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Data Security Breaches No Longer 'Dirty Secret' Says White & Case Lawyer

Data Security Breaches No Longer 'Dirty Secret' Says White & Case Lawyer

NEW YORK, April 12 /PRNewswire/ -- Today's announcement of a massive theft of personal data from the LexisNexis computer systems, and other similar recent announcements, may suggest that computer security breaches are on the rise. But in reality, it is new data privacy laws in California that have begun forcing companies to disclose and respond to breaches that previously would have not been made public, says a noted privacy lawyer with White & Case.

"While this latest news and other recently announced breaches involving established, reputable companies have captured growing attention, there's no evidence that the overall number of security breaches is on the rise. Rather the increasing crescendo of security breach disclosures is a consequence of the California statute requiring database owners to notify California residents, essentially one out of every eight Americans, of breaches involving their data," said White & Case privacy and intellectual property lawyer David Bender, author of the four-volume Computer Law: Software Protection and Litigation. "The era characterized by the industry's 'dirty little secret' -- that only a tiny percentage of breaches are ever disclosed -- is over."

Bender added that while the enhanced disclosure requirements may perhaps shine an unwelcome spotlight on the disclosing companies and the problem of data theft in general, the statute actually fits in well with the way businesses operate in the United States.

"The statute does not create a heavy bureaucracy or set forth a long list of detailed rules. Instead it invokes Adam Smith's 'invisible hand' and works by indirection. Most of all, it makes it in the company's interest to tend adequately to security," said Bender.

Moreover, the California statute, and the subsequent disclosures on the part of companies, is prompting the federal government to begin moving in a similar direction.

"Currently, the US lacks a comprehensive national law regarding data privacy, though numerous privacy bills are pending before Congress. However, while we anticipate that some sort of federal legislation will be enacted, it remains to be seen what the final form will be," said Bender.

The latest news concerning a security breach of personal data came just as Bender and several of his White & Case colleagues were addressing a group of privacy officers and other business executives at White & Case's Fifth Annual Global Privacy Symposium in New York and London.

At the symposium, Bender said many security breaches involve the theft of highly sensitive personal identification such as names, addresses, social security numbers, driver's license numbers and credit reports. The hackers who break into computer systems and take information often use it to raid consumer bank accounts, obtain false passports and driver's licenses and generally "assume" the victim's identity. In one case, a major US bank reported that data on some 1.2 million federal employees -- including some US Senators -- was stolen apparently from back-up tapes being shipped to storage.

Current government estimates say identify theft costs US consumers and businesses $50 billion annually, and that doesn't include the costs of security breaches and any subsequent litigation that may arise.

"Public companies that experience a privacy breach also need to consider the disclosure implications under federal securities laws," said Bender. "Failure to disclose a privacy breach while trading in company stock could trigger liability and even spark an investigation by the SEC."

In the meantime, Bender recommends that the best way for companies to protect themselves from liability is to familiarize themselves with current data privacy laws in the United States, the European Union and other jurisdictions in which they do business to ensure compliance with those laws, and work closely with security experts to explore more effective ways to restrict break-ins.

White & Case's privacy lawyers counsel clients on all aspects of privacy law, including cross-border data transfer, compliance with laws in various jurisdictions, privacy policies, the right to monitor employee electronic communications and specific procedures that may be helpful in avoiding privacy-related litigation. The Firm's privacy practice pioneered a proprietary methodology for conducting privacy data protection audits, which identifies and analyzes in detail, the client's collection, use, disclosure, and cross-border transfer of personal information, and provides advice as to necessary modifications to the company's policies and practices.

About White & Case

White & Case LLP is a leading global law firm with 1900 lawyers practicing in 38 offices in 25 countries. Global Counsel consistently ranks White & Case among the top global law firms. For the latest materials from the White & Case Global Privacy Symposium, visit http://www.whitecase.com/privacy

White & Case LLP

CONTACT: Sandi Sonnenfeld, Media Relations Manager of White & Case LLP,
+1-212-819-8299, [email protected]

Web site: http://www.whitecase.com/privacy

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