World events, such as the COVID-19 pandemic, have accelerated the need for business operations to grow more digitally reliant and driven. As the global network grows and becomes more interconnected, privacy and data-protective measures have become a paramount consideration for business organizations in response to ensuing frequent and highly publicized data breaches. Given that the current pace of technological advances and innovation is expected to continue, it is important for companies to understand the security safeguards and regulations in place to protect their privacy and data. It is also important for companies to be mindful of relevant legislation and regulations on the horizon to address the pressing privacy and data challenges facing business operations everywhere.
In this roundup of key takeaways from Morgan Lewis’s Technology Marathon and Asia Technology Innovation webinar series, we take a look at the patchwork of privacy and data laws and legislation developing in the United States, United Kingdom, Europe, and China.
The privacy legislative landscape is active on the US front, with data privacy laws taking effect in California, Virginia, Colorado, Utah, and Connecticut throughout 2023.
With the new year only months away, it is prime time to be thinking about compliance with the varying requirements and the scope of one’s business obligations under these privacy laws. In addition to the five above states, nearly a dozen others are actively debating imposing a comprehensive privacy law. Morgan Lewis is tracking developments in all 50 states in its US Privacy and Data Protection Law Tracker as new data privacy legislation is proposed, enacted, and amended.
Currently, the United States does not have a federal data privacy law. While several federal bills have been proposed over the years, none have been successful. In May 2022, a bipartisan group of legislators introduced the American Data Privacy and Protection Act, which includes federal preemption of state laws with some exceptions, such as a limited private right of action for certain privacy violations. The chances of the act’s passage remain unclear, but there has been some noteworthy movement with a draft of the legislation being circulated on Capitol Hill and among key industry stakeholders.
Biometric Data Privacy
Currently, only Illinois, Texas, and Washington have enacted biometric privacy laws, although in 2022 new biometric laws were considered in at least eight states. Most often, the Illinois Biometric Data Privacy Act seems to serve as the inspiration for developing legislative activity in this space. It is likely that states without biometric legislation will look to the Illinois law as a model. In some instances, localities such as New York City have regulated the collection and use of biometric data.
In our recent Technology Marathon presentation, “New State Consumer Privacy Laws,” we discuss the latest developments in state consumer privacy legislation and consider how businesses can meet the challenges of a US privacy regulatory landscape that is growing increasingly complex.
US Congressional Activity Related to Privacy
In addition to the American Data Privacy and Protection Act mentioned above, there have been recent privacy and data security developments on Capitol Hill and at the Federal Communications Commission and Federal Trade Commission (FTC).
For instance, the Computer Fraud and Abuse Act (CFAA) is one of the very few statutes that addresses privacy and data protection from a federal level, where it imposes criminal and civil liability on anyone who “intentionally accesses a computer without authorization or exceeds authorized access.” Website owners have used the CFAA as a method to protect themselves from unauthorized scraping of data and other information from their website(s).
Additionally, a recent US Court of Appeals for the Ninth Circuit ruling upheld that the data scraping of public websites is not unlawful. On April 18, 2022, the Ninth Circuit affirmed its previous decision that plaintiffs may not use the CFAA as a deterrent to keep third parties from data scraping their websites.
The following is a list of recently introduced privacy-related legislation, although it remains to be seen whether such will progress:
In our recent Technology Marathon presentation, “Hot Privacy and Data Security Issues on the Hill and at the FCC and FTC,” we consider legislative initiatives and priorities of the FCC and FTC in this space. We also examine the continuing evolution of Telephone Consumer Protection Act litigation, recent developments concerning the interpretation of the Computer Fraud and Abuse Act, and other timely topics.
The United States in many ways is playing catch-up to certain data privacy regulations that are already in place in Europe. In 2022, there have been a number of new developments in data privacy across Europe, particularly as governments and regulators continue their acute focus on cross-border data transfers, along with updates to the Privacy Shield 2.0 and requirements for data transfers. In addition, we saw the United Kingdom’s new proposed Privacy Bill, which sets out to amend some of the United Kingdom’s obligations under the EU General Data Protection Regulation (GDPR) post-Brexit, but there does not appear to be any proposed dilution of privacy rights and obligations, meaning that the United Kingdom is likely to retain adequacy with the European Union.
EU Regulatory Activity
In April 2022, the French Blocking Statute was amended to include requirements for French companies receiving discovery requests to report them to French authorities and provide them with more information to evaluate those requests. The French Blocking Statute was originally enacted as a level of protection for French businesses and individuals against requests for information from other nations. It prohibits the disclosure of information that would harm the security or economic interests of France, unless already allowed under an existing treaty.
Privacy Shield 2.0
The Trans-Atlantic Data Privacy Framework (TADPF) was announced in February 2022. Although details have yet to be released on the TADPF, it will likely:
If the European Commission and US government agree to the TADPF, the approval process will commence and could anticipate an EU Adequacy Decision by early 2023. In the meantime, data importers and exporters may want to rely on other data transfer tools, such as the new EU Standard Contractual Clauses, or, in rare instances, derogations under Article 49 of the GDPR, such as individual, specific consents.
Standard Contractual Clauses
According to the GDPR, contractual clauses establishing the appropriate data protection safeguards can be used as a method for data transfers from the European Union to third countries. This includes contract clauses—so-called Standard Contractual Clauses (SCCs)—that have been preapproved by the European Commission. In June 2021, the European Commission issued modernized SCCs that replaced the three sets of SCCs, which had been adopted under the previous Data Protection Directive 95/46, to now include four modules. These include “docking clauses,” which provide the flexibility to add additional parties (e.g., subprocessors) in the future.
