Making Sense of the Internet of Things

Lefkowitz_peterby Peter M. Lefkowitz

The Profession

We have seen the marketing. According to a recent report by a top consulting firm, the Internet of Things will have an annual economic impact of between $4 trillion and $11 trillion by 2025.  Another firm has announced that there will be 50 billion internet-connected devices globally by 2020.  And companies already have rebranded in grand fashion, declaring the arrival of “Smart Homes,” “Smart Cities,” the “Smart Planet,” the “Industrial Internet” (the contribution of the author’s company), and even the “Internet of Everything.”  We also have seen the reality of Fitbits that record our activity and suggest changes to our exercise and sleep patterns, cars that accept remote software updates, and airplane engines that communicate maintenance issues from the tarmac.  For all of this potential, and even greater claimed potential, our shared late-night admission is that none of us has a well-defined picture what, precisely, the Internet of Things is or does.

This combination of wide promise and shared confusion is not a trivial matter.  Companies are setting long-term strategy based upon Jetsons-like glimmers of the future; consumer expectations and fears are being set in an environment of rapidly-evolving offerings and — most critically for attorneys providing advice to clients considering investments in this area  — legislators and regulators are being asked to set legal and enforcement frameworks without a clear picture of the future product landscape or whether products still in their infancy will create anticipated harm.  In order to advise properly in this area, and to avoid regulatory frameworks getting far ahead of actual product development, it is important that lawyers appreciate the scope of Internet of Things technology and the policy implications of internet-connected goods and the data they create and use.

So what is the Internet of Things?  Simply put, the Internet of Things, or IoT, is a set of devices that connect to and send or receive data via the internet, but not necessarily the devices people most often think of as being connected to the internet.  In the consumer world, IoT includes smart meters that measure home energy use, refrigerators that can report back on maintenance needs or whether the owner needs more eggs, and monitors that can record blood sugar results and communicate via Bluetooth to a connected insulin pump.  It also increasingly includes cars that sense other cars in close proximity and record and report on driver speed, location and music listening choices.  And in the industrial space, offerings include an array of sensors and networks that measure and manage the safety and efficiency of oil fields or the direction, speed and service life of wind turbines and airplane engines;  X-ray and CT machines with remote dose monitoring; and badge-based radio-frequency identification systems that analyze whether medical providers are washing their hands in the clinical setting and the resulting impact on infection rates.  This definition generally does not include computers, tablets and other computing devices, although — with smartphone apps advancing to the point of measuring movement and heart rate and reading bar codes to compare prices at local retailers — one could argue that the iPhone and Android phone are the Swiss Army Knives of personal internet-based data collection and use.  In turn, IoT devices generate large sets of sensor-based data, or Big Data, which can be aggregated and analyzed to generate observations concerning the world around us and to improve products and services in healthcare, energy, transportation and consumer industries.

These developments have not been lost on government.  The White House has commissioned two major studies on the potential of Big Data.  The Federal Trade Commission held a full-day workshop to discuss IoT in the home, in transportation and in healthcare, and FTC staff subsequently issued a comprehensive report discussing benefits and risks of IoT.  Branches of the European Commission are encouraging companies to establish European research and development footholds for internet-based devices.  The European Commission noted the development of internet-based devices and the prospect of a Digital Single Market as inspirations for the anticipated replacement of the European Data Privacy Directive.  And European Data Protection Commissioners have boldly asserted their authority, declaring that in light of the risk presented by sensor-based devices, “big data derived from the internet of things . . . should be regarded and treated as personal data” under European data privacy law.  Unfortunately, the Commissioners did not distinguish industrial uses such as wind turbines and oil wells from consumer goods that actively collect personal information.

The FTC report above summarizes many of the practical and policy challenges presented by emerging IoT technologies and the views of advocates for industry and consumers.  Security is, for many, the most compelling issue.  Internet-connected devices must collect data accurately; those data sets need to be communicated securely to data centers; and devices and back-end computing systems need to be protected against hackers, both to protect the data collected from devices and to protect the networks and devices against hijacking.  Recent stories of rogue engineers using laptops to break into parked cars and controlling car brakes remotely, and the dystopian nightmare of a hacked pacemaker on the TV drama Homeland, have not helped mitigate these concerns.  This risk is compounded by the prospect of “big data warehouses” that can store and analyze zettabytes of data in support of technological breakthroughs.

