Data monetization coming to California?

“In his first state of the state address on Tuesday, California Gov. Gavin Newsom proposed “a new data dividend” that could allow residents to get paid for providing access to their data” – reports CNBC.

“California’s consumers should also be able to share in the wealth that is created from their data,” Newsom said. Tech companies that “make billions of dollars collecting, curating and monetizing our personal data have a duty to protect it.”

Details from CNBC.

Data privacy bills are pending in at least eight states, reports Sara Merken at Bloomberg Law.

State lawmakers are aiming to give citizens more control over their personal data. Some of the bills largely follow the lead of California, whose Consumer Privacy Act takes effect Jan. 1, 2020. Others are more narrowly focused on specific business practices.

Some highlights:

  • In North Dakota – a bill would require companies to provide to consumers, upon request, information about the types of personal information the companies collect and possess
  • In New York – one bill addresses biometric privacy and another would govern businesses’ collection and disclosure of personal information
  • In Utah – a bill would require law enforcement to get a warrant from a judge to access electronic information
  • In Washington state – a bill would allow consumers to ask companies for a copy of their personal data and to delete or correct inaccurate data and would also regulate facial recognition technology

Details in Bloomberg Law.

Data rights > data ownership?

That’s the position taken by Privacy International in its response to the recent editorial by artist wil.i.am in The Economist which called for tech giants to pay individuals for their data:

  • Data rights offer a system of control and protection that is much more comprehensive than ownership, and these rights continue to exist even after you share your data with others. They apply to data that others collect about you with or without your knowledge and they also apply to the insights and conclusions that they make about you.
  • Existing data protection laws, like the EU General Data Protection Regulation (GDPR) put a strong data rights system in place. Now is the time to focus efforts on making it easy to use and widely adopted.
  • As powerful as data rights are, they are not a silver bullet. Market dominance and other distortions are a growing concern which should be addressed as well.

Read Privacy International’s Full Argument.

The Illinois Supreme Court’s Ruling

On January 25, 2019, the Illinois Supreme Court issued its long awaited opinion in Rosenbach v. Six Flags Entertainment Corp, ruling that the Illinois Biometric Privacy Act, 740 ILCS 14/1 et seq. (“BIPA”) does not require an actual injury for a plaintiff to be considered “aggrieved” under the Act. The ruling, which was widely anticipated based on the court’s comments during oral argument, is widely expected to open the flood gates on class actions brought under BIPA, given the statutory damages available to plaintiffs. Indeed, in the first week since the ruling, at least 10 new BIPA class actions have been filed.

Under BIPA, parties that possess biometric identifiers (i.e. fingerprints, retina scans and voice recognition) are prohibited from (i) selling, leasing, trading or otherwise profiting from such identifiers; and (ii) otherwise disclosing or disseminating such information unless the individual consents to such disclosure. BIPA imposes penalties of $1,000 per negligent violation of the Act and $5,000 (or actual damages, whichever is greater) for intentional or reckless violations. Second, BIPA allows for the recovery of reasonable attorneys’ fees and costs, including expert witness fees.

What Next?

The court’s ruling stands at odds with the Northern District of Illinois’ recent decision in Rivera v. Google, in which that court ruled that, unless a party suffers an actual injury, it does not satisfy the “injury in fact” requirement of Article III standing to pursue a BIPA claim in Federal Court. Consequently, expect all future BIPA cases going forward to be filed in Illinois state courts.

While the Illinois Supreme Court’s ruling opens the door for an onslaught of BIPA litigation, certain defenses to such actions remain untested and will surely be litigated. For one, expect the issue of whether a plaintiff has consented to the use of his or her biometric information to be hotly contested. For plaintiffs who are employees, that likely means arguing over a company’s policies contained in a handbook or employment agreement. Indeed, employers would be well served to review their policies and agreements to specifically address its potential collection of employees’ biometric information.

Another line of defense may rest in a defendant’s ability to remove a case to federal court and then have it dismissed. If successful, a defendant could avoid liability to a plaintiff who does not suffer an actual injury if it can successfully use the parties’ diversity jurisdiction to remove the case and then argue that the plaintiff lacks Article III standing.

