Data Security and Legal Compliance in the Technology Industry

Data is a key resource for artificial intelligence (AI) and technology companies. But with this power comes a critical responsibility: data security. For AI and tech companies, data security isn’t just a matter of ethics — it’s a legal requirement. A single breach can mean hefty fines, lawsuits, and reputational damage. Here are some of the key legal requirements shaping this industry and the practical steps to ensure compliance.

Key Data Protection Laws

Governments worldwide have crafted regulations like General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), the Health Insurance Portability and Accountability Act (HIPAA), and the Family Educational Rights and Privacy Act (FERPA) to protect personal data as technology advances. Below are the essentials of these laws, organized for quick reference.

1. GDPR: Europe’s Global Standard

Introduced in 2018, the GDPR addresses data breaches and privacy concerns with a worldwide reach.

• Applies To: Companies (controllers and processors) of data, including those outside of the EU) that process EU/EEA residents’ personal data (e.g., via analytics or profiling).
• Key Rules:
  • Personal data includes names, IP addresses, biometrics.
  • Requires transparency, data minimization, and strong security (e.g., encryption).
  • Grants individuals rights to access, erase, or port their data.
  • Mandates a Data Protection Officer for large-scale processing.
  • Breach notification: 72 hours to regulators.
• Penalties: Up to €20M or 4% of global revenue.

2. CCPA/CPRA: California’s Privacy Push

The CCPA, effective 2020 and expanded by the California Privacy Rights Act (CPRA), empowers residents with control over their data.

• Applies To: For-profit businesses with $25M+ revenue, 50,000+ residents’ data, or 50%+ revenue from data sales.
• Key Rules:
  • Covers data tied to individuals or households (e.g., browsing history).
  • Offers rights to know, delete, correct and opt-out of data sales.
  • Demands clear notices and “reasonable” security.
  • The California Privacy Protection Agency (CPPA) now enforces the law.
• Penalties: $7,500 per intentional violation; $100 to $750 per consumer in breach lawsuits.

3. HIPAA: Health Data’s Guardian

Since 1996, HIPAA has safeguarded health information.

• Applies To: Healthcare providers, plans, and business partners (e.g., health app developers).
• Key Rules:
  • Protects identifiable health data (e.g., medical records).
  • Requires risk analysis, encryption, and staff training.
  • Breach notification: 60 days to individuals and authorities.
• Penalties: Up to $1.5M annually with some possible additions depending on tier and duration; willful violations can lead to prison.

4. FERPA: Student Record Protection

FERPA from 1974 secures student data.

• Applies To: Federally funded schools and their tech vendors.
• Key Rules:
  • Covers grades, attendance, and similar records.
  • Allows parents/students to access and amend data; consent needed for disclosure.
  • Schools may disclose “directory information” (e.g., name, enrollment) unless parents opt out.
• Penalties: Loss of federal funding.

5. Other Notable Laws

• NY SHIELD Act: Applies to any business holding private information of NY residents, not just those based in NY. Includes administrative, technical, and physical safeguards. Requires safeguards for NY residents’ data; fines up to $250,000.
• Gramm-Leach-Bliley Act (GLBA): Applies to a broader range of financial service providers, not just traditional banks. Requires annual privacy notices and risk assessments. Mandates financial institutions protect customer data; $100,000 per violation.

From Rules to Action

Compliance starts with understanding these laws and ends with putting them into practice. Here’s how to make it happen:

• Run Security Audits: Perform annual risk assessments and penetration tests (GDPR, CCPA/CPRA, HIPAA, SHIELD).
• Secure Data: Use AES-256 encryption, multi-factor authentication, and role-based access (all major laws).
• Train Staff: Hold quarterly sessions on phishing and data handling (HIPAA required; others recommended).
• Plan for Breaches: Build and test a response plan with clear timelines (e.g., GDPR’s 72-hour rule).
• Stay Updated: Track legal changes (e.g., CPRA’s 2023 CCPA update). Consider adding the role of data protection counsel or compliance software/tools or newsletters.

Data security is an ongoing mission and legal requirement. As AI and tech evolve, so do risks and regulations. By weaving these requirements into your operations, you protect your data, dodge penalties, and earn trust—securing not just compliance, but your company’s future.

For legal counsel with a data security and privacy, please contact Stuart Tubis, Esq. at skt@jmbm.com or 415-984-9622.