The RISKS Digest
Volume 13 Issue 18

Tuesday, 25th February 1992

Forum on Risks to the Public in Computers and Related Systems

ACM Committee on Computers and Public Policy, Peter G. Neumann, moderator

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o California data-privacy/comp.crime bill [PART TWO]
Jim Warren
o Info on RISKS (comp.risks)

California data-privacy/comp.crime bill [Part TWO]

Jim Warren <autodesk!megalon!>
Mon, 17 Feb 92 19:19:18 PST
                                               [PART ONE IS IN RISKS-13.17.]

=============== background comments by legislative assistant ===============

[[**** In this section, since underlining is for emphasis, only, and has no
legal meaning, I changed Mr. Firschein's underlined text to all-caps. ****]]

                       California State Senate
                            Bill Lockyer
                      Tenth Senatorial District
                       Southern Alameda County
                           State Capitol
                    Sacramento, California 95814

TO: Interested parties
FROM: Ben Firschein, Senator Lockyer's Office
DATE: February 14, 1992

   You should have received a copy of SB 1447 (Lockyer, Privacy) in the mail
recently.  Senator Lockyer introduced the bill in an effort to address some
of the concerns raised at the privacy hearing on December 10, 1991.
   This memorandum is intended to explain the intent of the various sections
of the bill, but it is not a committee analysis.
   (A committee analysis will be forthcoming at a later date, when the bill
is set for a hearing).  We welcome suggestions as to how to clarify the
language of the bill, or otherwise improve the bill.

   The bill may be cited as the "Privacy Act of 1992"

   This section requires the written consent of a consumer for a business
entity to (1) sell information obtained from the consumer's driver's license
or (2) use such information to advertise goods or services.
   The section is intended to cover instances where a consumer presents a
driver's license or identification card for identification purposes during a
business transaction.  The section is not intended to prevent businesses from
using driver's license information for business record-keeping, or for other
purposes related to the transaction (i.e. authorizing a transaction).
   The section is not intended to change existing law with respect to the
ability of businesses to obtain driver's license information from other
sources (such as DMV records).
   The need for this section is heightened by the new "magstripe" drivers
license developed by the Department of Motor Vehicles.  This license has a
magnetic stripe on the back which contains much of the information on the
front of the license.  The stripe will enable a business entity to store
information contained on a driver's license simply by scanning the card
through a reader.
   A publication by the Department of Motor Vehicles dated May 1991
("Department of Motor Vehicles Magnetic Stripe Drivers License/Identification
Card") states that "using point of sale (POS) readers and printers, the
business community can electronically record the DL [driver's license] /ID
number on receipts and business records."  The publication notes that
"magnetic stripe readers are readily available, relatively low in cost, and
are already available in many retail outlets."
   However, a merchant might access much more than the driver's license/ID
number; the publication notes that "readers have been produced, and market
available readers can be modified that will read the three tracks of
information contained on the California card."  According to the publication,
the tracks contain information such as license type, name, address, sex,
hair-color, eye-color, height, weight, restrictions, issue date.