One thing is for sure – expect Illinois state courts to become a hotbed of BIPA litigation.

If at first they don’t consent, try, try again?

A new form of privacy fraud further complicates the relationship between the Ad Tech industry and GDPR.

As Ad Tech vendors struggle to comply with the strict requirements of the EU General Data Protection Regulation (GDPR), especially around the acquisition of freely given, specific, informed and unambiguous user consent for the use of personal data – a new form of privacy fraud called “consent string fraud” has been detected.

What is a GDPR consent string? This is “a series of numbers added to an ad bid request, which identifies the consent status of an ad tech vendor. That means whether or not they have a user’s consent to use their data in order to serve them personalized advertising.”

What is consent string fraud? In this practice, companies (whether knowingly or mistakenly), tamper with the consent string, changing the “0” (no user consent) to a “1” (have user consent).

CPO Magazine has more details.

Jeffrey L. Widman writes:

Fingerprint scanner, illustrating concept of biometricsIn 2008, the Illinois legislature enacted the Illinois Biometric Privacy Act, 740 ILCS 14/1 et seq. (“BIPA”) to provide standards of conduct for private entities in connection with the collection and possession of “biometric identifiers and information.” BIPA regulates the collection, use, safeguarding, handling, storage, retention and destruction of such biometric identifiers. Biometric identifiers include retina and iris scans, fingerprints, voiceprints, and scans of hands and faces. It does not include writing samples, signatures, photographs, physical descriptions or biological materials used for medical or scientific purposes.

BIPA’s Requirements

Significantly, BIPA does not prohibit the collection or purchase of biometric identifiers. Instead, BIPA requires private entities to develop written policies to establishing a retention schedule and guidelines for the destruction of such biometric identifiers. BIPA also imposes a set of guidelines with which the entities that do possess such biometric identifiers must comply. These include requirements that such entities:

  • Inform individuals in writing that the information is being collected or stored;
  • Inform individuals in writing of the purpose and length of time for which the information is being collected and stored; and
  • Obtain written consent from individuals whose biometric information is collected;

BIPA also prohibits entities that possess biometric identifiers from (i) selling, leasing, trading or otherwise profiting from such identifiers; and (ii) otherwise disclosing or disseminating such information unless the individual consents to such disclosure, the disclosure completes a financial transaction authorized by the individual, the disclosure is required by municipal, state or federal law or the disclosure is required in response to a warrant or subpoena.

The Recent Onslaught of BIPA Class Actions

Although BIPA provides a private right of action to individuals aggrieved by a violation of the Act, plaintiff’s attorneys essentially ignored BIPA from 2008 through 2016 and few lawsuits were brought on behalf of aggrieved individuals. However, in the past year, more than 30 class actions have been filed in Illinois for purported BIPA violations. Why the trend? For one, BIPA imposes penalties of $1,000 per negligent violation of the Act and $5,000 (or actual damages, whichever is greater) for intentional or reckless violations. Second, BIPA allows for the recovery of reasonable attorneys’ fees and costs, including expert witness fees. Accordingly, BIPA is a prime target for members of the plaintiff’s bar.

Although there is little case law interpreting BIPA, the Illinois Appellate Court issued its first opinion in December 2017 addressing the Act. In Rosenbach v. Six Flags Entertainment Corp., 2017 IL App. (2d) 170317, the court, citing several Federal Court decisions, dismissed a plaintiff’s BIPA claim for failure to state a claim due to the her inability to cite actual damages. In so holding, the Court focused on whether an individual is “aggrieved” (as required by BIPA) if he or she alleges that biometric information was collected without consent, but does not allege actual injury. In dismissing the case, the appellate court found that mere technical violations are not actionable since a plaintiff is not “aggrieved” as the plain language of BIPA requires. While the opinion may deter some cases from being filed, it certainly leaves the door open for claims of actual damage and we expect BIPA cases to continue to be filed in the near future.


Jeffrey L. Widman is a partner in the firm’s Litigation Department, based in its Chicago office.

