SEC Cybersecurity Disclosure Trends: 2025 Update on Corporate Reporting Practices
Go-To Guide:
Since April 2024, 41 companies disclosed cybersecurity incidents via Form 8-K, with 26 filing under voluntary Item 8.01 and 15 under mandatory Item 1.05, which requires reporting if the incident had a material impact on the company.
Following the SEC’s May 2024 guidance clarifying that Item 1.05 is intended only for mandatory filings, companies appear to be increasingly filing voluntary non-material cybersecurity incidents under Form 8-K Item 8.01 rather than under Item 1.05.
Recent cybersecurity incident disclosures contain more detailed information about affected systems and compromised data, particularly in Item 1.05 filings, than the more general disclosures filed right after the rule became effective.
Some amended Form 8-K filings under both rules focus on operational recovery status and typically conclude no material impact occurred, even under Item 1.05 filings.
Six months after the SEC’s Cybersecurity Incident Disclosure Rule (SEC Rule) came into force, an April 2024 GT Alert summarized disclosure trends. The GT Alert identified that the companies who filed a mandatory form 8-K disclosing a cybersecurity incident had erred on the side of caution, hedged on whether the materiality threshold had been met or outright stated that it had not, reported an incident early, and provided only high-level information about the incident.
The SEC’s Division of Corporation Finance (Corp Fin) issued clarifying guidance on May 21, 2024, noting that companies were filing materiality disclosures under new Item 1.05 for incidents that did not rise to the level of a material adverse event. In other words, companies possibly afraid of being second-guessed were opting to report under Item 1.05 even when they determined that the cybersecurity incident did not have a material adverse event. The SEC’s guidance clarified that new Item 1.05 was only appropriate for cybersecurity incidents that had a material effect on the company and suggested companies could avail themselves of voluntary disclosure under Item 8.01 instead.
As a potential result of the May guidance, companies are increasingly filing non-material cyber incident disclosures under Item 8.01 of Form 8-K, while material incidents continue to be reported under Item 1.05. Since April 2024, 41 companies have filed a form 8-K to disclose a new cybersecurity incident, but 26 did so under 8.01 and 15 did so under 1.05.1 Additionally, companies are providing more detailed disclosures about affected systems and data, but amended filings often lack clarity on when additional information was discovered and primarily confirm the resumption of operations with no material impact.
SEC Rule Disclosure Requirements
As a recap, the SEC Rule requires the following:
1.
Disclosure Requirement: Companies must disclose material incidents within four business days of determining their materiality by filing a Form 8-K under Item 1.05.
2.
Materiality Determination: The assessment of materiality must happen without unreasonable delay after discovering the incident. A cybersecurity incident is material if it has a “substantial likelihood that a reasonable shareholder would consider it important” in making an investment decision or would have “significantly altered the ‘total mix’ of information made available.” There is no bright-line test for assessing materiality. When assessing materiality, the SEC directed public companies to consider both quantitative and qualitative factors, including the immediate consequences and long-term implications for operations, customer relationships, financial performance, brand reputation, and the likelihood of litigation or regulatory action.
3.
Delay Exception: The only reason to delay disclosure is a written request from the U.S. Attorney General to protect national security or public safety.
4.
Form 8-K Content: The form must include:
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discovery date and status (ongoing or not),
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description of the incident’s nature and scope,
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information about stolen or altered data,
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potential impact on operations, including financial effects, and
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remediation efforts or plans.
5.
Amended Form 8-K Filing: Once this information becomes known, the SEC’s Final Rule requires companies to amend a prior Form 8-K to disclose any information called for that was unavailable at the time of the initial Form 8-K filing. Amendments must be filed within four business days after the company, without unreasonable delay, determines such information or within four business days after such information becomes available.
Emerging Cybersecurity Incident Disclosure Trends
Looking at the disclosures companies have made up until today, there are five emerging trends:
1.
Disclosures of non-material incidents are increasingly filed under Item 8.01. The SEC’s guidance was effective in providing a roadmap for public companies to disclose incidents deemed initially immaterial under Item 8.01. Since then, more companies have started using Item 8.01 to disclose non-material cybersecurity incidents in their 8-K filings.
2.
Uptick in companies reporting material impact. Since April 2024, there has been an uptick in companies disclosing a material impact of their cyber incidents under Item 1.05. Six out of 15 companies specified the material impact on their financial condition or results of operations in their disclosures under Item 1.05, whereas prior to April 2024, there were none. However, there are still no cases where the company later (in the amended Form 8-K) confirms that there was in fact material impact. So far, the amended disclosures conclude that there is no material impact or that material impact is reasonably unlikely.
3.
More detail in the disclosures. Companies are starting to include more details in their 8-K filings than the first half of 2024. For instance, companies report about the affected systems, particularly the impacted data, such as whether it contains sensitive personal information. On the other hand, filings under Item 8.01 have been considerably shorter, generally providing a high-level overview of the incident, as they do not need to meet the content requirements for the material incident disclosure under Item 1.05.
4.
Amended disclosures do not include the date when additional information was identified. While an amended Form 8-K must be filed within four business days after additional information becomes available, companies do not indicate the date when they became aware of additional information on the incident. Hence, it cannot be determined whether companies have met the timing requirement.
5.
Amended disclosures often focus on the resumption of operations and confirm no material impact has been identified. Generally, companies use the amended Form 8-K under both Items 1.05 and 8.01 (i) to indicate that they have resumed their normal business activities and (ii) to confirm that the incident does not or is unlikely to have a material impact.
1 This number excludes amended filings.
Trump Administration Unveils New AI Policy, Reverses Biden’s Regulatory Framework
Early signals from the Trump administration suggest it may move away from the Biden administration’s regulatory focus on the impact of artificial intelligence (AI) and automated decision-making technology on consumers and workers. This federal policy shift could result in an uptick in state-based AI regulation.
Quick Hits
On January 23, 2025, President Trump signed an executive order to develop an action plan to enhance AI technology’s growth while reviewing and potentially rescinding prior policies to regulate its use.
The Trump administration is reversing Biden-era guidance on AI and emphasizing the need for minimal barriers to foster innovation and U.S. leadership in artificial intelligence.
The administration is working closely with tech leaders and has tapped a tech investor and former executive as the newly created White House AI & Crypto Czar to guide policy development in the AI sector.
State legislators may step in to fill the regulatory gap.
As part of a flurry of executive action during President Donald Trump’s first week of his second term in office, the president rescinded a Biden-era executive order (EO) issued on October 30, 2023, titled the “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence,” which sought to create safeguards for the “responsible development and use of AI.”
Further, on January 23, 2025, President Trump took action to shape the development of AI technology, signing EO 14179, “Removing Barriers to American Leadership in Artificial Intelligence.” The order states, “It is the policy of the United States to sustain and enhance America’s global AI dominance in order to promote human flourishing, economic competitiveness, and national security.”
AI Executive Order
President Trump’s EO 14179 directs that, within 180 days, “relevant” agencies create an “action plan to achieve” the EO’s AI policy. That plan is to be developed by the “Assistant to the President for Science and Technology (APST), the Special Advisor for AI and Crypto, and the Assistant to the President for National Security Affairs (APNSA), in coordination with the Assistant to the President for Economic Policy, the Assistant to the President for Domestic Policy, the Director of the Office of Management and Budget (OMB Director), and the heads of such executive departments and agencies (agencies) as the APST and APNSA deem relevant.”
The order also mandates that these heads of agencies immediately review all policies, directives, regulations, and other actions taken under President Biden’s now-revoked EO 14110 to identify any actions inconsistent with the EO’s policy objectives. The EO states that inconsistent actions will be suspended, revised, or rescinded as appropriate to ensure that federal guidelines and regulations do not impede the nation’s role as an AI leader.
