Esq., CIPP
Holme, Roberts & Owen LLP
San Francisco

48. How Will Privacy Regulation Impact
Your Business In 2012?
Daniel T. Rockey, Esq., CIPP
Holme, Roberts & Owen LLP
San Francisco