Government Affairs Blog

March 18, 2019


March 18, 2019

Congress may soon adopt a statute to provide nationwide privacy protection for personal information collected online. How would the new law affect communication service providers (CSPs)?

State privacy initiatives are pushing Congress to enact a nationwide privacy law

Companies that provide services through the internet commonly collect records containing personal facts about their customers. Meanwhile, the service providers increasingly sell those records to third parties, especially for marketing purposes. No one nationwide law protects the privacy of the personal data. Privacy advocates have called for a national privacy law, but in the absence of congressional action, individual states have taken matters into their own hands. Last year California adopted a strong privacy law, and other states have signaled their intent to follow suit. The specter of 50 different privacy mandates has provoked anxiety in the business community.

Arguably, the pro-privacy trend in America was inspired by a strong European privacy law called the General Data Protection Regulation (GDPR), which gained approval in 2016 and took effect in 2018. The GDPR gave “data subjects” the “fundamental right” to decide how their personal information is “controlled” and “processed.” Fines for breaches of the GDPR were set as high as four percent of a violator’s annual revenue. Since the advent of GDPR, many non-European nations have decided to craft similar nationwide privacy laws. Experts believe the widespread legislation could make the GDPR a global standard.

In response to the above policy tensions, congressmen have proposed nearly a dozen privacy laws that would apply nationwide and potentially preempt the state initiatives. The proposals would generally protect the privacy of all Americans who disclose personal information in their online transactions. Some of the legislative approaches would give consumers a privacy-protecting “bill of rights” similar to the GDPR. Other draft statutes would focus more on cyber security and data breach notices. Most of the legal schemes would be implemented through the Federal Trade Commission (FTC).

CSPs already operate under a nationwide privacy law: the SCA

CSPs use online-generated records to register and serve subscribers. These service providers already follow legal guidelines to protect the privacy of the records and disclose them in response to due process requests from law enforcement. The records-management policies are governed by the federal Stored Communications Act (SCA).

How would a new nationwide privacy law be reconciled with the SCA?

A new nationwide privacy law would likely parallel the SCA

None of the data privacy laws percolating on Capitol Hill would abolish or limit the SCA. Instead, the privacy measures would co-exist with the SCA. As a result, CSPs would continue to receive investigative requests from law enforcement. However, a mistake in handing subscriber records could subject the CSP to liability under both the new law and the SCA.

Reviewing a sample of the pending privacy bills reveals the potential interplay between those legal frameworks and the SCA.

The proposed Consumer Data Protection Act (S. 2188) would govern companies that use the internet to collect and share consumer data. It would instruct the FTC to establish a national “Do Not Track” website, similar to the existing “Do Not Call” site, so consumers may opt out of unwanted online marketing. The Act would not cover:

disclosures made to the government that are either required or permitted
by law; … disclosures made pursuant to an order of a court or administrative
tribunal; … disclosures made in response to a subpoena, discovery request,
or other lawful process …. or … disclosures made to investigate, protect
themselves and their customers from, or recover from fraud, cyber attacks,
or other unlawful activity ….

A violation of the Act could trigger an FTC investigation and a fine totaling up to $25 million. In addition, an aggrieved consumer could pursue a private cause of action to recover damages, including punitive damages in egregious cases.

Under the Consumer Data Protection Act, if a law enforcement agency serves a CSP with a valid subpoena for a suspect’s subscriber records, the CSP would be required by the SCA to disclose the records, and the disclosure would be exempt from the Consumer Data Protection Act. However, if the CSP sends a subscriber a marketing message despite the person’s Do-Not-Track command, the CSP could be liable under both the SCA and the Consumer Data Protection Act.

The proposed Information Transparency & Personal Data Control Act (H.R. 6864) would generally govern web site “operators” engaged in the collection and sale of “sensitive personal information,” including financial information. Among other things, the bill would require the operators to: (a) give customers notice and a right of opt-in consent to the use of the sensitive data; and (b) observe policies to protect the privacy and security of the data. The bill would exempt sensitive data uses when the operators are “responding in good faith to valid legal process.” In an enforcement proceeding the FTC could levy a fine of up to $40,000.

Under this statutory formula, suppose a law enforcement agency sends a CSP a valid subpoena to learn a suspect/subscriber’s credit card payment information. Under the SCA, the service provider would properly disclose the credit card details. And because this sensitive personal information would be delivered in response to valid legal process, the disclosure would be exempt from the Information Transparency & Personal Data Control Act. Nevertheless, if the CSP were to sell the credit card data to an internet data broker, the seller could be punished under both the SCA and the Information Transparency & Personal Data Control Act.