Acting Federal Trade Commission (FTC) Chairman Maureen K. Ohlhausen made it clear that she expects the FTC’s enforcement role in protecting privacy and security to encompass automated and connected vehicles. In her opening remarks at a June 28, 2017 workshop hosted by the FTC and National Highway Traffic Safety Administration (NHTSA), she said the FTC will take action against manufacturers and service providers of autonomous and connected vehicles if their activities violate Section 5 of the FTC Act, which prohibits unfair and deceptive acts or practices.

Such concern is warranted as new technologies allow vehicles to not only access the Internet, but also to independently generate, store and transmit all types of data – some of which could be very valuable to law enforcement, insurance companies, and other industries. For example, such data can not only show a car’s precise location, but also whether it violated posted speed limits, and aggressively followed behind, or cut-off, other cars.

Acting Chairman Ohlhausen noted that the FTC wants to coordinate its regulatory efforts with NHTSA, and envisions that both organizations will have important roles, similar to the way the FTC and the Department of Health and Human Services both have roles with respect to the Health Insurance Portability and Accountability Act (HIPAA).

Traditionally, NHTSA has dealt with vehicle safety issues, as opposed to privacy and data security. Thus, it may mean that the FTC will have a key role on these issues as they apply to connected cars, as it already has been a major player on privacy and data security in other industries.

Acting Chairman Ohlhausen also encouraged Congress to consider data breach and data security legislation for these new industries, but speakers at the workshop (video available here and embedded below) noted that legislation in this area will have difficulty keeping up with the fast pace of change of these technologies.

Part 1:

Part 2:

Part 3:

Specific federal legislation, or even laws at the state level, may be slow in coming given the many stakeholders who have an interest in the outcome. Until then, the broad mandate of Section 5 may be one of the main sources of enforcement. Companies who provide goods or services related to autonomous and connected vehicles should be familiar with the basic FTC security advice we have already blogged about here, and should work with knowledgeable attorneys as they pursue their design and manufacture plans.

Eric Bixler has posted on the Fox Rothschild Physician Law Blog an excellent summary of the changes coming to Medicare cards as a result of the Medicare Access and CHIP Reauthorization Act of 2015.  Briefly, Centers for Medicare and Medicaid Services (“CMS”) must remove Social Security Numbers (“SSNs”) from all Medicare cards. Therefore, starting April 1, 2018, CMS will begin mailing new cards with a randomly assigned Medicare Beneficiary Identifier (“MBI”) to replace the existing use of SSNs.  You can read the entire blog post here.

The SSN removal initiative represents a major step in the right direction for preventing identity theft of particularly vulnerable populations.  Medicare provides health insurance for Americans aged 65 and older, and in some cases to younger individuals with select disabilities.  Americans are told to avoid carrying their social security card to protect their identity in the event their wallet or purse is stolen, yet many Medicare beneficiaries still carry their Medicare card, which contains their SSN.  CMS stated that people age 65 or older are increasingly the victims of identity theft, as incidents among seniors increased to 2.6 million from 2.1 million between 2012 and 2014.  Yet the change took over a decade of formal CMS research and discussions with other government agencies to materialize, in part due to CMS’ estimates of the prohibitive costs associated with the undertaking.  In 2013, CMS estimated that the costs of two separate SSN removal approaches were approximately $255 million and $317 million, including the cost of efforts to develop, test and implement modifications that would have to be made to the agency’s IT systems – see United States Government Accountability Office report, dated September 2013)

We previously blogged (here and here) about the theft of 7,000 student SSNs at Purdue University and a hack that put 75,000 SSNs at risk at the University of Wisconsin.  In addition, the Fox Rothschild HIPAA & Health Information Technology Blog discussed (here) the nearly $7 million fine imposed on a health plan for including Medicare health insurance claim numbers in plain sight on mailings addressed to individuals.

On July 23, 2017, Washington State will become the third state (after Illinois and Texas) to statutorily restrict the collection, storage and use of biometric data for commercial purposes. The Washington legislature explained its goal in enacting Washington’s new biometrics law:

The legislature intends to require a business that collects and can attribute biometric data to a specific uniquely identified individual to disclose how it uses that biometric data, and provide notice to and obtain consent from an individual before enrolling or changing the use of that individual’s biometric identifiers in a database.

— Washington Laws of 2017, ch. 299 § 1.  (See complete text of the new law here).