   This section provides that an employer shall be liable to an employee or
prospective employee for damages caused by subjecting an employee to
discipline or discharge or denying employment to a prospective employee, on
account of the exercise by that person of privacy rights guaranteed by the
California Constitution.
   This section is modeled after Connecticut Labor Code Section 31-51q.  The
Lockyer bill goes further than the Connecticut statute in that it applies to
prospective as well as current employees.
   The bill would allow punitive damages and reasonable attorney's fees to be
awarded pursuant to Section 3 (page 3 lines 10-12).
   The bill would specify that if the court decides that an action for
damages was brought by an employee or a prospective employee without
"substantial justification," the court may award costs and reasonable
attorney's fees to the employer (page 3, lines 12-15).
   As with the Connecticut statute, an employee's cause of action would only
exist if the activity for which the employee was disciplined or discharged
did not "substantially interfere with the employee's bona fide job
performance or working relationship with the employer." (Page 3, lines 4-5).
   POSSIBLE AMENDMENT: The language in the bill covering prospective
employees (page 3, lines 6-9) omits the "substantial interference" language
contained in the section covering existing employees.  Perhaps the bill
should specify that a prospective employee lacks a cause of action if the
prospective employer has a compelling business interest in rejecting someone
because they engaged in certain acts (even though those acts were protected
by the constitutional right to privacy).
   Such an amendment would be consistent with cases such SOROKA V. DAYTON
HUDSON CORPORATION, 91 Daily Journal D.A.R. 13204 (1st Appellate District).
The court in SOROKA found that a psychological screening test administered to
Target Store security officer applicants violated the applicants' state
constitutional right to privacy when it inquired about their religious
beliefs and sexual orientation, because there was no compelling need for the
   POSSIBLE AMENDMENT # 2: One of the participants in the privacy hearing
suggests language making it clear that the rights and remedies set forth in
the section are not exclusive and do not pre-empt or limit any other
available remedy.
   POTENTIAL ARGUMENTS AGAINST THIS SECTION: Some may argue that in light of
cases such as Soroka, this statute is unnecessary, because these rights are
already set forth in existing case law.
   They may also point out that the California Supreme Court held in WHITE V.
DAVIS that the right to privacy is self-executing, meaning that every
Californian has standing to sue directly under Article I, Section I of the
California Constitution for a privacy violation.  WHITE V. DAVIS (1975) 13
Cal.3d 757, 775.  Given that the right to privacy is self-executing, why is a
statute needed?
   The answer is that case law is in a state of flux, and there is no
guarantee that future courts will construe Article I in such a liberal
fashion.  Also, the bill is an improvement over existing case law in that it
specifically lists the types of damages that may be awarded, including
punitive damages, and reasonable attorney's fees.

   Jim Warren (one of the witnesses at the hearing) posted the Leg Counsel
draft of the bill on one of the networks and showed me some of the responses.
This section generated most of the comments, some of which were quite vocal.
   First a word of caution to those uninitiated in the ways of the
proposed additions are contained in language that is in italics or
   PROPOSED ADDITION #1 (page 7, line 25): Extend the existing computer crime
statute [Penal Code Section 502] to allow civil recovery by any injured party
against someone convicted under Section 502 of breaking into a computer. (The
existing law just allows recovery by the owner or lessee of a computer
system). For example, if someone is convicted under Section 502 of breaking
into TRW's computers and altering credit records, the existing statute would
allow TRW to recover against the hacker in a civil suit, but the statute
would not allow someone whose credit history was injured by the hacker to sue
the hacker under statute.
   PROPOSED ADDITION #2 (page 7, lines 30-33): Extend Penal Code Section 502
to allow civil recovery against a convicted hacker for more than just the
cost of expenditures necessary to verify that a computer system was or was
not altered, damaged, or deleted by the access.  The proposed language would
allow civil recovery for ALL CONSEQUENTIAL OR INCIDENTAL DAMAGES resulting
from the intrusion.
   PROPOSED ADDITION #3 (page 7, lines 38-40 & page 8, lines 1-6): Create a
cause of action against those who "recklessly store or maintain data in a
manner which enables a person to commit acts leading to a felony conviction
under this section."
   The section is intended to address the situation where someone stores
information (e.g. credit data) in a manner which easily allows unauthorized
access, and the person who is able to access the information as a result of
the lack of safeguards injures a third party (e.g. a creditor, or a person
whose credit history is altered).
   The source of the section is the case of PEOPLE V. GENTRY 234 Cal.App.3d
131 (1991).  In that case, a hacker figured out that if he queried the credit
databases of TRW, CBI, or Trans Union, about a nonexistent person, each
system would create a new file for that non-existent person.  The non-
existent person would have an exemplary credit history, because there was no
negative credit information in the new file.  The hacker in the GENTRY case
went into the business of rehabilitating people's credit history by having
them change their name, and then creating credit files on these "new" people.
   The court stated in a footnote "we do not address the potential liability
to innocent third parties who might be harmed by this feature of the software
program.  Although Gentry found a weakness in the program and exploited it,
responsibility should not rest solely with the felon. Credit reporting
companies should recognize that this flaw is needlessly risky and remedy it."
(GENTRY, page 135, footnote 3).
   POTENTIAL CONCERNS:  some people who have seen the bill worry that section
4 would apply to someone (e.g. a computer bulletin board operator) who stores
information on a computer about how to commit a crime (e.g. information about
how to break into a computer, or how to build a bomb)
   The section is intended to be limited to reckless storage of data in a
manner which enables a person to commit acts LEADING TO A FELONY CONVICTION
UNDER SECTION 503 (not other types of criminal acts).  "Reckless storage" is
intended to mean maintaining a system that lacks appropriate security
safeguards; it is not intended to include storing information about how to
commit crimes. Hopefully any potential ambiguities can be clarified through
   PROPOSED ADDITION #4: The bill requires the reporting to local law
enforcement of violations of the computer crime statute (Penal Code Section
503) within 60 days after such violations become known to the owner or lessee
of a computer system (page 8, lines 26-34).  The bill states that "failure to
report a previous violation of this section to a local law enforcement
agency...may constitute evidence of [reckless storage of data]."
   This is intended to ensure that people report such crimes to law
enforcement.  There are anecdotal reports that some of these crimes are not
being reported because people are concerned about bad publicity resulting
from reports that their systems were broken into.
   POSSIBLE AMENDMENT: it has been suggested that the reporting requirement
be limited to certain types of systems, or to a certain level of monetary
loss.  Objections have been raised that the bill would apply equally to
someone who operates a home computer and to a business that operates a large
mainframe.  One could argue that the reporting requirement is more essential
where a computer owner has a fiduciary or quasi-fiduciary duty to the people
whose records are stored on the system (e.g. accounting or credit records).
An accountant's or a credit company's failure to report a computer break-in
is more serious than a computer game bulletin board operator's failure to
report a break in.
   One possible objection to restricting the reporting requirement to a
certain level of financial loss is that financial loss is hard to quantify.
   However, Section 503 already uses amount of financial loss to determine
the type of criminal penalty to apply, so one could argue that amount of
monetary loss could similarily be used as an indication of the need to