The Congressional privacy bills that focus on cyber security and data breaches would likewise apply independently of the SCA. For example, if someone could hack into a CSP’s customer care database and delete subscriber records, the service provider might suffer penalties under both the data breach law and the SCA.

CSPs should prepare to meet both a new nationwide privacy law and the SCA

Congress is responding to growing public pressure for a nationwide data privacy law. The planned national privacy law may parallel some or all of the GDPR. So far, the question for CSPs is not whether such a national law would reduce their obligation to meet the needs of law enforcement. It would not. The new law would likely exempt valid SCA disclosures.

The greater concern is how CSPs would cope with any new privacy law layered atop the SCA. In an age of dual federal privacy regimes, a privacy violation could subject a CSP to two federal enforcement actions. CSPs should therefore prepare their privacy programs for a new source of potential liability.

January 14, 2019


January 12, 2019

On December 8th the government of Australia enacted a statute designed to help law enforcement and intelligence agencies overcome technical barriers to lawful electronic surveillance. The most notable provisions of the statute would help monitor criminals, spies and terrorists whose communications are encrypted. How exactly will the new “Encryption Act” work, and what are the implications for the communications industry?

The ‘Going Dark’ Problem

Australia’s Telecommunications and Other Amendments (Assistance and Access) Act 2018 (the Encryption Act) was adopted to help government investigators implement court orders for lawful surveillance without crashing into the technical brick wall of encryption.  For years law enforcement agencies in democracies worldwide had complained that they were ‘going dark’ because they could not decipher the lawfully intercepted communications. The gradual deployment of strong encryption had made the task increasingly difficult.

In the U.S. the “CALEA” lawful surveillance statute attempted to solve the encryption problem, but the measure was ineffective. A provision of the mandate required the communications industry to install surveillance solutions that would decipher encrypted communications. Unfortunately, the 1994 law failed to keep pace with modern encryption configurations.

Privacy groups actively opposed ideas to save investigations from going dark. In their view, any technique powerful enough to translate an encrypted phone call, email, or SMS message into plain text could be acquired and exploited by hackers to invade the privacy of innocent users. The activists rightly argued that communications privacy was vital to win subscriber trust.

How Australia’s Encryption Act Addresses the Going Dark Problem

Australia’s Encryption Act enables lawful access to a suspect’s encrypted messages. The Act applies to all “designated communications providers” (DCPs).  This category includes not only traditional communication service providers such as telephone companies and wireless carriers but also VoIP providers, satellite operators, web site hosts, and telecom equipment vendors.  Any communications industry competitor that operates facilities in Australia – or otherwise serves an Australian user – is apparently subject to the law.  

The Act paves a path to decryption for both law enforcement and national security investigators. Specifically, the beneficiaries include the Australian Security and Intelligence Organisation, the Australian Secret Intelligence Service, the Australian Signals Directorate, the Australian Federal police, the Australian Crime Commission, and the state and territory police forces.

Under the Act, the government may serve a DCP with any of three legal instruments. The first and least onerous document is the “technical assistance request.” A technical assistance request seeks surveillance support on a voluntary basis. For example, the government could question Apple about the encryption program applied to its iPhones.  It could also inquire about how to access encrypted messages stored in an iPhone.  The exact scope of the voluntary assistance was left undefined.

More burdensome is the “technical assistance notice.” This legal instrument is compulsory. A technical assistance notice may require a DCP to activate an existing decryption capability to access suspect communications or user logs. Presumably, this mandatory measure would be invoked only where a DCP refuses to help voluntarily.

The last form of assistance, called the “technical capability notice,” is also compulsory. It would require a DCP to develop a new decryption capability. For example, it may compel a DCP to provide law enforcement with a suspect’s password, if possible, or make the suspect’s communications accessible through a push technology.

As you would expect, anyone who fails to comply with either of the above-described notices could be fined.

How the Act Addresses Security and Privacy

The authors of the Encryption Act considered the risk of creating encryption “backdoors” that might be exploited by bad guys. Accordingly, the Act stated that a DCP shall not be forced to build a “systematic weakness or “systematic vulnerability” into its infrastructure. A systematic weakness or vulnerability was defined as a technical condition that would “affect a whole class of technology,” as opposed to “a particular person.” Observers say these definitions will likely be interpreted through case-by-case litigation.

