Breach Notification: What Does "As Soon As Possible" Mean? And Why It May Not Be Wise To Comply

Attorney Mark D. Rasch is the former head of the U.S. Justice Department's computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

When a retail chain suffers a data breach, as in many aspects of life, no good deed goes unpunished. Conventional wisdom—reinforced by a host of legal requirements throughout the country—is that you should notify all potentially affected customers about the breach as soon as possible. But that's often not the best approach.

The earliest preliminary data breach information is invariably wrong. Some IT alarmists immediately assume the sky is falling, while the initial reports from more politically oriented CYA folk arethat nothing of importance was touched. A recent report from the Ponemon Institute actually said that rapid responses to data breaches increase the cost of those breaches.

Why would early responders suffer a greater dollar loss? Many reasons. First, by rushing to respond, companies may be over-notifying. This might occur if individuals are notified about a potential data breach when no actual breach existed. A classic example of this was the theft of a laptop computer containing millions of records pertaining to veterans. The Veterans Administration, upon learning of the theft from a contractor, notified all of the affected individuals, at a cost of millions of dollars. Indeed, the VA had to borrow printing and mailing facilities from the IRS.

A few weeks later, the VA recovered the stolen laptop intact and discovered that no VA records had actually been touched. A delayed response in that case would have not only saved money but also prevented what turned out to be needless worry.

Given all of this, what exactly does it really mean to legally notify as soon as possible? In New York state, the General Business Law Section 899-aa states that "the disclosure shall be made in the most expedient time possible and without unreasonable delay, consistent with the legitimate needs of law enforcement or any measures necessary to determine the scope of the breach and restore the reasonable integrity of the system."

In the Lone Star state, Texas law similarly states that "The disclosure shall be made as quickly as possible, except as necessary to determine the scope of the breach and restore the reasonable integrity of the data system."

The general theme to all of these statutes is for the retailer or entity suffering the breach to notify "as quickly as possible." However, not only does no one seem to define exactly what "as quickly as possible" means but, more importantly, none of these statutes says why that should be done.

In the movie Apollo 13, flight controller Gene Krantz is informed that the spaceship is coming in shallower than its projected orbit, which could lead to the ship bouncing off the atmosphere and into space. Krantz is asked whether they should inform the crew. He asks if there is anything the crew can do about it, and when he is told there isn't, he replies, "Then they don't need to know, do they?"

When evaluating how to handle a data breach incident—whether, when and how to make a notification—a good rule of thumb is what I call the "grandmother rule." If the data subject were your grandmother, what would she want to know and when?

This is not meant to be patronizing or to underestimate grandmothers. The goal instead is to understand the true purpose of data breach notification requirements so data subjects can take precautionary actions to insulate themselves—and, therefore, you—from further injury.

If you are told that your credit card number was stolen (but not yet used), you would likely obtain a replacement card, examine your upcoming bill for unauthorized charges and be done with it. Maybe—just maybe—you would refrain from shopping at the store that suffered the breach. But, in general, we have not seen customers punish retailers for data breaches.If you are told that your personal information (name, address, social security number) has been compromised, then you will need to run credit reports, have full credit freezes and generally look for signs of ID fraud.

The problem for companies suffering a data breach is that the law requires notification as soon as possible—whether that is good for the customer or not. That Ponemon report offered some interesting numbers, although the methodologies behind these types of reports is highly suspect. Ponemon said that 43 percent of companies notified data breach victims within one month of discovery of the breach last year, a figure that had been 36 percent the year before.

You would think this would decrease overall retail costs and liabilities, but no. Indeed, the report claimed that those who responded quickly in 2010 had a per-record cost of $268, up $49 from the $219 of the year before. Conversely, the "slow responders" paid $174 per record, down $22 from 2009.

What was the report's rationale? "Moving too quickly through the data breach process may cause cost inefficiencies for the organization, especially during the detection, escalation and notification phases. The notable increase in companies responding quickly to breaches, despite the additional cost, may reflect pressure companies feel to comply with commercial regulations and state and federal data protection laws."

This suggests that companies are trying to do what they believe is both the "right thing" and what the law requires with respect to data breaches. Many laws require companies to "promptly" notify data subjects of the breach or potential breach of their personal information, and some states may further define both what constitutes "promptly" and the manner in which such notifications must be made. Most state laws also have a law enforcement exemption—that is, you are permitted to delay or defer notification if you are requested to do so by law enforcement.

The problem with that exception is it's a Holland Tunnel size loophole. Why? Law enforcement—whether it's police, FBI or, especially, the Secret Service—love to keep details as quiet as possible for as long as possible. In a chase for cyberthieves, you want the suspects kept in the dark as long as possible. If it's at all possible to have the suspects think the attack hasn't been detected yet, they may be more easily caught if the thieves get careless.

None of this means that delay is always—or even usually—the appropriate response. Remember that the purpose of notification is to allow the data subjects to mitigate their (and indirectly the retailer's) damages. What companies should be doing is following normal procedures to determine the scope, nature and extent of a breach, the nature of the data subject to the breach, the time that has already elapsed from the date that the information has been presumably compromised, and the date the entity became aware of the breach, and then make a rational, informed and justifiable decision about when, how, and who to notify.

In Douglas Adams' Hitchhiker's Guide to the Galaxy, Ford Prefect advises, "Don't Panic." That advice works as well in law as in intergalactic transportation.

If you disagree with me, I'll see you in court, buddy. If you agree with me, however, I would love to hear from you.

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