The EO directs the OMB Director, in coordination with the APST, to revise two specific OMB memoranda “as necessary to make them consistent” with the president’s new AI policy:
OMB Memorandum M-24-10, “Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence,” issued in March 2024, which directed the Board of Governors of the Federal Reserve System to submit a biennial AI compliance plan to OMB.
OMB Memorandum M-24-18, “Advancing the Responsible Acquisition of Artificial Intelligence in Government,” issued in October 2024.
Shifting AI Policy
The Biden administration sought to create safeguards for the development of AI technology and its impact on labor markets, potential displacement of workers, and the use of AI and automated decision-making tools to make employment decisions and evaluate worker performance.
In November 2024, the U.S. Department of Labor (DOL) issued guidance on AI, detailing principles and best practices for employers in using AI in the workplace. That guidance built on prior guidance published by the DOL’s Wage and Hour Division and Office of Federal Contract Compliance Programs. Also, in 2022 and 2023, the U.S. Equal Employment Opportunity Commission (EEOC) issued guidance on employers’ use of AI tools and the potential for discrimination. As of the date of publication of this article, the EEOC’s former AI guidance has been removed from its website.
However, in a fact sheet published on January 23, 2025, the Trump administration stated that the “Biden AI Executive Order established unnecessarily burdensome requirements for companies developing and deploying AI that would stifle private sector innovation and threaten American technological leadership.” According to the fact sheet, the “development of AI systems must be free from ideological bias or engineered social agendas.”
President Trump is also reportedly working closely with many tech company leaders and AI developers. The president tapped investor and former tech executive David Sacks as the newly created “White House AI & Crypto Czar,” who will help shape policy around emerging technologies.
Next Steps
The Trump administration’s shift in AI policy marks a substantial departure from the previous administration’s focus. By rescinding Biden-era executive orders and implementing new directives to foster innovation, the Trump administration seeks to remove perceived barriers to the development of artificial intelligence technology.
Although the new administration has expressed its intent to deregulate this area, many states and jurisdictions have taken a different position, including California, Colorado, Illinois, and New York City. Other states may also consider filling the gap created by the absence of federal agency action on AI in employment.
In light of this, employers may want to continue to implement policies and procedures that protect the workplace from unintended consequences of AI use, including maintaining an AI governance team, establishing policies and practices for the safe use of AI in the workplace, enhancing cybersecurity practices, auditing results to identify and correct unintended consequences (including bias), and maintaining an appropriate level of human oversight.
Judge Denies Kochava’s Motion to Dismiss FTC’s Suit Over Selling Geolocation Data
On February 3, 2025, U.S. District Judge B. Lynn Winmill of the District of Idaho denied digital marketing data broker Kochava Inc.’s motion to dismiss a suit brought by the Federal Trade Commission. As previously reported, in August 2022, the FTC announced a civil action against Kochava for “selling geolocation data from hundreds of millions of mobile devices that can be used to trace the movements of individuals to and from sensitive locations.”
In the order denying Kochava’s motion to dismiss, Winmill rejected Kochava’s argument that Section 5 of the FTC Act is limited to tangible injuries and wrote that the “FTC has plausibly pled that Kochava’s practices are unfair within the meaning of the FTC Act.”
LIP GLOSS POPPIN’, TEXTS DROPPIN’: Colourpop’s Late-Night Texts May Have Compliance Floppin’
Greetings TCPAWorld!
Lip gloss is poppin’, lip gloss is cool—but late-night marketing texts? Those might land them in court. Listen up, beauty lovers and TCPA watchers—Colourpop Cosmetics is facing a serious touch-up in court over its late-night marketing tactics. A new class action lawsuit filed in the U.S. District Court for the Middle District of Florida claims the company violated federal law by blasting promotional text messages well past bedtime. See Trushel v. Colourpop Cosmetics, LLC, No. 8:25-CV-00282 (M.D. Fla. filed Feb. 4, 2025).
We all know the thrill of a midnight flash sale—one second, you’re winding down for the night, and the next, you’re frantically adding items to your cart before the “FINAL HOURS!” timer runs out. Amazon Prime Day flashbacks, anyone? But there’s a fine line between FOMO marketing and federal law violations, and according to this lawsuit, Colourpop might have crossed it.
So here is the deal. Plaintiff alleges she received multiple late-night texts from Colourpop, including a “$2 Lips” deal and other Cyber Sale alerts sent around 10 PM. That might seem harmless, but here’s the problem—the Telephone Consumer Protection Act (“TCPA”) explicitly bans marketing calls and texts before 8 AM or after 9 PM (local time). See 47 C.F.R. § 64.1200(c)(1)).
And Colourpop didn’t just allegedly text Plaintiff—it may have done this to thousands of customers across the U.S. over the last four years. That’s why this lawsuit isn’t just about one person’s disrupted sleep cycle—it’s a potential nationwide class action covering anyone in the U.S. who received similar late-night texts from Colourpop. If Colourpop loses, the financial impact could be major. The TCPA allows for damages of $500 per text—which already stings—but if Colourpop knowingly ignored the law? That jumps to $1,500 per message.
The lawsuit alleges this wasn’t just an innocent mistake. The Complaint asserts that Colourpop’s late-night texts were part of a broader telemarketing strategy—meaning these weren’t one-off messages but part of a deliberate campaign. That distinction matters because it could increase the likelihood that the Court finds Colourpop acted willfully, which raises the potential damages. And here’s another issue—Plaintiff never gave consent to receive messages outside of legal hours.
Interestingly, this isn’t Plaintiff’s first TCPA lawsuit. The same day, Plaintiff sued The Children’s Place, Inc. in the same court, alleging nearly identical violations. See Trushel v. The Children’s Place, Inc., No. 8:25-CV-00284 (M.D. Fla. filed Feb. 4, 2025). According to that Complaint, Plaintiff received late-night marketing texts from The Children’s Place around 10:35 PM and 10:36 PM on separate occasions, and the lawsuit similarly seeks damages under the TCPA’s statutory framework. With two lawsuits filed back-to-back, it raises the question—are these brands engaging in widespread non-compliance, or are plaintiffs becoming increasingly aware of TCPA violations and actively monitoring for missteps? Given the financial penalties, could some consumers opt for promotional texts and wait for a company to slip up with an eye toward litigation? One misstep in your SMS marketing could be more than just a blemish—it could stain your brand. No pun intended.
What makes this case particularly interesting is how Colourpop’s Terms of Use comes into play. I did some digging into their website, and their terms contain several provisions: 1) a mandatory arbitration clause requiring disputes to be resolved through JAMS arbitration in Los Angeles County, California; 2) a 60-day notice and informal resolution period before any legal action; 3) a class action waiver requiring all claims to be brought individually; and 4) detailed SMS marketing consent provisions that are notably silent on message timing.
But here’s where things get even more complicated for Colourpop—its SMS Terms of Use might work against it. According to its official policy, Colourpop requires users to “affirmatively opt-in” to receive marketing texts and states that “consent is not required to make any purchase.” That’s standard, but the policy doesn’t say anything about notifying users that messages may arrive at prohibited hours. In other words, just because someone opted in doesn’t mean they agreed to get texts at 10 PM.
What is more, the Terms include a “Class Action Waiver,” stating that customers agree to resolve disputes through individual arbitration rather than class actions. However, TCPA cases have successfully challenged these waivers, particularly when courts find them unconscionable or conflicting with consumer protection policies. But let’s be clear—each case has its own legal and factual workup, and enforcing arbitration clauses isn’t a one-size-fits-all. Have you ever read Troutman Amin’s motions to compel arbitration? They are top-notch, crafted with precision, and built to withstand scrutiny. Whether enforcing a waiver or strategically defending against class certification, our team knows how to keep businesses out of costly courtroom battles and in control of their legal strategy. You don’t want to be left covering up legal blemishes—you want a flawless finish. (And yes, my pun game is getting better.)
