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FTC Sends Warning Shot to Organizations Allowing Peer-to-Peer Software on their Networks

23 February 2010

The Federal Trade Commission has warned one hundred businesses and organizations that peer-to-peer software (typically used by employees to download and share copyrighted music, software and movie files over the Internet) is exposing information on customers and employees, including health and financial data, Social Security numbers and driver's license numbers.

In a release entitled "Widespread Data Breached Uncovered by FTC Probe" the FTC warned that the presence of privacy-violating peer-to-peer software on an organization's network may represent a violation of the security obligations under a variety of federal statutes.

In one sample letter of the type sent to one of the 100 entities referenced in the FTC release the Commission wrote:

We have not determined whether your company is violating laws enforced by the Commission. However, the FTC is urging you to review your security practices for personal information about your customers and employees, and, if appropriate, the practices of contractors and vendors with access to such information, to ensure that the practices are reasonable, appropriate, and in compliance with the law. It is your responsibility to protect such information from unauthorized access, including taking steps to control the use of P2P software on your own networks and those of your service providers. (emphasis supplied)

In the letters sent to organizations found to be hosting the P2P software, the Commission also pointedly provided a link to the long list of enforcement actions taken by the Commission for inadequate data security (leading to compromised personal privacy).

While focused on the data security threats created by P2P software, the FTC's release also underscores the importance of data security generally and the legal risks involved in not adequately addressing the issue.   (In that connection, Hogan & Hartson's privacy and data security practice group regularly assists clients in conducting a risk management assessment to indentify privacy and data security issues, including the presence of P2P software, and to suggest remedial steps.)

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