By Stuart M. Gerson, a Member of Epstein Becker & Green, P.C. and previously served as Acting Attorney General and Assistant Attorney General at the Department of Justice. Mr. Gerson is a member of Washington Legal Foundation’s Legal Policy Advisory Board and serves as a Director of The National Council of Registered ISAOs (NCRI), a member-driven organization that functions as a forum for sharing cybersecurity threat information and best practices.

Regulatory Background and the Need for Change

 Significant data breaches at every level of national life have pushed the privacy and security of personally-identifiable information (PII), to the forefront of state and federal policymakers’ agendas. In the interests of efficiency and effectiveness, the American business community has argued for several years for a uniform national breach-notification statute that is preemptive of State law. While there have been several congressional initiatives along this line, none have produced a politically-viable solution. However, legislative interest has intensified of late for a federal law that encompasses data-breach notification and other aspects of privacy and security. Large and small businesses support a national approach due in part to the risks posed by contradictory and discriminatorily enforced state rules that undergo constant changes and arbitrary administrative implementation.

Despite American businesses’ commitment to security compliance and training efforts, cybercrime and the losses it engenders continue to grow substantially. Moreover, the cyber landscape itself has changed, magnifying the effects of data-breach incidents at both the personal and national-security levels. Both domestic and foreign criminal activity, often sponsored or even conducted directly by, hostile nation states, has run rampant. Individuals, businesses, and government are caught up in a global cyber conflict that cannot be won with the current legal framework of fragmented and contradictory laws, inefficient and often pointless private litigation, inconsistent federal oversight and enforcement, and insufficient public-private trust. We can do better.

Federal preemption and a greater level of privacy and security for personal and enterprise data are not mutually exclusive. Indeed, this paper’s fundamental thesis is that enhancing security and coordination of effort and enforcement at the national level will help preserve individuals’ and businesses’ privacy.

A Confused and Misdirected Cybersecurity and Privacy Landscape

 The United States currently has no national, unifying data-security or privacy law. There are industry-specific federal laws like The Health Insurance Portability and Accountability Act of 1996 (HIPAA; Pub.L. 104-191, 110 Stat. 1936, enacted August 21, 1996), which governs entities that hold or manage individuals’ healthcare-related identifiable information. But HIPAA and other federal privacy laws present certain regulatory and compliance difficulties and don’t preempt state laws occupying the same field.

Currently all 50 States and each U.S. Territory have data-security and breach notification statutes, but they vary widely and often are contradictory. A company doing interstate business and handling PII faces:

  • Differing and confusing definitions of covered entities;
  • Varying requirements for third parties that maintain PII;
  • Disparate definitions of what constitutes a reportable breach;
  • Widely varying procedures regarding notices and timing in the case of a breach;
  • Inconsistent availability and extent of exemptions and safe harbors, e.g., for encryption, good-faith receipt of protected information, credit for compliance with regulatory protocols, etc.;
  • Varying methods of enforcement, e.g., attorneys general, regulatory bodies, private rights of action;
  • Irrationally differing penalties and required remedies; and
  • Uncertain rights and remedies for injured persons and litigants.

The Status Quo Is Not Working Well

Despite a commitment to cyber compliance by businesses of all sizes, and their determined education of individuals about password protection, security of mobile devices, phishing, and other social engineering, reportable cyber incidents grew an astounding 1,300% between 2006 and 2015. With massive ransomware attacks, zero-day exploits and nation-state-sponsored onslaughts, the number of incidents continues to grow.