This lawsuit isn’t just about Colourpop—it’s a reminder to every brand using SMS marketing that timing isn’t just a courtesy; it’s the law. Translation? If your brand hits “send” on promotional texts after 9 PM, you might wake up to a class action lawsuit. The old saying goes, “Nothing good happens after midnight,” but for businesses, it’s starting to look like “nothing safe happens after 9 PM.”
As always,
Keep it legal, keep it smart, and stay ahead of the game.
Talk soon!
Key Considerations for the Prospective Blockchain Investor
Prospective purchasers of blockchain assets can now navigate through global exchanges (i.e., Coinbase or Kraken) to invest in various forms of tokens. Investments in tokens, however, are only the tip of the iceberg for those who are interested in undertaking financial exposure in blockchain projects. Here, we will provide a high-level overview of common forms of securities that blockchain investors may choose to acquire.
Tokens.
As perhaps the most straightforward form of blockchain investment, tokens can be purchased by investors either from the token issuer directly or through a secondary market. Tokens can take various forms, including utility tokens, security tokens, payment tokens, or stablecoins.
Equity.
Rather than acquiring tokens themselves, investors can purchase equity of companies that either have issued tokens or plan to do so in the future. Whereas certain issuers may distribute tokens directly, others may have a business model related to blockchain more generally. These investments may take the form of an issuer’s common or preferred stock. As an alternative to a purchase of share, investors may instead receive an instrument convertible into equity such as a Simple Agreement for Future Equity (a “SAFE”) or a convertible note. As a further incentive for equity investment, issuers may offer an option to purchase tokens at a future point in time (such as a “warrant”; more on this below).
Pre-Purchase Agreement for Tokens.
When an issuer has not yet minted tokens but intends to do so in the near future, the issuer may decide to issue pre-purchase agreements. As a play on the SAFE acronym, a pre-purchase agreement for tokens is often referred to as a Simple Agreement for Future Tokens (or a “SAFT”). However, unlike a standard Y-Combinator form of SAFE, there is not yet an industry standard form for a SAFT, although certain forms have gained in popularity.
Below are key considerations to be taken into account when evaluating an investment in a SAFT:
Valuation. Whereas a SAFE typically defers on the determination of valuation to a future point in time, a SAFT is often drafted as a pre-purchase agreement with a specified price per token. In exchange for an early investment while the token is still in development, an investor is given a price per token more favorable than that which will be offered to future investors upon a token launch. Less often, a SAFT may be drafted more analogously to a SAFE and will defer the valuation question to the future. With this formulation, the price per token will be determined based on the rate offered by the issuer upon token launch and may offer a percentage discount.
Deadline. Unlike a typical form of SAFE, a SAFT often includes a maturity date upon which the investor’s purchase price must be returned if a token has not been issued. The inclusion of a maturity date protects the investor against the risk of a company either pivoting its business and deciding not to issue tokens or failing to develop the intended token. Even with a maturity date, a SAFT is not without risk. Issuers often use funds received pursuant to a SAFT in connection with the development of their project and may not have funds available to make a repayment upon maturity.
Token Warrant.
A token warrant provides an investor with the option, but not the obligation, to purchase tokens prior to the warrant’s expiration at a set price. A token warrant may be sold on its own, but it most often issued alongside another security such as stock or an instrument convertible into shares of stock.
Below are key considerations to be taken into account when evaluating a token warrant:
Expiration Date. Whereas some warrants expire upon a specific date, others may expire sooner upon the achievement of a milestone. A common milestone is the initial launch of the applicable token. Additionally, token warrants often permit for multiple exercises; for example, subsequent exercises may be permitted if additional tokens are launched or if the quantity of a token previously minted is increased.
Price. An investor could pay a nominal amount upon issuance of a token warrant for the right to buy tokens at a price offered in the future; for example, at the price that tokens are offered to insiders or at a discount to the price that tokens are offered to the public. Alternatively, a token warrant could be drafted as a “penny warrant” whereas the investor is granted a right to purchase tokens for nominal amount (for example, $0.01 total) in the future.
Allocation. The allocation of tokens to be issued may be provided as a predetermined number of tokens or as a percentage of the future tokens issued. Alternatively, as is often the case when warrants are issued in connection with an equity investment, a warrant may grant to the investor a right to purchase their “pro rata” percentage of the future token issuance. Although on its face this calculation may initially appear straightforward, the formula itself is often a point of considerable discussion among the investor and the issuer. An investor-favorable calculation would permit an investor to purchase their pro rata percentage (or perhaps a multiple of their pro rata percentage) of the total number of tokens generated. Issuers may push back, offering a pro rata issuance only of the percentage of tokens allocated to insiders. The definition of “insiders” is itself a negotiated term, and may include the issuer’s founders, other investors, and key employees. Given the significant economic impact that this initially innocuous term may have, all elements of the calculation of the investor’s allocation should be carefully considered by all parties involved.
Additional Terms for Consideration.
Vesting. In any transaction that involves the future issuance of tokens, there is likely to be a tension between the issuer, who in order avoid an immediate sell-off upon grant would prefer to lock up the tokens from future sales for an extended period of time, and the investor, who would prefer to be permitted to freely transfer their tokens as soon as permitted by law (which in the United States may involve compliance with transfer restrictions under the securities laws). Investors may consider requesting that the tokens vest in accordance with a pre-determined schedule, whereas issuers may prefer to retain flexibility to set a vesting schedule upon the token launch. As a middle-ground, parties may consider permitting a lock-up of tokens to be determined by the issuer at launch, but in no event more restrictive than the least restrictive vesting schedule applicable to any insiders.
Governing Law. Across jurisdictions, the treatment of tokens continues to evolve at a rapid pace. Investors must consider not only the applicable law in the jurisdiction in which they reside, but also the local laws of the token issuer. Given the potential regulatory disparity between jurisdictions, investors should seek the advice of local counsel.
Regulatory Updates. In the United States, blockchain tokens are likely to be considered “securities”. However, this is a rapidly-evolving regulatory landscape under which the classification and treatment of blockchain tokens may be reconsidered. For example, the SEC has recently created a new “Crypto Task Force” and has rescinded certain controversial staff guidance related to the accounting treatment of custodied crypto assets. Investors and issuers alike should procure legal counsel to ensure continued compliance with all applicable laws and regulations.
ONE-TO-ONE IS DEAD– OR IS IT?: Three Reasons Why One-To-One Consent May Still be a Thing After All
Another big one this Friday.
Everyone is saying one-to-one consent is dead (heck, even I have said it.)
But is it really?
Consider:
First, the wireless carriers are still requiring one-to-one opt in for SMS traffic on their network. T-Mobile for instance outright bans the sharing of collected consents for messaging on their network. They essentially treat lead generation the same as scams, gambling and illegal conduct. So SMS isn’t getting through unless it is one-to-one!
THIS issue is why the R.E.A.C.H. petition asking the FCC to stop content-based call and text blocking is so important– these restrictions are categorically unconstitutional, yet the carriers censor speech in plain sight.
Second, speaking of R.E.A.C.H– the R.E.A.C.H Standards still require one-to-one consent. So expect a huge number of buyers to continue to require such consent to comply with those standards. (The board is meeting today and we may see some softening on one-to-one in light of the 11th Circuit ruling– more on that soon.)