   Existing law directs Caltrans to develop specifications for automatic
vehicle tracking systems for toll facilities, such as those on bridges
(Streets and Highways Code 27565).  People will soon be able have a device
installed in their car which allows them to drive through a toll facility
without stopping.  The device will send a signal to a computer,  which will
keep track of their use of the facility.  At the end of the month, they will
get a bill. Presumably there will continue to be booths that people can drive
through and pay cash.
   At the December 10 privacy hearing, concern was expressed that the device
offers potential for abuse.  For example, if you know a particular vehicle is
driving through the facility, why not program the system to:
   1. Stop all people with outstanding warrants
   2.  Stop all people who have not paid their vehicle registration
   3.  Compile lists of all people who drove through the facility during a
given month and sell the lists to the private sector.
   One could argue that uses 1 and 2 are legitimate uses of this technology,
because people who have broken the law should expect to come into contact
with the police when they drive on public roads and highways.  But one could
also argue that people have an expectation of privacy when they drive and are
not breaking the law at the time they are stopped (e.g. they are not
speeding, driving under the influence, or otherwise doing anything to attract
the attention of the police).
   Use # 3 is harder to justify.  Why should people have to reveal their
personal lives to the private sector in order to use a device that will speed
up their commute?
   WHAT THE BILL DOES: The bill allows people the option of prepaying their
tolls, and then using the facility anonymously. People would continue to have
the option of being billed, rather than prepaying tolls.
   Under the bill, people who prepaid their tolls would be given an
identification number unrelated to the vehicle owner's name, address, social
security number, or driver's license number, or the vehicle's license number,
vehicle identification number, or registration (page 10, lines 34-40).  When
they drive through the facility, the facility would look at their account,
and let them through if there was still money in the account.
   The bill provides that once a numbered account has been established,
neither Caltrans nor a private facility shall keep any record of the vehicle
owner's name, address, social security number, or driver's license number, or
the vehicle's license number, vehicle identification number, or registration
(Page 11, lines 1-7).
   The user could make additional prepayments under the bill by specifying
the account number and furnishing payment (Page 11, lines 8-10).

[[**** END OF MR. FIRSCHEIN'S BACKGROUNDER ON SB 1447 OF FEB. 14, 1992 ****]]


[[**** Both of these documents were edited by word-processor, rather than
by retyping most of the text.  I believe it is faithful to the original.
Any errors are mine; not those of Mr. Firschein nor Sen. Lockyer.
  --Jim Warren ****]]

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