Separately, there is the question of notice and consent for the collection and use of IoT data.  As the FTC staff report notes, it is significantly easier to provide notice about a company’s data practices on a computer screen than on a piece of medical equipment or in a friend’s car that already is collecting and reporting a wide array of data.  This problem is compounded in industrial settings, for example, where passenger weight is analyzed to optimize airplane engine function, or where data sets from and surrounding an MRI machine are communicated to the hospital network to read the scan and to the device manufacturer to facilitate maintenance and product improvement.

Other questions abound.  Will data from an internet-connected device be used for unanticipated purposes, such as devising large consumer medical or credit reports, without the consumer having the ability to know what is being done or how to correct or delete data?  Will providers use data to discriminate improperly, or will better use of data create a more level playing field, facilitating new services at lower prices for a wider swath of consumers?  And are some issues already addressed by current regulatory frameworks like HIPAA or the Fair Credit Reporting Act, related standards like the Payment Card Industry security rules, or extensive regulatory frameworks governing security and data use for government contractors, transportation providers and energy providers?

In turn, certain baselines have emerged.  First, “security by design” and “privacy by design,” the practices of building security and privacy protections into the development lifecycle of goods and networks, are essential.  These requirements become even more compelling in light of the recent decision of the Third Circuit in FTC v. Wyndham Corporation Worldwide, holding, among other things, that the FTC has authority to bring claims alleging “unfairness” for a company’s purported failure to properly secure networks and data.  Second, companies collecting data from IoT devices must carefully consider how much data they need and whether it can be de-identified to minimize privacy risk, whether the data will be aggregated with other data, and whether consumer choice is needed to make specific use of the resulting data set.  And in light of privacy and national security laws around the world — including recent data localization and national security laws in Russia and China — companies will need to evaluate where data is transferred globally and where to locate the associated databases and possibly even global computing, service and engineering staff.

Much of the promise and peril of the Internet of Things and Big Data are in the future.  Google and Dexcom, a maker of blood sugar monitoring devices, recently announced an initiative to make a dime-sized, cloud-based disposable monitor that would communicate the real-time glucose values of diabetes patients directly to parents and medical providers.  No date has been announced, although recent advances in remote monitoring suggest hope.  And the journal Internet of Things Finland recently published an article announcing the proof-of-concept for a “wearable sensor vest with integrated wireless charging that . . . provides information about the location and well-being of children, based on received signal strength indication (RSSI), global positioning system (GPS), accelerometer and temperature sensors.”

Thus far, rule-making has focused on security standards for connected devices and related computing networks.  The FDA has issued detailed security guidance for connected devices and systems, and the Department of Defense has issued security standards for contractors that include an expansive definition of government data subject to coverage under the U.S. Department of Commerce’s NIST 800-171 standard for protecting sensitive federal information.  However, there has not been a push in the U.S. for comprehensive legislation governing internet-connected goods and services.   As the FTC staff report explained: “[t]his industry is in its relatively early stages.  Staff does not believe that the privacy and security risks, though real, need to be addressed through IoT-specific legislation at this time.  Staff agrees with those commentators who stated that there is great potential for innovation in this area, and that legislation aimed specifically at IoT at this stage would be premature.”

The marketplace for internet-connected goods and services surely will continue to expand, and the product and service landscape will advance rapidly.  Whether we will see more than $10 trillion dollars of annual economic impact has yet to be determined.  In this fast-moving environment, companies considering investment in the Internet of Things and Big Data and the attorneys who advise them would be well served to monitor the evolving regulatory and legislative landscape.

Peter Lefkowitz is Chief Counsel for Privacy & Data Protection, and Chief Privacy Officer, at General Electric. Mr. Lefkowitz previously served on the Boston Bar Journal’s Board of Editors.

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