As reported by the LA Times, “a powerful coalition of technology companies and business lobbies that included Facebook, Inc., Google, Inc., the California Chamber of Commerce, insurers, bankers and cable television companies as well as direct marketers and data brokers” were able to stop a California bill aimed at giving consumers greater insight as to the use of their personal data.

First introduced in February by Assemblywoman Bonnie Lowenthal (D-Long Beach), the proposed Right to Know Law (AB 1291) would have implemented major revisions to existing law and created new rights for consumers.  Specifically, the proposed law would require

any business that has a customer’s personal information, as defined, to provide at no charge, within 30 days of the customer’s specified request, a copy of that information to the customer as well as the names and contact information for all 3rd parties with which the business has shared the information during the previous 12 months, regardless of any business relationship with the customer.

This new level of transparency might have helped sooth consumer concerns.  According to a 2012 USC Dornsife/Los Angeles Times poll, “82 percent of Californians said they are “very concerned” or “somewhat concerned” about Internet and smartphone companies collecting their personal information.”   On the other hand, providing a full and accurate accounting of who had access to a consumer’s data – even to only the small percentage of consumers who would actually take the time to request it – would have generated a major undertaking for a wide range of companies.  It is not surprising that the companies who fought so hard to pull the plug on this bill represent a very diverse coalition of businesses.

Even if this bill does not get revived in a new form sometime in the future, the prospect of what it might have brought to the table should serve as a wake up call to those businesses deep into online behavioral advertizing.  It may be time to better understand just who has access to what information – and it may not eventually matter whether that information belongs to a current client or consumer or whether it was anonymized.  As usual, staying in front of the regulatory curve remains a sound business practice.

In Letting Down Our Guard With Web Privacy, published on March 30, 2013, the author details ongoing research being conducted by Alessandro Acquisti, a behavioral economist at Carnegie Mellon University.  Mr. Acquisti’s research is cutting edge when it comes to online behavioral advertising (OBA)  and associated consumer behavior.  Indeed, he’s the academic who famously announced in 2011 that one might be able to discover portions of someone’s social security number simply by virtue of a posted photograph.   His research often distills to one major premise – consumers may not always act in their best interests when it comes to online privacy decisions.

It appears consumers and merchants alike may be missing out on fully cultivating a very valuable commodity.  According to the World Economic Forum, “personal data represents an emerging asset class, potentially every bit as valuable as other assets such as traded goods, gold or oil.”  Rethinking Personal Data:  Strengthening Trust, at 7, World Economic Forum Report (May 2012).  Before this asset class can ever be completely exploited and fully commercialized, however, its constituent value components must be correlated by all in the privacy food chain.

Over three decades ago, it was recognized that the three pillars of privacy – the very foundation of personal data – secrecy, anonymity, and solitude, were distinct yet interrelated.  See Gavison, Ruth, Privacy and the Limits of Law, 89 The Yale Law Journal 421, 428-429 (1980) (“A loss of privacy occurs as others obtain information about an individual, pay attention to him, or gain access to him. These three elements of secrecy, anonymity, and solitude are distinct and independent, but interrelated, and the complex concept of privacy is richer than any definition centered around only one of them.”).

Current OBA has made it so these three privacy pillars may be confusing for consumers to value, manage, and isolate when online – it is not generally up to consumers whether they will be fed an ad based on previous website visits or purchases – it will just happen.  Indeed, according to a survey of 1,000 persons conducted by Ipsos Public Affairs and released by Microsoft in January 2013, forty-five percent of respondents felt they had little or no control over the personal information companies gather about them while they are browsing the Web or using online services.  This view may not be unfounded given that data routinely gathered online, e.g., operating system, browser, IP address, persistent cookies, last used server, can be used to divulge the activity of individual devices.

