California bill encourages data protection

What happens when a quarter-million California state employees get mad? Bills get passed.

Case in point: SB 1386, which grew out of the high-profile theft of personal information from California state employees. The bill mandates that companies doing business in California must inform customers if they believe their personal information has been stolen. The bill was staunchly opposed by a number of industry groups, including the Software & Information Industry Association and the Information Technology Association of America.

Among other things, the law says that companies must report to their customers if they have reason to believe that personal information has been compromised. That standard is nebulous. It doesn't give any indication of how deep companies should dig into their systems to look for security breaches. It also doesn't tell them what to do when it isn't clear if a breach has occurred. The California bill says that the notification requirement for exposed personal information applies only to unencrypted personal information. That makes data encryption a "safe harbor" for companies, says Dan Burton, senior vice president of government affairs at Entrust Inc.

Companies worried about compliance should do a risk assessment of their IT resources and find out which databases contain personal identity information such as first and last name and Social Security number. Those data strings should then be encrypted, both for storage and transmission, Burton says.

"If you do that, according to (SB 1386), you don't have to worry about (U.S. Federal Trade Commission) action, class action lawsuits or attorneys general coming after you," he says. But 1386 doesn't specify what level of encryption must be used or how it should be used. It's presumed that this will be worked out in the courts as data is stolen and injured parties attempt to use the law for legal redress.

While the protection of personal data is good public policy, more work and, perhaps, overreaching federal legislation such as that proposed by Calif. Sen. Dianne Feinstein is needed to clarify some of the murky issues raised by the California law, experts say.