For many companies, the main question about cloud computing is no longer whether to move their data to the “cloud,” but how they can accomplish this transition. Cloud (or Internet-based on-demand) computing involves a shift away from reliance on a company’s own local computing resources, in favor of greater reliance on shared servers and data

From our sister blog, MoFo Tech:

Within a decade, analysts say, the “Internet of Things” will have transformed our lives. Billions of Internet-connected devices will monitor our homes, businesses, cars, and even our bodies, using the data to manage everything from appliances to heart monitors. Companies like Google— which recently paid $3.2 billion for

Not to be outdone by Florida, California has yet again amended its data security breach law and again in groundbreaking (yet confusing) fashion. On September 30, 2014, California Governor Brown signed into law a bill (“AB 1710”) that appears to impose the country’s first requirement to provide free identity theft protection services to consumers in connection with certain data security breaches. The law also amends the state’s personal information safeguards law and Social Security number (“SSN”) law. The amendments will become effective on January 1, 2015.

Free Identity Theft Protection Services Required for Certain Breaches

Most significantly, AB 1710 appears to amend the California breach law to require that a company offer a California resident “appropriate identity theft prevention and mitigation” services, at no cost, if a breach involves that individual’s name and SSN, driver’s license number or California identification card number. Specifically, AB 1710 provides, in pertinent part, that if a company providing notice of such a breach was “the source of the breach”:

an offer to provide appropriate identity theft prevention and mitigation services, if any, shall be provided at no cost to the affected person for not less than 12 months, along with all information necessary to take advantage of the offer to any person whose information was or may have been breached.

The drafting of this requirement is far from clear and open to multiple readings. In particular, the use of the phrase “if any” can be read in multiple ways. For example, the phrase “if any” can be read to modify the phrase “appropriate identity theft prevention and mitigation services.” Under this reading, the law would impose an obligation to provide free identity theft protection services if any such services are appropriate. The phrase “if any,” however, could be read to modify the “offer” itself. Under this alternate reading, the law would provide that if a company intends to offer identity theft protection services, those services must be at no cost to the consumer. It is difficult to know how the California Attorney General (“AG”) or California courts will interpret this ambiguity. One thing is clear: until the AG or courts opine, the standard will remain unclear.

The drafting of the requirement also is not clear in other ways. For example, the statute does not specify what type of services would qualify as “appropriate identity theft prevention and mitigation services.” For example, would a credit monitoring product alone be sufficient to meet the requirement? Or would the law require something in addition to credit monitoring, such as an identity theft insurance element?

Nonetheless, state AGs historically have encouraged companies to provide free credit monitoring to consumers following breaches. In addition, even though not legally required, free credit monitoring has become a common practice, particularly for breaches involving SSNs and also increasingly for high-profile breaches. Nonetheless, California appears to be the first state to legally require that companies offer some type of a free identity theft protection service for certain breaches.

AB 1710 is particularly notable in its approach. First, the offer of free identity theft protection services will only be required for breaches involving SSNs, driver’s licenses or California identification card numbers. In this regard, an offer of free identity theft protection services will not be required for breaches involving other types of covered personal information, such as payment card information or usernames and passwords. This approach endorses a position that many companies have long held—that credit monitoring is appropriate only when the breach creates an actual risk of new account identity theft (as opposed to fraud on existing accounts). In addition, the offer of free identity theft protection services will only be required for a period of one year (as opposed to, for example, two years). The length of the offer of free credit monitoring has always been an issue of debate, and California has now endorsed a position that a one-year offer is sufficient.


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