The privacy trade-offs being researched by Mr. Acquisti and others offer insight into the true value of these data constituents.  Consumers who try to “shut off” or render anonymous access to their device’s data or settings, would not only likely fail in their attempt at being anonymized, they would also lose out on access to most social media and other websites requiring browsers to accept cookies as well as product offers that may presumably are of interest.  Indeed, this coordinated tracking of consumers is not even unique to the Internet.   See generally Bibas, Steve, A Contractual Approach to Data Privacy, 17 Harv. J. Law & Public Policy 591 (Spring 1994) (“Although the ready availability of information helps us to trust others and coordinate actions, it also lessens our privacy. George Orwell presciently expressed our fear of losing all privacy to an omniscient Big Brother.  Computers today track our telephone calls, credit-card spending, plane flights, educational and employment records, medical histories, and more.  Someone with free access to this information could piece together a coherent picture of our actions.”).  There are even companies that bridge the gap between offline and online activities by taking in-store point of sale purchases and converting such data to an anonymous online cookie ID that will eventually be used online by clients.  Such use of in-store data is generally permissible under a retailer’s loyalty program.

Current law does not generally prevent someone from collecting public information to create consumer profiles – nor is there the right to opt out of having your public record information sold or shared.  And, when one wants to self-determine whether data will be disclosed or whether he or she will be “untraceable”, “anonymous” or “left alone”, there may not always exist the ability to easily curtail these rights from being exploited – there is certainly no way to obtain a direct financial gain in return for the relinquishment of such privacy rights.  Instead, there has generally been a “privacy for services” marketing/advertizing arrangement that has been accepted by consumers – which, in fact, has helped pay for and fuel the growth of the commercial Internet.

The current OBA ecosystem does not posit a “loss of privacy” as much as it offers a bartering system where one party feels the value of what is being bartered away while the other party actually quantifies with cascading/monetizing transactions what is only felt by the other party.  In other words, it is not a financial transaction.  Those who are able to find an entertaining online video or locate a product online using a search engine don’t really mind that an ad will be served to them while visiting some other website given they feel this loss of privacy is worth the value of the services being provided.

Ironically, the interactive advertising industry itself may believe it is collecting too much sensitive consumer data.  According to a study conducted by the Ponemon Institute, 67 percent of responding online advertisers believe “limiting sensitive data collection for OBA purposes is key to improving consumer privacy and control when browsing or shopping online.” Leading Practices in Behavioral Advertising & Consumer Privacy:  A Study of Internet Marketers & Advertisers, at 2, The Ponemon Institute (February 2012).

As recognized by privacy researchers, “[e]mpirical evidence on the behavioral effects of privacy is rather scarce.”  Regner, Tobias; Riener, Gerhard, Voluntary Payments, Privacy and Social Pressure On The Internet: A Natural Field Experiment, DICE Discussion Paper, No. 82 (December 2012) at 6.  Although “some consumers are willing to pay a premium to purchase from privacy protective websites”; there is no measure of what that premium should be or how widespread a factor it is for consumers as a whole.  Id. at 7.

More often than not, consumers have been “often willing to provide personal information for small or no rewards.”  Losses, Gains, and Hyperbolic Discounting: An Experimental Approach to Information Security Attitudes and Behavior, presented by Alessandro Acquisti and Jens Grossklags at the 2nd Annual Workshop on Economics and Information Security, College Park, Maryland, May 2003, at 4.

This does not mean researchers have not tried to quantify a “privacy valuation” model.  In 2002, a Jupiter Research study found 82% of online shoppers willing to give personal data to new shopping sites in exchange for the chance to win $100.  See c.f. Tsai, Janice; Egelman, Serge; Cranor, Lorrie; Acquisti, Alessandro; The Effect of Online Privacy Information on Purchasing Behavior: An Experimental Study, Information Systems Research (February 2010) at 22 (describing survey results which concludes that “people will tend to purchase from merchants that offer more privacy protection and even pay a premium to purchase from such merchants.”); Beresford, Alastair; Kübler, Dorothea; Preibusch, Sören, Unwillingness To Pay For Privacy: A Field Experiment, 117 Economics Letters 25 (2010) (“Thus, participants predominantly chose the firm with the lower price and the more sensitive data requirement, indicating that they are willing to provide information about their monthly income and date of birth for a 1 Euro discount.”).