Members of the Australian parliament wanted the Encryption Act to include additional provisions for security and privacy.  To accommodate these political leaders, the government adopted the Act with a promise to discuss further modifications in 2019. 

The Impact of the Act on the Communications Industry

The Encryption Act imposes a potentially expensive regulatory burden. In particular, the open-ended technical capability notice could expose a service provider to any kind of encryption-related technical mandate. On the other hand, the Act provides cost-based reimbursement for entities subject to such demands.  

Also consider that the Act may impact some communications competitors heavily and others not at all. Regrettably, the service providers that undertook the greatest efforts to secure their networks with strong encryption may now be forced to expend the greatest resources to penetrate that security for the sake of improved surveillance. These entities are inferably the ones that marketed to the most privacy-minded customers. Thus, the new law may erode their competitive advantage. The harm may not be too significant, however, as long as Australia observes standards for surveillance and security that apply equally to all competitors.

Possibly, an international competitor with only a token presence in Australia could be forced to rearchitect its encryption infrastructure throughout its global network. In effect, Australia could dictate surveillance practices in other countries, even those that prioritize subscriber privacy. It is unclear how these policy conflicts would be resolved.

Further complicating the risk of a surveillance-privacy conflict, the U.S. and other countries may learn from Australia’s example and adopt decryption laws of their own. The intelligence alliance known as the “Five Eyes” – consisting of the U.S., Canada, the United Kingdom, Australia, and New Zealand – has spent years lobbying for relief from the blinding effect of encryption. If all these governments adopt decryption mandates, the communications industry may struggle to reconcile the potentially divergent technical assistance demands.

One overriding factor may ultimately iron out the above-described regulatory wrinkles. All democracies experience similar needs for lawful surveillance and privacy. Cool-headed diplomacy could produce an international consensus that balances the two policy goals. In fact, the U.S. has already negotiated treaties of law enforcement cooperation called “mutual legal assistance treaties” with numerous countries worldwide. Moreover, the U.S. Congress is gravitating towards a bipartisan national privacy law that would emulate the privacy framework of the European Union.

How Industry Service Providers Should Comply with the Act

The Encryption Act does not require covered communications service providers to take any immediate compliance steps. Instead, the tasks will emerge ad hoc as the Australian government may decide.  The first providers to be contacted will probably be those with the largest subscriber bases. After all, the biggest networks tend to witness the greatest volume of illegal activity.

Smart service providers will not wait for an Encryption Act mailing from the government. They will take inventory of their encryption capabilities now.

To begin with, a provider should amass literature that answers the kind of encryption-related questions a law enforcement agency might ask in a technical assistance request. What type of encryption is employed in which services and features? Can the encrypted communications be decrypted today? If not, what types of technical modifications would be needed to meet that goal? How could the decryption solution minimize the risk of a systematic weakness or systematic vulnerability?

Next, each service provider should study the feasibility of its decryption options. It should specifically examine how the cost of complying with a technical assistance notice or technical capability notice may be compensated through the government’s cost-recovery process. To decrypt a given type of communication, would the resource burden be prohibitive? If so, that fact should be documented. It could prove decisive when contesting a technical capability notice.

After completing the above-described analyses, a service provider could request a meeting with Australian law enforcement to present its compliance strategy. Law enforcement officials respect industry members that position themselves as good corporate citizens. Meanwhile, the public-private meeting could help manage regulatory expectations. 

A new and technically-challenging regulatory mandate like Australia’s Encryption Act is bound to increase the communications industry’s potential liability. However, a little planning and talking with regulators could substantially mitigate the risk.

January 4, 2019

Subsentio General Counsel Joel Margolis Interviewed by Corporate Counsel Magazine

Last week Corporate Counsel Magazine interviewed Subsentio General Counsel Joel Margolis. The reporter asked Joel about Subsentio’s comments in the pending Department of Commerce rule making proceeding on advanced technologies. In the comments, Subsentio had proposed a novel approach for the administration of export controls governing advanced surveillance technologies. The approach would create a streamlined process of approvals for exporters who qualify as “trusted” parties.
For the full article, please click the link below.

Legal Tech News

November 14, 2018


I recently moderated a legal seminar in Washington, D.C. on the issue of wireless location privacy.  The seminar was hosted by the Federal Communications Bar Association, and the panelists represented a variety of opposing interests.  In a series of questions, I asked them how law enforcement investigations are affected by the Supreme Court’s June 22, 2018 ruling in Carpenter v. US.  The panelists’ reactions were not as divisive as you might think.