Third, many buyers want the option to purchase one-to-one consent regardless. The consents convert better and I have heard in many instances there is lower CPA. So this is an attractive product.
Will everyone move to one-to-one? Doesn’t seem likely. But looks like it will be much more durable than expected.
Nation State Backed Groups Using AI for Malicious Purposes
The Google Threat Intelligence Group (GTIG) recently published a new report “Adversarial Misuse of Generative AI,” which is well worth the read. The report shares findings on how government-backed threat actors use and misuse the Gemini web application. Although the GTIG is committed to countering threats across Google’s platforms, it is also committed to sharing findings “to raise awareness and enable stronger protections across the wider ecosystem.” This is an excellent mission.
GTIG found government adversaries, including the People’s Republic of China (PRC), Russia, Iran, and North Korea, are attempting to misuse Gemini through jailbreak attempts, “coding and scripting tasks, gathering information about potential targets, researching publicly known vulnerabilities and enabling post-compromise activities, such as defense evasion in a target environment.”
According to the report, Iranian threat actors used Gemini the most, for “crafting phishing campaigns, conducting reconnaissance on defense experts and organizations, and generating content with cybersecurity themes.” Over ten Iran-backed groups were using Gemini for these purposes.
PRC threat actors used Gemini the second most to “conduct reconnaissance, for scripting and development, to troubleshoot code, and to research how to obtain deeper access to target networks. They focused on topics such as lateral movement, privilege escalation, data exfiltration, and detection evasion.” GTIG found over 20 China-backed groups were using and misusing Gemini.
Nine North Korean-backed groups “used Gemini to support several phases of the attack lifecycle, including researching potential infrastructure and free hosting providers, reconnaissance on target organizations, payload development, and assistance with malicious scripting and evasion techniques. They also used Gemini to research topics of strategic interest to the North Korean government, such as the South Korean military and cryptocurrency. Of note, North Korean actors also used Gemini to draft cover letters and research jobs—activities that would likely support North Korea’s efforts to place clandestine IT workers at Western companies.”
Russian threat actors are using Gemini the least. Three Russia-backed groups focused on coding tasks, including converting publicly available malware into another coding language and adding encryption functions to existing code.
This research confirms our previous suspicions. Google has “shared best practices for implementing safeguards, evaluating model safety and red teaming to test and secure AI systems.” They are also actively sharing threat intelligence that will assist all users of AI tools to understand and mitigate risks of threat actors misusing AI.
The BR Privacy & Security Download: February 2025
STATE & LOCAL LAWS & REGULATIONS
New York Legislature Passes Comprehensive Health Privacy Law: The New York state legislature passed SB-929 (the “Bill”), providing for the protection of health information. The Bill broadly defines “regulated health information” as “any information that is reasonably linkable to an individual, or a device, and is collected or processed in connection with the physical or mental health of an individual.” Regulated health information includes location and payment information, as well as inferences derived from an individual’s physical or mental health. The term “individual” is not defined. Accordingly, the Bill contains no terms restricting its application to consumers acting in an individual or household context. The Bill would apply to regulated entities, which are entities that (1) are located in New York and control the processing of regulated health information, or (2) control the processing of regulated health information of New York residents or individuals physically present in New York. Among other things, the Bill would restrict regulated entities to processing regulated health information only with a valid authorization, or when strictly necessary for certain specified activities. The Bill also provides for individual rights and requires the implementation of reasonable administrative, physical, and technical safeguards to protect regulated health information. The Bill would take effect one year after being signed into law and currently awaits New York Governor Kathy Hochul’s signature.
New York Data Breach Notification Law Updated: Two bills, SO2659 and SO2376, that amended the state’s data breach notification law were signed into law by New York Governor Kathy Hochul. The bills change the timing requirement in which notice must be provided to New York residents, add data elements to the definition of “private information,” and adds the New York Department of Financial Services to the list of regulators that must be notified. Previously, New York’s data breach notification statute did not have a hard deadline within which notice must be provided. The amendments now require affected individuals to be notified no later than 30 days after discovery of the breach, except for delays arising from the legitimate needs of law enforcement. Additionally, as of March 25, 2025, “private information” subject to the law’s notification requirements will include medical information and health insurance information.
California AG Issues Legal Advisory on Application of California Law to AI: California’s Attorney General has issued legal advisories to clarify that existing state laws apply to AI development and use, emphasizing that California is not an AI “wild west.” These advisories cover consumer protection, civil rights, competition, data privacy, and election misinformation. AI systems, while beneficial, present risks such as bias, discrimination, and the spread of disinformation. Therefore, entities that develop or use AI must comply with all state, federal, and local laws. The advisories highlight key laws, including the Unfair Competition Law and the California Consumer Privacy Act. The advisories also highlight new laws effective on January 1, 2025, which include disclosure requirements for businesses, restrictions on the unauthorized use of likeness, and regulations for AI use in elections and healthcare. These advisories stress the importance of transparency and compliance to prevent harm from AI.
New Jersey AG Publishes Guidance on Algorithmic Discrimination: On January 9, 2025, New Jersey’s Attorney General and Division on Civil Rights announced a new civil rights and technology initiative to address the risks of discrimination and bias-based harassment in AI and other advanced technologies. The initiative includes the publication of a Guidance Document, which addresses the applicability of New Jersey’s Law Against Discrimination (“LAD”) to automated decision-making tools and technologies. It focuses on the threats posed by automated decision-making technologies in the housing, employment, healthcare, and financial services contexts, emphasizing that the LAD applies to discrimination regardless of the technology at issue. Also included in the announcement is the launch of a new Civil Rights Innovation lab, which “will aim to leverage technology responsibly to advance [the Division’s] mission to prevent, address, and remedy discrimination.” The Lab will partner with experts and relevant industry stakeholders to identify and develop technology to enhance the Division’s enforcement, outreach, and public education work, and will develop protocols to facilitate the responsible deployment of AI and related decision-making technology. This initiative, along with the recently effective New Jersey Data Protection Act, shows a significantly increased focus from the New Jersey Attorney General on issues relating to data privacy and automated decision-making technologies.
New Jersey Publishes Comprehensive Privacy Law FAQs: The New Jersey Division of Consumer Affairs Cyber Fraud Unit (“Division”) published FAQs that provide a general summary of the New Jersey Data Privacy Law (“NJDPL”), including its scope, key definitions, consumer rights, and enforcement. The NJDPL took effect on January 15, 2025, and the FAQs state that controllers subject to the NJDPL are expected to comply by such date. However, the FAQs also emphasize that until July 1, 2026, the Division will provide notice and a 30-day cure period for potential violations. The FAQs also suggest that the Division may adopt a stricter approach to minors’ privacy. While the text of the NJDPL requires consent for processing the personal data of consumers between the ages of 13 and 16 for purposes of targeted advertising, sale, and profiling, the FAQs state that when a controller knows or willfully disregards that a consumer is between the ages of 13 and 16, consent is required to process their personal data more generally.
CPPA Extends Formal Comment Period for Automated Decision-Making Technology Regulations: The California Privacy Protection Agency (“CPPA”) extended the public comment period for its proposed regulations on cybersecurity audits, risk assessments, automated decision-making technology (“ADMT”), and insurance companies under the California Privacy Rights Act. The public comment period opened on November 22, 2024, and was set to close on January 14, 2025. However, due to the wildfires in Southern California, the public comment period was extended to February 19, 2025. The CPPA will also be holding a public hearing on that date for interested parties to present oral and written statements or arguments regarding the proposed regulations.