In his 1994 paper, A Contractual Approach to Data Privacy, Steve Bibas suggests that individual contracts may provide the best solution to the privacy compensation dilemma:  “In the hands of the contracting parties, however, flexibility allows people to control their lives and efficiently tailor the law to meet their needs. Flexibility is the market’s forte; the pricing mechanism is extremely sensitive to variations in valuation and quickly adjusts to them.”  Bibas, 17 Harv. J. Law & Public Policy 591 (Spring 1994).   Mr. Bibas, however, recognized the limitations in what could be accomplished with privacy transactions that relied only on static privacy trades.  In other words, a model that might be effective is one that customizes the financial rewards to consumers are based on a continuous exchange of information between the consumer and merchant.

One problem most consumers face when using commonly marketed solutions that are meant to safeguard their privacy is that they fail to also create an acceptable value proposition for merchants.  As well, those recently formed companies promising a private web experience will not be able to – nor should they even try – to curtail firms from using OBA to reach consumers.  For the foreseeable future, OBA will continue to drive the Internet and “pay” for a much richer and rewarding consumer experience than would otherwise exist.  It may one day be determined, however, that an even more effective means to satisfy all constituent needs of the OBA ecosystem (consumer, merchant, publisher, agency, etc.) will be to find a means to directly correlate between privacy rights, consumer data, and a merchant’s revenue.

According to the World Economic Forum, “personal data represents an emerging asset class, potentially every bit as valuable as other assets such as traded goods, gold or oil.”  Given the inherent value of this new asset class, it’s no surprise there has been an ongoing tug of war regarding how consumers should be compensated for access to their personal data.

In a March 2003 Wired article titled, “Who’s Winning Privacy Tug of War?“, the author suggests that “[c]onsumers appear to have become weary of the advertising bombardment, no matter how targeted to their tastes those ads may be.”  And, the “tit-for-tat tactic on the Web” that requires users to provide certain personal information in exchange for product or other information may be much less than a perfect marketing model given these marketing preference databases “are polluted with lies.”

Fast forward a decade or so and companies are still trying to figure out the Privacy Tug of War rules of engagement.  In a report released on September 19, 2012, UK think tank Demos released a report it considered “the most in-depth research to date on the public’s attitudes toward the sharing of information.”   Not surprisingly, Demos found that in order to maximize the potential value of customer data, there needs to be “a certain level of trust established and a fair value exchange.”   The firm found that only 19 percent of those surveyed understand the value of their data, and the benefits of sharing it.

The surveys, workshops and other research tools referenced in the Demos report all point towards a “crisis of confidence” which may “lead to people sharing less information and data, which would have detrimental results for individuals, companies and the economy.”   Demos offers up a possible solution to this potential crisis:

The solution is to ensure individuals have more control over what, when and how they share information. Privacy is not easily defined. It is a negotiated concept that changes with technology and culture. It needs continually updating as circumstances and values change, which in turn requires democratic deliberation and a dialogue between the parties involved.

It is hard to have any meaningful deliberations when no one is charting a clear path to victory in the Privacy Tug of War — nor is there any consensus regarding whether it is preferable to even have such a path.   Some on the privacy circuit have suggested we must create better privacy metrics and offer tools to use those metrics to measure whether a company’s privacy protections are “satisfactory”.   Consumers right now can rely on sites such as Clickwrapped to score the online privacy policies of major online brands.   Certification services such as TRUSTe provide insight regarding the online privacy standards of thousands of websites.   If they don’t like what they see, consumers can always “opt out” and use services such as that of start-up Safe Shepherd to remove “your family’s personal info from websites that sell it.”

Unfortunately, no commercially available privacy safeguard, testing service or certification can ever move fast enough to address technological advances that erode consumer privacy given such advances will always launch unabated — and undetected — for a period of time.  Not unlike Moore’s Law regarding the doubling of transistor computing power every two years, it appears that consumer privacy diminishes in some direct proportion to new technological advances.  Consumer privacy expectations should obviously be guided accordingly.   Unlike with Moore’s Law, however, there is no uniform technology, product, or privacy metric that can be benchmarked as it is in the computer industry.

This does not mean we are powerless to follow technology trends and quantify an associated privacy impact.  For example, the Philip Dick/Steven Spielberg Minority Report vision of the future where public iris scanning offers up customized advertisements to people walking around a mall has already taken root in at least one issued iris-scanning patent that is jointly owned by the federal government and a start-up looking to serve ads suggested using facial recognition techniques.  In direct reaction to EU criticism of Facebook’s own facial recognition initiative, Facebook temporarily suspended its “tag-suggest” feature.  This automatic facial recognition system recognized and suggested names for those people included in photographs uploaded to Facebook – without first obtaining the consent of those so recognized and tagged.

