Insights
Publications

What California’s New Security Law Means to Your Business

June 13, 2019 Articles

Commonsense IoT security steps that startups and small business should consider to comply with California’s new law

California recently enacted a new law, Senate Bill 327, that requires companies that make Internet of Things (IoT) devices to incorporate minimum security features for every device. The federal government is also ramping up efforts to regulate IoT security, with everyone from the U.S. Senate to the Commerce Department to the FTC getting involved. Many large companies will already have detailed security and privacy protocols in place for the IoT development processes. But what are some commonsense, inexpensive steps that entrepreneurs, startups, and smaller companies can take in response to California’s new law and possible federal action in the near future?

It’s worth knowing that the California law is vague—intentionally so, it turns out. SB 327 requires manufacturers of any device that’s “capable of connecting to the internet, directly or indirectly, and that is assigned an Internet Protocol address or Bluetooth address” to have “a reasonable security feature or features” designed to prevent unauthorized users from accessing the device. Cal. Civ. Code, section 1798.91.04(a) (full text available here). The law also sets minimum password requirements for any device capable of authentication outside a local area network (LAN). For those devices, a security feature is deemed “reasonable” if there is either (1) a pre-programmed password that is different for each device (as opposed to, say, a pre-set password common to an entire batch or line of devices), or (2) the device requires the user to create a new password before the user can access the device for the first time. See section 1798.91.04(b). One last word about the basics of this new law: it doesn’t kick in until January 1, 2020, so there’s some time to put measures in place to comply with it.

Beyond these minimum password requirements, what’s a “reasonable security feature?” The law doesn’t really say, and that’s intentional. The legislative history behind the law strongly suggests that the author, State Senator Hannah-Beth Jackson, intended to leave it up to industry to define what’s reasonable. For example, Senator Jackson testified before the Assembly Appropriations Committee on August 15, 2018 that the bill “gives industry wide latitude in determining what precise security measures are needed for each particular device” in light of the “ever changing landscape of cybersecurity.”

Legislators at the federal level are also showing increasing interest in IoT security and privacy issues, but they also seem to be struggling to legislate in an area where new kinds of threats arise seemingly every day. What might be good security today could be outdated in days or weeks. For example, in a 2015 study, the FTC (like the California law) simply threw the issue back onto the business community, concluding that there should be “further self-regulatory efforts on IoT” (emphasis added, see the full FTC report here). More recently, as GeekWire reported here, Representative Suzan DelBene, the co-founder of the Congressional Caucus on the Internet of Things, remarked at an industry conference on the challenge of passing a law “given how much things are changing.”

A bipartisan group of U.S. Senators is also working on an updated version of legislation on standards for IoT security called the Internet of Things Cybersecurity Improvement Act. This shows continued interest in this area at the federal level, but these senators also seem keenly aware that it’s hard to legislate cutting edge technology. Some of the authors had previously proposed similar legislation that actually required certain password and software updating features, but the current bill merely calls on the National Institute of Standards and Technology to make recommendations that could be the baseline for federal IoT purchases in the future (see a description of the original bill here and the current one here). Similarly, the SMART IoT Act, which passed the House in November 2018 (full text here), merely directed the Commerce Department to conduct research into potential IoT security measures.

So, for the time being at least, industry is setting the pace on this subject. What does that mean for small business and startups wondering how to comply? Based on our discussions and counseling with companies in the IoT business, the following four measures seem to be commonsense steps that businesses of any size can implement:

  1. Make cybersecurity part of your design and product launch protocols so that it is considered up front, even for updates;
  2. Comply with reasonable password requirements, such as those set forth in the California legislation;
  3. Ensure all devices can be automatically patched when security vulnerabilities are identified; and
  4. Consider how your device’s interaction with third-party devices and software might expose new vulnerabilities.

Until industry can agree on a standard or legislators find a way to enact flexible laws to address these threats, instituting a deliberate protocol for considering IoT cybersecurity that includes at least these steps may be the best defense.

Alex Reese is a senior associate at Farella Braun + Martel, a leading Northern California law firm. He helps individuals and companies of all sizes resolve disputes involving technology and issues of unfair competition. @FarellaBraun

Firm Highlights

Publication

Facebook Suspends Apps That Scrape Data From Its Platform Following Cambridge Analytica Scandal

Read More
Publication

Securing Against Trade Secret Pitfalls and Dangers Arising From Employee Mobility Situations

Published on ACCDocket.com . By Walt Norfleet, Smiths Group plc and Eugene Y. Mar, Farella Braun + Martel LLP Picture this: Your company is in a highly competitive industry with several leading players heavily supported...

Read More
Publication

Who 'Owns' a Secret? Whether Trade Secret Licensees Have Standing to Sue in California

If the eye-popping damages awards in several recent lawsuits are any indication, companies are increasingly coming to see their private information as one of their most valuable assets—and California juries apparently agree. For example...

Read More
Event

WSJ Pro Cybersecurity Symposium

Tyler Gerking will be speaking at the WSJ Pro Cybersecurity Symposium session, "The Role of Cyber-Insurance." Details: How much should you buy, what does it cover and how does it fit with an overall...

Read More
News

Farella Braun + Martel Ranked Among “Best Law Firms” by U.S. News & World Report and Best Lawyers

Read More
News

Jeff Fisher Named Among California’s 2019 Top Trade Secrets Lawyers by the Daily Journal

SAN FRANCISCO, October 9, 2019: Farella Braun + Martel is proud to announce that Jeffrey M. Fisher was named among the “Top Trade Secrets Lawyers” in California by the Daily Journal . Fisher has...

Read More
Publication

Practices to Protect Trade Secrets in Failed Acquisitions and Customer Relationships

Published on  ACCDocket.com . By Walt Norfleet, Smiths Group plc and Eugene Y. Mar, Farella Braun + Martel LLP In part one of this three-part series on best practices for protecting trade secrets and guarding...

Read More
News

Benchmark California 2020 Ranks Farella Among Top Litigation Firms

Doug Young named among Top 20 Trial Lawyers in California SAN FRANCISCO, October 16, 2019: Farella Braun + Martel continues to be ranked among the top litigation firms by Benchmark California 2020, a guide...

Read More
Publication

Cannabis Companies and the California Consumer Privacy Act

Read More
Publication

Nonprofits and the California Consumer Privacy Act

The new California Consumer Privacy Act of 2018 (CCPA) will come into effect January 1, 2020. In most situations, nonprofits won’t be subject to the law—but in some cases they necessarily will be and/or...

Read More