Based on the seminar, Carpenter is impacting law enforcement investigations significantly, despite the open-ended nature of the ruling. At the same time, the ruling’s loose logic will likely spawn a generation of litigation to strengthen privacy protection for other types of personal data.

The Carpenter Ruling

Carpenter v US held that wireless communication subscribers have a reasonable expectation of privacy in the long-term accumulation of records that track their wireless locations because the records reveal personal details about their lives, and therefore law enforcement investigators may collect such data only after qualifying for a judicial warrant, which requires them to serve a judge with a demonstration of probable cause.  Probable cause is a higher standard of due process than the “2703(d)” hurdle widely observed in the pre-Carpenter days.

The Carpenter ruling was controversial.  To begin with, courts had traditionally applied the legal standard of probable cause only to communications content such as phone conversations, email and SMS texts, and everything an internet user may view and hear during a browsing session.  Carpenter applied probable cause to the non-content realm of wireless location records.

Another novel feature of Carpenter downplayed the traditional “Third Party Doctrine” of privacy protection.  The Third Party Doctrine instructed that “business records” produced by activities such as phone calls, banking transactions, credit card charges, and hotel reservations were not private for purposes of the Fourth Amendment, and therefore not subject to the probable cause standard, because the customers of these services shared those personal details with their third party service providers.  Carpenter held that wireless location records deserve Fourth Amendment protection even though subscribers share the information with their wireless carriers.

Yet another oddity of Carpenter appeared in a footnote.  The incidental remark stated that wireless location records lasting as long as seven days would receive Fourth Amendment status but a shorter span of location data might not.  In response, observers questioned why seven days of such data should deserve any more privacy protection than six days or five.

The Consensus Interpretation of the Ruling

One of the panelists at the above-described seminar was a high-ranking attorney in the Department of Justice. Another was a senior counsel in a Tier I communications company.  The third was a spokesperson for a leading public interest group that watchdogs government surveillance.  And the last was a Fourth Amendment scholar with the National Association of Criminal Defense Lawyers. You might expect these diverse experts to present different interpretations of the Carpenter case.  They did not.

All four experts agreed Carpenter raised as many questions as it answered.  What should be the scope of the probable cause standard now that it covers at least one type of non-content communications?  How will judges know whether and how to apply the Third Party Doctrine to all the myriad types of personal business records shared with service providers?  Should wireless carriers insist on probable cause-based warrants, as opposed to 2703(d) orders, before fulfilling all law enforcement requests for location records, regardless of whether the covered timeframe extends as long as seven days?

The last question may be yielding to a practical result.  When the communications provider panelist was asked how his company’s law enforcement assistance staff applies Carpenter, he said they “hold law enforcement to the highest standard.”  He explained that they expect warrants for all location records requests, even those with one-day timeframes, while accepting lower levels of due process in emergency situations, as the Carpenter Court allowed.

The DOJ representative was asked how Carpenter has changed the government’s efforts to gather location data.  He said their current policy is to meet the probable cause standard as often as possible, even when requesting fewer than seven days of records.  However, he warned that the new practice makes it harder to solve crimes.

These responses indicate that Carpenter has substantially raised the bar for nearly all law enforcement requests involving location records.

The Consensus Prediction of Outcomes from the Ruling

The four panelists also offered similar predictions of how Carpenter will shape future investigations.  They all expect abundant litigation over the questions left unanswered by the case. For example, now that law enforcement must show top-level due process to obtain records of a suspect’s past wireless locations, the investigators may eventually be held to the same high standard before engaging in real-time location monitoring.

Likewise, now that location data is subject to probable cause, other types of communications metadata may gradually fall under the same legal standard.  Knowing who called a suspect, and who the suspect called, can be revealing about the individual’s personal life.

Conceivably, we may see legal fights over the Fourth Amendment treatment of non-communications records.  Some examples include video surveillance data, facial recognition data, data generated by the “internet of things,” and of course, the records kept by banks, credit card companies and hotels.

August 14, 2018


The Australian government recently announced that it will soon introduce legislation to facilitate lawful surveillance of encrypted communications. How will the Australian law work, and what are the implications for the communications industry, privacy, and public safety?

How encryption frustrates lawful surveillance

Terrorists and criminals commonly use communications with strong encryption, which is extremely difficult if not impossible for law enforcement to crack.  Instant messaging services such as Apple’s iMessage and Facebook’s WhatsApp pose especially difficult barriers to lawful surveillance because they are delivered “over the top” and encrypted “end-to-end.”  An over-the-top service travels over the public internet but cannot be decrypted by the service providers. End-to-end encryption means there is no point where the communication must be decrypted for inter-network transport, such as when a VoIP call interconnects to the public switched telephone network.