Closely monitoring technological advances that may impact privacy rights — whether the body diagnostics of Mc10 and ingested medical sensors from Proteus, the latest in Big Data analytics, or a new EHR system that seamlessly ties such innovations together — becomes the necessary first step towards understanding how to partake in the Privacy Tug of War.

Unlike the PC industry that is tied to Moore’s Law, our government’s unbounded funding is an active participant in developing privacy-curtailing technological advances.  For example, the FBI is currently undergoing a billion-dollar upgrade creating its Next Generation Identification Program which will deploy the latest in facial recognition technologies.   As recognized by CMU Professor Alessandro Acquisti, this “combination of face recognition, social networks data and data mining can significantly undermine our current notions and expectations of privacy and anonymity.”

Not surprisingly, there has been some push back on such government initiatives.    For example, on September 25, 2012, the ACLU filed suit against several government agencies under the Freedom of Information Act seeking seeking records on their use and funding of automatic license plate readers (APLRs).  According to the Complaint, “ALPRs are cameras mounted on stationary objects (e.g., telephone poles and the underside of bridges) or on patrol cars [and] photograph the license plate of each vehicle that passes, capturing information on up to thousands of cars per minute.”   The ACLU suggests that APLRs “pose a serious threat to innocent Americans’ privacy.”

The imminent unleashing of unmanned aircraft systems – commonly known as “drones” – sets in motion another technological advance that should raise serious concerns for just about anyone.  Signed by President Obama in February 2012, The FAA Modernization and Reform Act of 2012, among other things, requires that the Federal Aviation Administration accelerate the use of drone flights:

Not later than 270 days after the date of enactment of this Act, the Secretary of Transportation, in consultation with representatives of the aviation industry, Federal agencies that employ unmanned aircraft systems technology in the national airspace system, and the unmanned aircraft systems industry, shall develop a comprehensive plan to safely accelerate the integration of civil unmanned aircraft systems into the national airspace system.

As recognized by the Government Accountability Office in a September 14, 2012 Report, even though “[m]any [privacy] stakeholders believe that there should be federal regulations” to protect the privacy of individuals from drone usage, “it is not clear what entity should be responsible for addressing privacy concerns across the federal government.”

This is not an insignificant failing given according to this same report, commercial and government drone expenditures could top $89.1 billion over the next decade ($28.5 billion for R&D and $60.6 billion for procurement).  Interestingly, the necessary comprehensive plan to accelerate integration of civil drones into our national airspace systems will be due on November 10, 2012 – right after elections.   According to an Associated Press-National Constitution Center poll, 36 percent of those polled say they “strongly oppose” or “somewhat oppose” police use of drones.   This somewhat muted response is likely driven by the fact most polled just do not understand the capabilities of these drones and just how pervasive they will become in the coming years.

The technology advance that may have the greatest impact on privacy rights does not take to the skies but is actually found in most pockets and purses.   The same survey referenced above found that 43 percent of those polled (the highest percentage) primarily use a mobile device alone rather than a landline or a combination of mobile device and landline — with 34 percent of those polled not even having a landline in their home.   Not surprisingly, companies have been aggressively tapping into the Big Data treasure trove available from mobile device usage.   Some politicians have taken notice and are already drawing lines in the digital sand.

Under the Mobile Device Privacy Act introduced by Congressman Edward J. Markey, anyone who sells a mobile service, device, or app must inform customers if their product contains monitoring software — with statutory penalties ranging from $1,000 per unintentional violation to $3,000 per intentional violation.   This new bill addresses only a single transgression of the personal-data-orgy now being enjoyed by so many different companies up and down the mobile device communication and tech food chain.   As evidenced by the current patent landscape — including an issued Google patent that involves serving ads based on a mobile device’s environmental sounds — and the now well-known GPS capabilities of mobile devices, the privacy Battle of Midway will likely be fought around mobile devices. Companies with a stake in the Privacy Tug of War — as well as those professionals who advise such companies — will only be adequately prepared if they recognize that this battle may ultimately have no clear winners or losers — only willing participants.