2016

On November 1, 2016, the Payment Card Industry (“PCI”) Security Standards Council’s newest set of Data Security Standards (“DSS”) went into effect.  Announced earlier this year, PCI DSS Version 3.2 has made a variety of changes applicable to both merchants that accept payment cards as well as “Service Providers,” which are defined as third-party entities that “store, process, or transmit cardholder data” or that “manage components such as routers, firewalls, databases, physical security, and/or servers” on behalf of merchants. Below, we provide a summary of some of the more significant changes that affect merchants and Service Providers.

Data protection and privacy issues frequently intersect with other areas of the law. In addition to the Data Protection Report, Norton Rose Fulbright publishes other blogs covering important legal developments across the globe. These blogs sometimes touch on issues

Ten German data protection authorities (DPAs), led by the Berlin DPA, announced today that they will send formal questionnaires to about 500 companies in Germany to assess the scope of the companies’ cross-border data transfers. In a press release, the DPAs pointed out that the export of personal data to non-EU countries has become a common practice for major international, as well as small and medium sized companies, without, as the authorities say, adequate attention being paid to the unique data privacy issues raised by cloud computing and software as a service (SaaS).

On Friday, October 21, a series of Distributed Denial of Service (DDoS) attacks were launched against the servers of Dyn, a major DNS host. DNS hosts operate in a manner akin to a switchboard for the Internet, helping to route domain names (e.g., dataprotectionreport.com) to underlying IP addresses (e.g., 104.28.6.115). By attacking Dyn, hackers were able to prevent end-users from reaching the websites and online services that relied on Dyn, including Netflix, Twitter, Spotify, SoundCloud, Amazon, AirBnB, Reddit, PayPal, Pinterest, CNN, Fox News, the Guardian, the New York Times, and the Wall Street Journal. In a statement, Dyn described the attack as “a sophisticated, highly distributed attack involving 10s of millions of IP addresses.”

The Hong Kong Securities and Futures Commission (SFC) has launched a new cybersecurity review to assess the cybersecurity preparedness, compliance and resilience of brokers’ internet and mobile trading systems. This follows the increasing number of security incidents in which customers’ internet and mobile trading accounts were hacked, including 16 incidents involving seven securities brokers and unauthorized trades in excess of $100 million over the past 12 months.

The U.S. District Court for the Northern District of Illinois dismissed a putative class action against Barnes & Noble last week based on an incident in 2012 in which criminals tampered with payment card PIN pad terminals to steal customer payment card information from retail stores in nine states. The court’s decision highlights an important difference between the legal concepts of an “injury-in-fact” (which is necessary to support a finding of Article III standing so as to be able to maintain a case in federal court) and “damages” (which must be alleged to maintain many causes of action, such as for breach of contract). Although a plaintiff may have sufficiently alleged an “injury-in-fact” to enable a federal court to consider the case, those same allegations may be insufficient to allow the plaintiff to withstand a motion to dismiss.

Recent comments by FTC Chairwoman Edith Ramirez suggest that a company’s failure to take preventative measures to address ransomware could result in an enforcement action by the FTC, even if a company is never actually subject to a ransomware attack. The Chairwoman’s comments reflect a growing concern among US government agencies regarding ransomware and may foreshadow additional FTC action, building upon a developing trend of US regulators engaging in pre-breach enforcement action.

The U.S. Court of Appeals for the Eleventh Circuit—one of the highest federal courts below the Supreme Court—recently affirmed a decision in Silverpop Systems, Inc. v. Leading Market Technologies, Inc. finding that all damages flowing from a vendor’s data breach were barred by a standard provision in IT service contracts, disclaiming all liability for consequential damages.

The court’s analysis could apply to almost any breach of data provided to a vendor under an IT service contract, and highlights the need to carefully scrutinize a proposed waiver of consequential damages when confidential or sensitive data is involved in the contract.