Oregon DOJ Publishes Toolkit for Consumer Privacy Rights: The Oregon Department of Justice announced the release of a new toolkit designed to help Oregonians protect their online information. The toolkit is designed to help families understand their rights under the Oregon Consumer Privacy Act. The Oregon DOJ reminded consumers how to submit complaints when businesses are not responsive to privacy rights requests. The Oregon DOJ also stated it has received 118 complaints since the Oregon Consumer Privacy Act took effect last July and had sent notices of violation to businesses that have been identified as non-compliant.
California, Colorado, and Connecticut AGs Remind Consumers of Opt-Out Rights: California Attorney General Rob Bonta published a press release reminding residents of their right to opt out of the sale and sharing of their personal information. The California Attorney General also cited the robust privacy protections of Colorado and Connecticut laws that provide for similar opt-out protections. The press release urged consumers to familiarize themselves with the Global Privacy Control (“GPC”), a browser setting or extension that automatically signals to businesses that they should not sell or share a consumer’s personal information, including for targeted advertising. The Attorney General also provided instructions for the use of the GPC and for exercising op-outs by visiting the websites of individual businesses.
FEDERAL LAWS & REGULATIONS
FTC Finalizes Updates to COPPA Rule: The FTC announced the finalization of updates to the Children’s Online Privacy Protection Rule (the “Rule”). The updated Rule makes a number of changes, including requiring opt-in consent to engage in targeted advertising to children and to disclose children’s personal information to third parties. The Rule also adds biometric identifiers to the definition of personal information and prohibits operators from retaining children’s personal information for longer than necessary for the specific documented business purposes for which it was collected. Operators must maintain a written data retention policy that documents the business purpose for data retention and the retention period for data. The Commission voted 5-0 to adopt the Rule, but new FTC Chair Andrew Ferguson filed a separate statement describing “serious problems” with the rule. Ferguson specifically stated that it was unclear whether an entirely new consent would be required if an operator added a new third party with whom personal information would be shared, potentially creating a significant burden for businesses. The Rule will be effective 60 days after its publication in the Federal Register.
Trump Rescinds Biden’s Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence: President Donald Trump took action to rescind former President Biden’s Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (“AI EO”). According to a Biden administration statement released in October, many action items from the AI EO have already been completed. Recommendations, reports, and opportunities for research that were completed prior to revocation of the AI EO may continue in place unless replaced by additional federal agency action. It remains unclear whether the Trump Administration will issue its own executive orders relating to AI.
U.S. Justice Department Issues Final Rule on Transfer of Sensitive Personal Data to Foreign Adversaries: The U.S. Justice Department issued final regulations to implement a presidential Executive Order regarding access to bulk sensitive personal data of U.S. citizens by foreign adversaries. The regulations restrict transfers involving designated countries of concern – China, Cuba, Iran, North Korea, Russia, and Venezuela. At a high level, transfers are restricted if they could result in bulk sensitive personal data access by a country of concern or a “covered person,” which is an entity that is majority-owned by a country of concern, organized under the laws of a country of concern, has its principle place of business in a country of concern, or is an individual whose primary residence is in a county of concern. Data covered by the regulation includes precise geolocation data, biometric identifiers, genetic data, health data, financial data, government-issued identification numbers, and certain other identifiers, including device or hardware-based identifiers, advertising identifiers, and demographic or contact data.
First Complaint Filed Under Protecting Americans’ Data from Foreign Adversaries Act: The Electronic Privacy Information Center (“EPIC”) and the Irish Counsel for Civil Liberties (“ICCL”) Enforce Unit filed the first-ever complaint under the Protecting Americans’ Data from Foreign Adversaries Act (“PADFAA”). PADFAA makes it unlawful for a data broker to sell, license, rent, trade, transfer, release, disclose, or otherwise make available specified personally identifiable sensitive data of individuals residing in the United States to North Korea, China, Russia, Iran, or an entity controlled by one of those countries. The complaint alleges that Google’s real-time bidding system data includes personally identifiable sensitive data, that Google executives were aware that data from its real-time bidding system may have been resold, and that Google’s public list of certified companies that receive real-time bidding bid request data include multiple companies based in foreign adversary countries.
FDA Issues Draft Guidance for AI-Enabled Device Software Functions: The U.S. Food and Drug Administration (“FDA”) published its January 2025 Draft Guidance for Industry and FDA Staff regarding AI-enabled device software functionality. The Draft provides recommendations regarding the contents of marketing submissions for AI-enabled medical devices, including documentation and information that will support the FDA’s evaluation of their safety and effectiveness. The Draft Guidance is designed to reflect a “comprehensive approach” to the management of devices through their total product life cycle and includes recommendations for the design, development, and implementation of AI-enabled devices. The FDA is accepting comments on the Draft Guidance, which may be submitted online until April 7, 2025.
Industry Coalition Pushes for Unified National Data Privacy Law: A coalition of over thirty industry groups, including the U.S. Chamber of Commerce, sent a letter to Congress urging it to enact a comprehensive national data privacy law. The letter highlights the urgent need for a cohesive federal standard to replace the fragmented state laws that complicate compliance and stifle competition. The letter advocates for legislation based on principles to empower startups and small businesses by reducing costs and improving consumer access to services. The letter supports granting consumers the right to understand, correct, and delete their data, and to opt out of targeted advertising, while emphasizing transparency by requiring companies to disclose data practices and secure consent for processing sensitive information. It also focuses on the principles of limiting data collection to essential purposes and implementing robust security measures. While the principles aim to override strong state laws like that in California, the proposal notably excludes data broker regulation, a previous point of contention. The coalition cautions against legislation that could lead to frivolous litigation, advocating for balanced enforcement and collaborative compliance. By adhering to these principles, the industry groups seek to ensure legal certainty and promote responsible data use, benefiting both businesses and consumers.
Cyber Trust Mark Unveiled: The White House launched a labeling scheme for internet-of-things devices designed to inform consumers when devices meet certain government-determined cybersecurity standards. The program has been in development for several months and involves collaboration between the White House, the National Institute of Standards and Technology, and the Federal Communications Commission. UL Solutions, a global safety and testing company headquartered in Illinois, has been selected as the lead administrator of the program along with 10 other firms as deputy administrators. With the main goal of helping consumers make more cyber-secure choices when purchasing products, the White House hopes to have products with the new cyber trust mark hit shelves before the end of 2025.
U.S. LITIGATION
Texas Attorney General Sues Insurance Company for Unlawful Collection and Sharing of Driving Data: Texas Attorney General Ken Paxton filed a lawsuit against Allstate and its data analytics subsidiary, Arity. The lawsuit alleges that Arity paid app developers to incorporate its software development kit that tracked location data from over 45 million consumers in the U.S. According to the lawsuit, Arity then shared that data with Allstate and other insurers, who would use the data to justify increasing car insurance premiums. The sale of precise geolocation data of Texans violated the Texas Data Privacy and Security Act (“TDPSA”) according to the Texas Attorney General. The TDPSA requires the companies to provide notice and obtain informed consent to use the sensitive data of Texas residents, which includes precise geolocation data. The Texas Attorney General sued General Motors in August of 2024, alleging similar practices relating to the collection and sale of driver data.
Eleventh Circuit Overturns FCC’s One-to-One Consent Rule, Upholds Broader Telemarketing Practices: In Insurance Marketing Coalition, Ltd. v. Federal Communications Commission, No. 24-10277, 2025 WL 289152 (11th Cir. Jan. 24, 2025), the Eleventh Circuit vacated the FCC’s one-to-one consent rule under the Telephone Consumer Protection Act (“TCPA”). The court found that the rule exceeded the FCC’s authority and conflicted with the statutory meaning of “prior express consent.” By requiring separate consent for each seller and topic-related call, the rule was deemed unnecessary. This decision allows businesses to continue using broader consent practices, maintaining shared consent agreements. The ruling emphasizes that consent should align with common-law principles rather than be restricted to a single entity. While the FCC’s next steps remain uncertain, the decision reduces compliance burdens and may challenge other TCPA regulations.