For years American law enforcement has complained that its investigators are “going dark,” largely due to the inability to decipher encrypted suspect communications.  The CALEA lawful surveillance statute ameliorates the encryption problem somewhat. It states that when a service provider applies encryption it must undo the message-scrambling for purposes of lawful surveillance. But the statute was never updated to reach services such as iMessage and WhatsAp because it governs only “telecommunications carriers,” not device manufacturers such as Apple, social media networks such as Facebook, or over-the-top application providers.  

Australia’s anticipated approach to solve the encryption problem

Australian law enforcement has not explained its encryption proposal in any detail.  They deny any intention of mandating an encryption key “escrow” methodology. The escrow approach would entrust encryption keys to the custody of a neutral entity, which would disclose the keys to law enforcement as needed for investigations upon service of due process.  Past proposals of this kind were crushed by industry and the public. They feared the establishment of an escrow system would create a “backdoor” path of decryption that would weaken security because hackers would develop the trickery to obtain the keys.

The Australian government hinted that its approach to encryption would resemble that of Great Britain’s Investigatory Powers Act.  Although the IPA is currently undergoing revision, this much is known. The draft provision on encryption would require a covered party to decrypt any encryption that the entity itself provides, and the clause would apply to all types of communications entities, including device makers, social media sites, and over-the-top application providers. Most likely, the law would require companies like Apple to collect a suspect’s messages when they are decrypted for routing purposes at the applicable application server.  Then the company would deliver the plain-text versions of the messages to law enforcement.

For encrypted data stored on handsets, computers, laptops and tablets, the device makers could likewise decrypt a suspect’s content.  Apple once performed this assistance for US law enforcement when presented with suspect iPhones, even though that capability was not required by any lawful surveillance mandate. But after the 2013 mass-surveillance scandal sparked by NSA contractor Ed Snowden, Apple and numerous other communications competitors quickly tightened their security and privacy protocols.

Opposition to Australia’s approach to encryption

Although no encryption bill has been submitted to the Australian legislature, a coalition of industry and privacy groups has already denounced it.  These advocates believe any solution to the encryption problem would pose security risks. For example, they say communication users may lose trust in their service providers and thus resort to obsolete security products, which could be vulnerable to botnets or malware.  They urged the government to strengthen digital security, not adopt legislation to bypass it.

The pro-encryption alliance recognizes the need for government investigators to conduct lawful surveillance.  But the group has not tabled a proposal to meet that goal. Instead, they argue that the integrity of strong encryption must be preserved to protect the security of essential services such as communications, banking, and health care.

The potential implications for industry, consumers and law enforcement

There may be no solution to the encryption problem that satisfies all interested parties.  However, the Australian initiative may yield a workable compromise. Much depends on the extent of the burden imposed on the communications industry. The law should ask device vendors and specific commercial entities only for encryption assistance that is technically feasible. Moreover, it should also avoid hampering commercial services. Finally, it should be fairly reimbursed by government. Under these circumstances, industry may accept the new burden.  

Even if a broader range of industry players assumes responsibility for lawful decryption, the cooperation may not be welcomed by privacy-minded consumers.  They recognize the critical importance of encryption in their daily lives, and news reports of devastating data breaches only harden their resolve. Still, these users may prefer to see the decryption role assigned to their own chosen service providers and device makers rather than law enforcement.

Australia’s expected legal reform would reportedly not let law enforcement decode encrypted suspect communications.  But it would apparently do the next-best thing by giving them access to suspect communications in plain-text form.

When a reliable bypass for encryption is available for law enforcement agents in Australia or Great Britain, the capability may benefit their counterparts in other countries.  For example, once Apple upgrades its iMessage servers to capture and deliver plain-text messages, a court in Canada may validly order Apple to activate the technology in support of a Canadian investigation.

The implications are greatest for nations like the US, where device makers, social media networks, and over-the-top application providers are exempt from CALEA.  In the US, regardless of whether a communication provider is covered by CALEA, if it installs a capability to deliver suspect communications in plain text, a court may order the provider to enlist the capability for an investigation.  This means American law enforcement may overcome the “going-dark” problem without having to wait for Congress to update CALEA. For purposes of American public safety, that would be a godsend.