1st Circuit and FTC Address Definitions of “PII,” While Michigan Amends Privacy Law to Remove Statutory Damages

On April 29, 2016, the U.S. Court of Appeals for the First Circuit handed down its widely anticipated opinion in Yershov v. Gannett Satellite Information Network, Inc., in which it expanded the reach of the Video Privacy Protection Act ("VPPA" or "Act") by endorsing a considerably expanded view of how the statute applies in the digital media context. In its decision, the court held that (1) "personally identifiable information" ("PII") includes the GPS coordinates of a device; and (2) a user of a mobile application – even one who does not pay or otherwise register to use the app – qualifies as a "consumer" entitled to the protections of the Act. Although the information Gannett transferred to a third party also included unique device identifiers (i.e., an Android ID), the court noted that its holding "need not be quite as broad as [its] reasoning suggests," leaving unanswered the question of whether device identifiers alone would constitute PII.

With this condition set out in the holding, the decision may not be as far out of step with a slew of prior federal district court decisions holding that a consumer's personal data, when disclosed, must identify a particular individual, without more, to qualify as PII. The court found that GPS coordinates are more like a traditional street address than numeric device IDs such that their disclosure "effectively reveal[ed] the name of the video viewer."

The holding does, however, significantly expand most other courts' limited interpretation of "consumers" entitled to the protection of the Act. Those decisions (including one that relied on the now-reversed district court decision in Yershov) have generally held there must be some ongoing commitment by the consumer, even if the commitment was not monetary, beyond merely downloading an app or using a service. The First Circuit acknowledged that there were issues of fact not considered on a motion to dismiss such that its conclusions (as an appellate court) on Yershov's status as a "subscriber" and Gannett's violations of the VPPA could both be changed by the district court after remand and discovery. Nonetheless, the Yershov decision will no doubt give plaintiffs incentive to file new cases now.

Adding fuel to Plaintiffs' fire, the Yershov decision may be bolstered by a recent Federal Trade Commission (FTC) blog entry posted by Director Jessica Rich, in which she stated that the FTC "regard[s] data as ‘personally identifiable,' and thus warranting privacy protections, when it can be reasonably linked to a particular person, computer, or device" (emphasis in original). Director Rich went on to state that "in many cases, persistent identifiers such as device identifiers, MAC addresses, static IP addresses, or cookies meet this test." The contours of how easy or difficult it should be to "link" an identifier in order to qualify as PII will likely be a hotly contested issue in pending and future VPPA cases.

Moreover, as information proliferates and the definitions of PII and "personal information" evolve, legacy statutes designed in an era where it was difficult to correlate data points to identify actual people become problematic, especially when statutory damages are involved. To address this problem, Michigan recently amended its state version of the VPPA to both (1) eliminate the $5,000 per person statutory damage provision and require actual damages as a result of an alleged violation; and (2) permit the disclosure of PII in the ordinary course of business, including when marketing goods and services to customers or potential customers, when written notice is provided.

While the Michigan amendments are an important development for a number of publishers that have been targeted in state class actions, they provide no relief under the federal VPPA, nor are we likely to see similar amendments at the federal level in the near future. Therefore, as this body of case law develops, it is important for companies who disclose consumer viewing data coupled with other identifiers to consider approaches that reduce the plausible "linkage" between such identifiers and a person's actual identity.

Court Expands Definitions of "PII" and "Consumer" under the VPPA

The VPPA prohibits the "knowing" disclosure of the "personally identifiable information" of a "consumer of such provider" except in narrow and clearly defined circumstances. The two central issues considered by the court in Yershov were whether the information shared constituted PII, and whether the plaintiff was a "consumer" for purposes of the statute. Yershov alleged that Gannett violated the VPPA by sharing with Adobe data related to the videos he viewed through its free USA Today Mobile App which consisted of: (1) the title of the video viewed; (2) the GPS coordinates of the device at the time the video was viewed; and (3) unique device identifiers.

The court, taking the pleaded allegations as true, found that Adobe was able to combine the information provided by Gannett with a larger profile of information about the plaintiff gathered from other sources, in order to personally identify him and the videos he was watching (thus triggering the potential VPPA violation). According to the court:

"[W]hen a football referee announces a violation by ‘No. 12 on the offense,' everyone with a game program knows the name of the player who was flagged. … [A]ccording to the complaint, when Gannett makes such a disclosure to Adobe, it knows that Adobe has the ‘game program,' so to speak, allowing it to link the GPS address and device identifier information to a certain person by name, address, phone number, and more."

The court did recognize that "there is certainly a point at which the linkage of information to identity becomes too uncertain, or too dependent on too much yet-to-be-done, or unforeseeable detective work," but concluded that in this case "the linkage, as plausibly alleged, is both firm and readily foreseeable to Gannett." Because the First Circuit on review of a motion to dismiss had to accept the allegations as true, it remanded for further proceedings. The evidence on remand will ultimately prove or disprove what Gannett actually knew or what was reasonably foreseeable, and thus whether the linkage was enough to constitute a violation of the VPPA.