California Judge Blocks Enforcement of Social Media Addiction Law: The California Protecting Our Kids from Social Media Addiction Act (the “Act”) has been temporarily blocked. The Act was set to take effect on January 1, 2025. The law aims to prevent social media platforms from using algorithms to provide addictive content to children. Judge Edward J. Davila initially declined to block key parts of the law but agreed to pause enforcement until February 1, 2025, to allow the Ninth Circuit to review the case. NetChoice, a tech trade group, is challenging the law on First Amendment grounds. NetChoice argues that restricting minors’ access to personalized feeds violates the First Amendment. The group has appealed to the Ninth Circuit and is seeking an injunction to prevent the law from taking effect. Judge Davila’s decision recognized the “novel, difficult, and important” constitutional issues presented by the case. The law includes provisions to restrict minors’ access to personalized feeds, limit their ability to view likes and other feedback, and restrict third-party interaction.
U.S. ENFORCEMENT
FTC Settles Enforcement Action Against General Motors for Sharing Geolocation and Driving Behavior Data Without Consent: The Federal Trade Commission (“FTC”) announced a proposed order to settle FTC allegations against General Motors that it collected, used, and sold driver’s precise geolocation data and driving behavior information from millions of vehicles without adequately notifying consumers and obtaining their affirmative consent. The FTC specifically alleged General Motors used a misleading enrollment process to get consumers to sign up for its OnStar-connected vehicle service and Smart Driver feature without proper notice or consent during that process. The information was then sold to third parties, including consumer reporting agencies, according to the FTC. As part of the settlement, General Motors will be prohibited from disclosing driver data to consumer reporting agencies, required to allow consumers to obtain and delete their data, required to obtain consent prior to collection, and required to allow consumers to limit data collected from their vehicles.
FTC Releases Proposed Order Against GoDaddy for Alleged Data Security Failures: The Federal Trade Commission (“FTC”) has announced it had reached a proposed settlement in its action against GoDaddy Inc. (“GoDaddy”) for failing to implement reasonable and appropriate security measures, which resulted in several major data breaches between 2019 and 2022. According to the FTC’s complaint, GoDaddy misled customers of its data security practices, through claims on its websites and in email and social media ads, and by representing it was in compliance with the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks. However, the FTC found that GoDaddy failed to inventory and manage assets and software updates, assess risks to its shared hosting services, adequately log and monitor security-related events, and segment its shared hosting from less secure environments. The FTC’s proposed order against GoDaddy prohibits GoDaddy from misleading its customers about its security practices and requires GoDaddy to implement a comprehensive information security program. GoDaddy must also hire a third-party assessor to conduct biennial reviews of its information security program.
CPPA Reaches Settlements with Additional Data Brokers: Following their announcement of a public investigative sweep of data broker registration compliance, the CPPA has settled with additional data brokers PayDae, Inc. d/b/a Infillion (“Infillion”), The Data Group, LLC (“The Data Group”), and Key Marketing Advantage, LLC (“KMA”) for failing to register as a data broker and pay an annual fee as required by California’s Delete Act. Infillion will pay $54,200 for failing to register between February 1, 2024, and November 4, 2024. The Data Group will pay $46,600 for failing to register between February 1, 2024, and September 20, 2024. KMA will pay $55,800 for failing to register between February 1, 2024, and November 5, 2024. In addition to the fines, the companies have agreed to injunctive terms. The Delete Act imposes fines of $200 per day for failing to register by the deadline.
Mortgage Company Fined by State Financial Regulators for Cybersecurity Breach: Bayview Asset Management LLC and three affiliates (collectively, “Bayview”) agreed to pay a $20 million fine and improve their cybersecurity programs to settle allegations from 53 state financial regulators. The Conference of State Bank Supervisors (“CSBS”) alleged that the mortgage companies had deficient cybersecurity practices and did not fully cooperate with regulators after a 2021 data breach. The data breach compromised data for 5.8 million customers. The coordinated enforcement action was led by financial regulators in California, Maryland, North Carolina, and Washington State. The regulators said the companies’ information technology and cybersecurity practices did not meet federal or state requirements. The firms also delayed the supervisory process by withholding requested information and providing redacted documents in the initial stages of a post-breach exam. The companies also agreed to undergo independent assessments and provide three years of additional reporting to the state regulators.
SEC Reaches Settlement over Misleading Cybersecurity Disclosures: The SEC announced it has settled charges with Ashford Inc., an asset management firm, over misleading disclosures related to a cybersecurity incident. This enforcement action stemmed from a ransomware attack in September 2023, compromising over 12 terabytes of sensitive hotel customer data, including driver’s licenses and credit card numbers. Despite the breach, Ashford falsely reported in its November 2023 filings that no customer information was exposed. The SEC alleged negligence in Ashford’s disclosures, citing violations of the Securities Act of 1933 and the Exchange Act of 1934. Without admitting or denying the allegations, Ashford agreed to a $115,231 penalty and an injunction. This case highlights the critical importance of accurate cybersecurity disclosures and demonstrates the SEC’s commitment to ensuring transparency and accountability in corporate reporting.
FTC Finalizes Data Breach-Related Settlement with Marriott: The FTC has finalized its order against Marriott International, Inc. (“Marriott”) and its subsidiary Starwood Hotels & Resorts Worldwide LLC (“Starwood”). As previously reported, the FTC entered into a settlement with Marriott and Starwood for three data breaches the companies experienced between 2014 and 2020, which collectively impacted more than 344 million guest records. Under the finalized order, Marriott and Starwood are required to establish a comprehensive information security program, implement a policy to retain personal information only for as long as reasonably necessary, and establish a link on their website for U.S. customers to request deletion of their personal information associated with their email address or loyalty rewards account number. The order also requires Marriott to review loyalty rewards accounts upon customer request and restore stolen loyalty points. The companies are further prohibited from misrepresenting their information collection practices and data security measures.
New York Attorney General Settles with Auto Insurance Company over Data Breach: The New York Attorney General settled with automobile insurance company, Noblr, for a data breach the company experienced in January 2021. Noblr’s online insurance quoting tool exposed full, plaintext driver’s license numbers, including on the backend of its website and in PDFs generated when a purchase was made. The data breach impacted the personal information of more than 80,000 New Yorkers. The data breach was part of an industry-wide campaign to steal personal information (e.g., driver’s license numbers and dates of birth) from online automobile insurance quoting applications to be used to file fraudulent unemployment claims during the COVID-19 pandemic. As part of its settlement, Noblr must pay the New York Attorney General $500,000 in penalties and strengthen its data security measures such as by enhancing its web application defenses and maintaining a comprehensive information security program, data inventory, access controls (e.g., authentication procedures), and logging and monitoring systems.
FTC Alleges Video Game Maker Violated COPPA and Engaged in Deceptive Marketing Practices: The Federal Trade Commission (“FTC”) has taken action against Cognosphere Pte. Ltd and its subsidiary Cognosphere LLC, also known as HoYoverse, the developer of the game Genshin Impact (“HoYoverse”). The FTC alleges that HoYoverse violated the Children’s Online Privacy Protection Act (“COPPA”) and engaged in deceptive marketing practices. Specifically, the company is accused of unfairly marketing loot boxes to children and misleading players about the odds of winning prizes and the true cost of in-game transactions. To settle these charges, HoYoverse will pay a $20 million fine and is prohibited from allowing children under 16 to make in-game purchases without parental consent. Additionally, the company must provide an option to purchase loot boxes directly with real money and disclose loot box odds and exchange rates. HoYoverse is also required to delete personal information collected from children under 13 without parental consent. The FTC’s actions aim to protect consumers, especially children and teens, from deceptive practices related to in-game purchases.