Washington’s new biometrics act governs three key aspects of commercial use of biometric data:

  1. collection, including notice and consent,
  2. storage, including protection and length of time, and
  3. use, including dissemination and permitted purposes.

The law focuses on “biometric identifiers,” which it defines as

data generated by automatic measurements of an individual’s biological characteristics, such as a fingerprint, voiceprint, eye retinas, irises, or other unique biological patterns or characteristics that is used to identify a specific individual.

— Id. § 3(1).

The law excludes all photos, video or audio recordings, or information “collected, used, or stored for health care treatment, payment or operations” subject to HIPAA from the definition of “biometric identifiers.” Id.  It also expressly excludes biometric information collected for security purposes (id. § 3(4)), and does not apply to financial institutions subject to the Gramm-Leach-Bliley Act.  Id. § 5(1).  Importantly, the law applies only to biometric identifiers that are “enrolled in” a commercial database, which it explains means capturing a biometric identifier, converting it to a reference template that cannot be reconstructed into the original output image, and storing it in a database that links the biometric identifier to a specific individual.  Id. §§ 2, 3(5).

Statutory Ambiguity Creates Confusion

Biometric data
Copyright: altomedia / 123RF Stock Photo

Unfortunately, ambiguous statutory language, combined with rapidly-advancing technology, virtually guarantees confusion in each of the three key aspects of the new law.

Regarding collection, the new law states that a company may not “enroll a biometric identifier in a database for a commercial purpose” unless it: (1) provides notice, (2) obtains consent, or (3) “provid[es] a mechanism to prevent the subsequent use of a biometric identifier for a commercial purpose.”  Id. § 2(1).  Confusingly, the law does not specify what type of “notice” is required, except that it must be “given through a procedure reasonably designed to be readily available to affected individuals,” and its adequacy will be “context-dependent.”  Id. § 2(2).

If consent is obtained, a business may sell, lease or disclose biometric data to others for commercial use.  Id. § 2(3).  Absent consent, a business may not disclose biometric data to others except in very limited circumstances listed in the statute, including in litigation, if necessary to provide a service requested by the individual or as authorized by other law. Id. However, the new law may ultimately be read by courts or regulators as including a “one disclosure” exception because it says disclosure is allowed to any third party “who contractually promises that the biometric identifier will not be further disclosed and will not be enrolled in a database for a commercial purpose” inconsistent with the new law.  Id.

The new law also governs the storage of biometric identifiers.  Any business holding biometric data “must take reasonable care to guard against unauthorized access to and acquisition of biometric identifiers that are in the possession or control of the person.”  Id. § 2(4)(a).  Moreover, businesses are barred from retaining biometric data for any longer than “reasonably necessary” to provide services, prevent fraud, or comply with a court order.  Id. § 2(4)(b).  Here too the law fails to provide certainty, e.g., it sets no bright-line time limits on retention after customer relationships end, or how to apply these rules to ongoing but intermittent customer relationships.

The Washington legislature also barred companies that collect biometric identifiers for using them for any other purpose “materially inconsistent” with the original purpose they were collected for unless they first obtain consent.  Id. § 2(5).  Confusingly, even though notice alone is enough to authorize the original collection, it is not sufficient by itself to authorize a new use.

Interestingly, the new Washington law makes a violation of its collection, storage or use requirements a violation of the Washington Consumer Protection Act (the state analog to Section 5 of the FTC Act).  Id. § 4(1).  However, it specifically excludes any private right of action under the statute and provides for enforcement solely by the Washington State Attorney General, leaving Illinois’s Biometric Information Privacy Act as the only state biometrics law authorizing private enforcement.  Id. § 4(2).

Washington’s new law was not without controversy.  Several state legislators criticized it as imprecise and pushed to more specifically detail the activities it regulates; proponents argued that its broad language was necessary to allow flexibility for future technological advances. Ultimately, the bill passed with less than unanimous approval and was signed into law by Washington’s governor in mid-May.  It takes effect on July 23, 2017.  A similar, but not identical, Washington law takes effect the same day governing the collection, storage and use of biometric identifiers by state agencies.  (See Washington Laws of 2017, ch. 306 here).