The First Circuit also considered whether Yershov qualified as a "consumer" entitled to the VPPA's protections. The VPPA defines a consumer as "any renter, purchaser, or subscriber of goods or services from a video tape service provider." The court easily ruled out Yershov as a renter or purchaser, but held that Yershov was a Gannett "subscriber."

In a decision that was relied on by the Eleventh Circuit in Ellis v. Cartoon Network, Inc., the district court had found that Yershov was not a "subscriber" because he did not have to pay, register, or make any commitments to use the App. In reversing the district court, the First Circuit found instead that the plaintiff was a subscriber because "[t]o use the App, Yershov did indeed have to provide Gannett with personal information, such as his Android ID and his mobile device's GPS location at the time he viewed a video, each linked to his viewing selections. While he paid no money, access was not free of a commitment to provide consideration in the form of that information, which was of value to Gannett."

Beyond the VPPA: FTC Clarifies PII and Michigan "Clarifies" Video Rental Privacy Act

On April 21, shortly before the First Circuit's ruling in Yershov, there were two other related developments. First, , Jessica Rich, the FTC's Director of Bureau of Consumer Protection published a statement on the FTC's business blog in which she underscored the FTC's concerns regarding cross-device tracking and recognized the importance of proper disclosure to consumers about such practices. Director Rich stated that the FTC "regard[s] data as ‘personally identifiable,' and thus warranting privacy protections, when it can be reasonably linked to a particular person, computer, or device" and that "in many cases, persistent identifiers such as device identifiers, MAC addresses, static IP addresses, or cookies meet this test." The FTC's 2012 privacy report already categorized precise location data as "sensitive information" that should be subject to a consumer's opt-in consent before collection and disclosure. While there is no recommendation to require opt-in consent for the collection or disclosure of non-sensitive information under the FTC's privacy framework, companies were advised to provide consumers with opt-out choices before collecting "personal information" such as persistent identifiers for interest-based advertising and certain other uses.

Then on May 2, Michigan amended its version of the VPPA (the Michigan Video Rental Privacy Act), effective May 3, by: (1) eliminating the $5,000 per person statutory damage provision and requiring individuals to prove actual damages as a result of an alleged violation; and (2) permitting the disclosure of PII in the ordinary course of business, including when marketing goods and services to customers or potential customers, when written notice is provided. Now, in order to bring suit under state law, plaintiffs would have to demonstrate that the business did not provide adequate notice of the disclosure and that the plaintiff suffered actual harm as a result of such disclosure. The amendment included language stating the "amendatory act is curative and intended to clarify that the prohibitions on disclosing information" under the Michigan law, presumably putting an end to numerous pending class actions.

The Impact of Yershov on Content Providers

The First Circuit's broad view regarding PII may cause concern for businesses that provide streaming content to their users, as its ruling may expand the scope of PII to include situations where device IDs and GPS codes may be used to reverse engineer an individual's identity using information collected from other sources. Yershov also does not take into account the numerous federal district court decisions which have held that the information disclosed by an entity subject to the VPPA "must, without more, itself link an actual person to actual video materials" to constitute PII. Moreover, the First Circuit's "game program" analogy runs contrary to federal district court rulings that there is no PII disclosure where a third party has to essentially create the "game program" itself by reverse engineering a consumer's identity by combining disclosed data with information collected from other sources. Because GPS data may be as specific as an individual's street address, that alone is not that necessarily an expansion of PII, but rather an analogous extension of the physical world to the online world, similar to the extension of "video tapes and other audio visual materials" to online streaming.

However, the First Circuit may have placed an additional burden on businesses to analyze the amount of information a third party partner collects on individuals from other sources when considering what information may be disclosed without running afoul of the VPPA. Here, the court accepted Yershov's allegations that Adobe holds vast stores of information about a huge swath of the population, would easily be able to cross reference device identifiers and GPS coordinates with this pool of information to personally identify him, and that Gannett reasonably foresaw this. However, whether or not Gannett's disclosures were actionable – and even whether Yershov qualifies as a "subscriber" – will be determined on remand: "Does access through the App generate value for Gannett that website access does not? Is Yershov correct about the extent to which Adobe foreseeably can identify him? Answers to these and similar questions may enable a more refined, and possibly different, conclusion on the ultimate question of whether Gannett has violated the VPPA."

Given the scope of the First Circuit's ruling, digital content and media providers should expect an increase in the number of VPPA class actions in the future as it is less likely that cases will be decided on motions to dismiss and instead will have to proceed to discovery.

Businesses should take note of the developments and consider whether their policies accurately reflect the current data collection and disclosures, and whether the appropriate level of consent is obtained when collecting and sharing precise data location information. Moreover, third parties should be contractually prohibited from re-identifying information and making any representations that they can do so without appropriate consumer consent. As Director Rich explained, "[i]f you're collecting persistent identifiers, be careful about making blanket statements to people assuring them that you don't collect any personal information or that the data you collect is anonymous. And as you assess the risks to the data you collect, consider all your data, not just the data associated with a person's name or email address. Certainly, all forms of personal information don't need the same level of protection, but you'll want to provide protections that are appropriate to the risks."