OCR Finalizes Several Settlements for HIPAA Violations: Prior to the inauguration of President Trump, the U.S. Department of Health and Human Services Office for Civil Rights (“OCR”) brought enforcement actions against four entities, USR Holdings, LLC (“USR”), Elgon Information Systems (“Elgon”), Solara Medical Supplies, LLC (“Solara”) and Northeast Surgical Group, P.C. (“NESG”), for potential violations of the Health Insurance Portability and Accountability Act’s (“HIPAA”) Security Rule due to the data breaches the entities experienced. USR reported that between August 23, 2018, and December 8, 2018, a database containing the electronic protected health information (“ePHI”) of 2,903 individuals was accessed by an unauthorized third party who was able to delete the ePHI in the database. Elgon and NESG each discovered a ransomware attack in March 2023, which affected the protected health information (“PHI”) of approximately 31,248 individuals and 15,298 individuals, respectively. Solara experienced a phishing attack that allowed an unauthorized third party to gain access to eight of Solara’s employees’ email accounts between April and June 2019, resulting in the compromise of 114,007 individuals’ ePHI. As part of their settlements, each of the entities is required to pay a fine to OCR: USR $337,750, Elgon $80,000, Solara $3,000,000, and NESG $10,000. Additionally, each of the entities is required to implement certain data security measures such as conducting a risk analysis, implementing a risk management plan, maintaining written policies and procedures to comply with HIPAA, and distributing such policies or providing training on such policies to its workforce.
Virgina Attorney General Sues TikTok for Addictive Fees and Allowing Chinese Government to Access Data: Virginia Attorney General Jason Miyares announced his office had filed a lawsuit against TikTok and ByteDance Ltd, the Chinese-based parent company of TikTok. The lawsuit alleges that TikTok was intentionally designed to be addictive for adolescent users and that the company deceived parents about TikTok content, including by claiming the app is appropriate for children over the age of 12 in violation of the Virginia Consumer Protection Act.
INTERNATIONAL LAWS & REGULATIONS
UK ICO Publishes Guidance on Pay or Consent Model: On January 23, the UK’s Information Commissioner’s Office (“ICO”) published its Guidance for Organizations Implementing or Considering Implementing Consent or Pay Models. The guidance is designed to clarify how organizations can deploy ‘consent or pay’ models in a manner that gives users meaningful control over the privacy of their information while still supporting their economic viability. The guidance addresses the requirements of applicable UK laws, including PECR and the UK GDPR, and provides extensive guidance as to how appropriate fees may be calculated and how to address imbalances of power. The guidance includes a set of factors that organizations can use to assess their consent models and includes plans to further engage with online consent management platforms, which are typically used by businesses to manage the use of essential and non-essential online trackers. Businesses with operations in the UK should carefully review their current online tracker consent management tools in light of this new guidance.
EU Commission to Pay Damages for Sending IP Address to Meta: The European General Court has ordered the European Commission to pay a German citizen, Thomas Bindl, €400 in damages for unlawfully transferring his personal data to the U.S. This decision sets a new precedent regarding EU data protection litigation. The court found that the Commission breached data protection regulations by operating a website with a “sign in with Facebook” option. This resulted in Bindl’s IP address, along with other data, being transferred to Meta without ensuring adequate safeguards were in place. The transfer happened during the transition period between the EU-U.S. Privacy Shield and the EU-U.S. Data Protection Framework. The court determined that this left Bindl in a position of uncertainty about how his data was being processed. The ruling is significant because it recognizes “intrinsic harm” and may pave the way for large-scale collective redress actions.
European Data Protection Board Releases AI Bias Assessment and Data Subject Rights Tools: The European Data Protection Board (“EDPB”) released two AI tools as part of the AI: Complex Algorithms and effective Data Protection Supervision Projects. The EDPB launched the project in the context of the Support Pool of Experts program at the request of the German Federal Data Protection Authority. The Support Pool of Experts program aims to help data protection authorities increase their enforcement capacity by developing common tools and giving them access to a wide pool of experts. The new documents address best practices for bias evaluation and the effective implementation of data subject rights, specifically the rights to rectification and erasure when AI systems have been developed with personal data.
European Data Protection Board Adopts New Guidelines on Pseudonymization: The EDPB released new guidelines on pseudonymization for public consultation (the “Guidelines”). Although pseudonymized data still constitutes personal data under the GDPR, pseudonymization can reduce the risks to the data subjects by preventing the attribution of personal data to natural persons in the course of the processing of the data, and in the event of unauthorized access or use. In certain circumstances, the risk reduction resulting from pseudonymization may enable controllers to rely on legitimate interests as the legal basis for processing personal data under the GDPR, provided they meet the other requirements, or help guarantee an essentially equivalent level of protection for data they intend to export. The Guidelines provide real-world examples illustrating the use of pseudonymization in various scenarios, such as internal analysis, external analysis, and research.
CJEU Issues Ruling on Excessive Data Subject Requests: On January 9, the Court of Justice of the European Union (“CJEU”) issued its ruling in the case Österreichische Datenschutzbehörde (C‑416/23). The primary question before the Court was when a European data protection authority may deny consumer requests due to their excessive nature. Rather than specifying an arbitrary numerical threshold of requests received, the CJEU found that authorities must consider the relevant facts to determine whether the individual submitting the request has “an abusive intention.” While the number of requests submitted may be a factor in determining this intention, it is not the only factor. Additionally, the CJEU emphasized that Data Protection Authorities should strongly consider charging a “reasonable fee” for handling requests they suspect may be excessive prior to simply denying them.
Daniel R. Saeedi, Rachel L. Schaller Gabrielle N. Ganz, Ana Tagvoryan, P. Gavin Eastgate, Timothy W. Dickens, Jason C. Hirsch, Tianmei Ann Huang, Adam J. Landy, Amanda M. Noonan, and Karen H. Shin contributed to this article
Health-e Law Episode 15: Healthcare Security is Homeland Security with Jonathan Meyer, former DHS GC and Partner at Sheppard Mullin [Podcast]
Welcome to Health-e Law, Sheppard Mullin’s podcast exploring the fascinating health tech topics and trends of the day. In this episode, Jonathan Meyer, former general counsel of the Department of Homeland Security and Leader of Sheppard Mullin’s National Security Team, joins us to discuss cyberthreats and data security from the perspective of national security, including the implications for healthcare.
What We Discussed in This Episode
How do cyberattacks and data privacy impact national security?
How can personal data be weaponized to cause harm to an individual, and why should people care?
Many adults are aware they need to keep their own personal data secure for financial reasons, but what about those who aren’t financially active, such as children?
How is healthcare particularly vulnerable to cyberthreats, even outside the hospital setting?
What can stakeholders do better at the healthcare level?
What can individuals do better to ensure their personal data remains secure?
DeepSeek AI’s Security Woes + Impersonations: What You Need to Know
Soon after the Chinese generative artificial intelligence (AI) company DeepSeek emerged to compete with ChatGPT and Gemini, it was forced offline when “large-scale malicious attacks” targeted its servers. Speculation points to a distributed denial-of-service (DDoS) attack.
Security researchers reported that DeepSeek “left one of its databases exposed on the internet, which could have allowed malicious actors to gain access to sensitive data… [t]he exposure also includes more than a million lines of log streams containing chat history, secret keys, backend details, and other highly sensitive information, such as API Secrets and operational metadata.”