Organizations should take note that after December 27, 2022, they cannot lawfully rely on prior SCCs to transfer data to the United States and other countries without an adequacy decision. Following Brexit, the United Kingdom is on a different regime. For transfers from the United Kingdom, existing SCCs can be used for new processing arrangements until September and referenced until March 2024.
Data Transfer Impact Assessments
Businesses with international operations and many companies, including small- to medium-sized enterprises, that rely on foreign providers should be concerned with complying with the requirements of a Transfer Impact Assessment (TIA) before transferring data to third countries. A relatively new term to the privacy world, a TIA stems from Clause 14 of the new SCCs. Conducting a TIA can be complicated, especially given the fact that there are no general standards and no template provided by the European Commission to help complete the process. The assessment consists of several components, including a risk analysis, asking for difficult determinations to be made that require a deep dive into US law, which European exporters may not be in a position to conduct.
Data Subject Access Requests
Over the last couple of years, privacy laws such as GDPR and CCPA have smoothed the path for individuals to learn how companies are using and processing their personal information. Consumers can obtain this information by making data subject access requests (DSARs). For companies, responding to DSARs can be a tedious process, so it is important to be mindful of the scope of access rights granted by privacy laws across jurisdictions, as well as the response deadlines that can range from one month to 45 days. Of equal significance is familiarity with data sources. While it can be difficult to identify the systems where data can reside and extract this information from those sources, companies gearing up for compliance need to be familiar with their data systems. Reasonable measures should be used to verify the identity of a data subject, and personal information should only be released in a secure manner after verifying the request.
Next year is anticipated to be a significant year for DSARs in the United States, with a likely expansion of rights beyond California into other states in 2024. US companies can learn from GDPR/UK GDPR guidance and experiences, including from the UK Information Commissioner’s Office’s guidelines on requesting compliance and from the European Data Protection Board’s guidelines on data subject rights.
Multinational tech companies handle significant amounts of often potentially sensitive personal data. The three most critical legal frameworks for data protection affecting global tech companies in China are the Cybersecurity Law (CSL), which took effect in 2017, and the Data Security Law (DSL) and Personal Information Protection Law (PIPL), both of which took effect in 2021. These laws demonstrate the Chinese government's aim in enhancing data protection supervision, specifically with respect to data that will impact data security and national security. Over the last year, a series of guiding regulations and national standards have been rolled out, further clarifying the new regulatory requirements. This includes most recently the Security Assessment Measures for Cross-Border Data Transfers. Effective from September 1, 2022, these apply to corporations transferring data from China to overseas countries/regions, with a six-month grace period for companies to take remedial actions to complete the government security assessment as required.
Issues Affecting Multinational Technology Companies
Proactive Steps to Mitigate Compliance Risks
China’s dynamic data protection regime continues to evolve. Regardless of the size of the entity operating in China, these developments will have an impact on nearly every company doing business in China, as the regulations protect all information from customer data to employee-hiring documents.
In our recent Asia Technology Innovation Series presentation, “China’s Privacy Regime: What Tech Companies Need to Know,” we provide an overview of PIPL and DSL, and their impact on the technology industry, cross-border transfer of data and technology, and relevant data privacy compliance issues.
The digital transformation of business operations and consumer habits is escalating the amount of data collected, transferred, and shared. Laws and regulations are playing catch-up with the complex, fast-evolving environment of technology. In order to navigate and effectively comply with the labyrinthine data privacy landscape, entities should keep an eye on the latest enforcement actions, review the latest guidance documents interpreting laws and regulations, and incorporate emerging privacy and security best practices.
Asia Tech Innovation Series
The series features a set of tailored webinars focused on hot topics, trends, and key developments in the technology industry that are of essential importance to our friends and clients operating in Asia.
US Privacy and Data Protection Law Tracker
To help companies and institutions of all sizes navigate the myriad challenges of this evolving regulatory landscape, Morgan Lewis is tracking developments in all 50 states as new data privacy legislation is proposed, enacted, and amended.
US Consumer Privacy Acts
Influenced by California’s Consumer Privacy Act (CCPA) and Europe Union’s General Data Protection Regulation (GDPR), a wave of new data privacy legislation has been introduced across the United States, including updates in California. This page for the latest developments during this critical juncture in US privacy regulation.
California Privacy Protection Agency Kicks Off CPRA Rulemaking Process
Businesses operating in California should follow the development of the California Consumer Privacy Rights Act regulations because, unless they are significantly modified, they are likely to once more place California on the cutting edge of US privacy regulation.
China’s Cross-Border Data Transfer Security Assessment Measures Take Effect September 1
The Cyberspace Administration of China’s Measures for Security Assessment of Cross-border Data Transfer have retroactive effect for cross-border data transfers conducted prior to September 1, 2022. Businesses have a grace period of just six months to rectify any noncompliant activities pertaining to data transfers out of China, and should bring their practices in line with the security assessment requirements as soon as possible.
Could Sensitive Personal Data Become Export Controlled?
Five US senators recently introduced legislation that would amend US export control laws to protect sensitive personal data. The bipartisan bill, titled the Protecting Americans’ Data from Foreign Surveillance Act of 2022, would provide additional authorities to the secretary of commerce, who is already charged with administering the US export control regime.
UK Government Outlines Plans to Tackle Big Tech Dominance
On May 6, 2022, the UK government outlined its plans to boost competition and drive economic growth and innovation in a major regulatory reform aimed at big tech. The news comes in the wake of fears that a handful of tech giants disproportionately dominate the market, subjecting smaller businesses to predatory prices and ultimately harming consumers through higher prices as well as limited options and control over their online experiences.