On top of that, security researchers identified two malicious packages using the DeepSeek name posted to the Python Package Index (PyPI) starting on January 29, 2025. The packages are named deepseeek and deepseekai, which are “ostensibly client libraries for access to and interacting with the DeepSeek AI API, but they contained functions designed to collect user and computer data, as well as environment variables, which may contain API keys for cloud storage services, database credentials, etc.” Although PyPI quarantined the packages, developers worldwide downloaded them without knowing they were malicious. Researchers are warning developers to be careful with newly released packages “that pose as wrappers for popular services.”
Additionally, due to DeepSeek’s popularity, it is warning X users of fake social media accounts impersonating the company.
But wait, there’s more! Cybersecurity firms are looking closely at DeepSeek and are finding security flaws. One firm, Kela, was able to “jailbreak the model across a wide range of scenarios, enabling it to generate malicious outputs, such as ransomware development, fabrication of sensitive content, and detailed instructions for creating toxins and explosive devices.” DeepSeek’s chatbot provided completely made-up information to a query in one instance. The firm stated, “This response underscores that some outputs generated by DeepSeek are not trustworthy, highlighting the model’s lack of reliability and accuracy. Users cannot depend on DeepSeek for accurate or credible information in such cases.”
We remind our readers that TikTok and DeepSeek are based in China, and the same national security concerns apply to both companies. DeepSeek is unavailable in Italy due to information requests from the Italian DPA, Garante. The Irish Data Protection Commissioner is also requesting information from DeepSeek. In addition, there are reports that U.S.-based AI companies are investigating whether DeepSeek used OpenAI’s API to train its models without permission. Beware of DeepSeek’s risks and limitations, and consider refraining from using it at the present time. “As generative AI platforms from foreign adversaries enter the market, users should question the origin of the data used to train these technologies. They should also question the ownership of this data and ensure it was used ethically to generate responses,” said Jennifer Mahoney, Advisory Practice Manager, Data Governance, Privacy and Protection at Optiv. “Since privacy laws vary across countries, it’s important to be mindful of who’s accessing the information you input into these platforms and what’s being done with it.”
Class Certification Granted – California Website Tracking Lawsuit Reminds Businesses about Notice Risks
A California federal district court recently granted class certification in a lawsuit against a financial services company. The case involves allegations that the company’s website used third-party technology to track users’ activities without their consent, violating the California Invasion of Privacy Act (CIPA). Specifically, the plaintiffs allege that the company along with its third-party marketing software platform, intercepted and recorded visitors’ interactions with the website, creating “session replays” which are effectively video recordings of the users’ real-time interaction with the website forms. The technology at issue in the suit is routinely utilized by website operators to provide a record of a user’s interactions with a website, in particular web forms and marketing consents.
The plaintiffs sought class certification for individuals who visited the company’s website, provided personal information, and for whom a certificate associated with their website visit was generated within a roughly year time frame. The company argued that users’ consent must be determined on an individual and not class-wide, basis. The company asserted that implied consent could have come from multiple different sources including its privacy policies and third-party materials provided notice of data interception and thus should be viewed as consent. Some of the sources the company pointed to as notice included third-party articles on the issue.
The district court found those arguments insufficient and held that common questions of law and fact predominated as to all users. Specifically, the court found whether any of the sources provided notice of the challenged conduct in the first place to be a common issue. Further, the court found that it could later refine the class definition to the extent a user might have viewed a particular source that provided sufficient notice. The court also determined plaintiffs would be able to identify class members utilizing the company’s database, including cross-referencing contact and location information provided by users.
While class certification is not a decision on the merits and it is not determinative whether the company failed to provide notice or otherwise violated CIPA, it is a significant step in the litigation process. If certification is denied, the potential damages and settlement value are significantly lower. However, if plaintiffs make it over the class certification hurdle, the potential damages and settlement value of the case increase substantially.
This case is a reminder to businesses to review their current website practices and implement updates or changes to address issues such as notice (regarding tracking technologies in use) and consent (whether express or implied) before collecting user data. It is also important when using third-party tracking technologies, to audit if vendors comply with privacy laws and have data protection measures in place.
HHS’s Proposed Security Rule Updates Will Substantially Increase the Controls Needed to Comply with the Technical Safeguard Requirements
In this week’s installment of our blog series on the U.S. Department of Health and Human Services’ (HHS) HIPAA Security Rule updates in its January 6 Notice of Proposed Rulemaking (NPRM), we are tackling the proposed updates to the HIPAA Security Rule’s technical safeguard requirements (45 C.F.R. § 164.312). Last week’s post on group health plan and sponsor practices is available here.
Existing Requirements
Under the existing regulations, HIPAA-covered entities and business associates must generally implement the following five standard technical safeguards for electronic protected health information (ePHI):
Access Controls – Implementing technical policies and procedures for its electronic information systems that maintain ePHI to allow only authorized persons to access ePHI.
Audit Controls – Implement hardware, software, and/or procedural mechanisms to record and examine activity in information systems that contain or use ePHI.
Integrity – Implementing policies and procedures to ensure that ePHI is not improperly altered or destroyed.
Authentication – Implementing procedures to verify that a person seeking access to ePHI is who they say they are.
Transmission Security – Implementing technical security measures to guard against unauthorized access to ePHI that is being transmitted over an electronic network.
The existing requirements either do not identify the specific control methods or technologies to implement or are otherwise “addressable” as opposed to “required” in some circumstances for regulated entities — until now.
What Are the New Technical Safeguard Requirements?
The NPRM substantially modifies and specifies the particular technical safeguards needed for compliance. In particular, the NPRM restructured and recategorized existing requirements and added stringent standard and implementation specifications, and HHS has proposed removing the distinction between “required” and “addressable” implementation specifications, making all implementation specifications required with specific, limited exceptions.
A handful of the new or updated standards are summarized below:
Access Controls – New implementation specifications to require technical controls to ensure access are limited to individuals and technology assets that need access. Two of the controls that will be required are network segmentation and account suspension/disabling capabilities for multiple log-in failures.
Encryption and Decryption – Formerly an addressable implementation specification, the NPRM would make encryption of ePHI at-rest and in-transit mandatory, with a handful of limited exceptions, such as when the individual requests to receive their ePHI in an unencrypted manner.
Configuration Management – This new standard would require a regulated entity to establish and deploy technical controls for securing relevant electronic information systems and the technology assets in its relevant electronic information systems, including workstations, in a consistent manner. A regulated entity also would be required to establish and maintain a minimum level of security for its information systems and technology assets.
Audit Trail and System Log Controls – Identified as “crucial” in the NPRM, this reorganized standard formerly identified as the “audit control” would require covered entities to monitor in real-time all activity in its electronic information systems for indications of unauthorized access and activity. This standard would require the entity to perform and document an audit at least once every 12 months.
Authentication – This standard enhances the implementation specifications needed to ensure ePHI is properly protected from improper alteration or destruction. Of note, the NPRM would require all regulated entities to deploy multi-factor authentication (MFA) on all technology assets, subject to limited exceptions with compensating controls, such as during an emergency when MFA is infeasible. One exemption is where the regulated entity’s existing technology does not support MFA. However, the entity would need to implement a transition plan to have the ePHI transferred to another technology asset that does support MFA within a reasonable time. Medical devices authorized for marketing by the FDA before March 2023 would be exempt from MFA if the entity deployed all recommended updates and after that date if the manufacturer supports the device or the entity deployed any manufacturer-recommended updates or patches.
Other Notable Standards – In addition to the above, the NPRM would add standards for integrity, transmission security, vulnerability management, data backup and recovery, and information systems backup and recovery. These new standards would prescribe new or updated implementation specifications, such as conducting vulnerability scanning for technical vulnerabilities, including annual penetration testing and implementing a patch management program.
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