Cloud Computing and the USA Patriot Act: Canadian Implications

August 2, 2012 8:16 pm Announcements, Canada, Cloud, Cloud Computing, Cloud Data Center, Cloud Hosting, Colocation, Colosseum Related, Data Center, Toronto, Virtual, Virtualization

A perennial issue in Canadian privacy law is what to do about the USA Patriot Act.  Just when we think we have things reasonably sorted out, the issues pop up again in a new context.  This time it is cloud computing.

What’s the USA Patriot Act?

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (usually referred to as the “USA Patriot Act” or just the “Patriot Act”) is US legislation that was passed following the September 11, 2001 attacks on the World Trade Centre in New York City.  Among other things, the Patriot Act made it easier for US law enforcement officials to intercept electronic communications and business records.  One of the controversial measures was that officials were granted the power to issue a National Security Letter to electronic communication service providers requiring them to hand over information without informing the affected parties (in some cases without any judicial oversight).

For the purposes of this discussion of cloud computing, however, one of the most important provisions is section 215, which deals with access to business records.  Section 215 repealed and re-enacted provisions of the Foreign Intelligence Surveillance Act (USA).  Pursuant to section 215 of the Patriot Act, the FBI may apply to a federal judge for an order requiring the production of any tangible things (including books, records, papers, documents, and other items) for an investigation to protect against international terrorism or clandestine intelligence activities.   US commentators agree that this definition covers electronic business records.

What’s cloud computing?

In its most complete form, cloud computing involves outsourcing applications (e.g. email, customer relationship management, and accounting software), platforms (e.g. database architecture) and infrastructure (e.g. servers).  All of these IT functions are offered as a service to organizations either independently or as a package.  An organization’s data (e.g. its emails) may be stored in segregated servers or intermingled with the data of other organizations and segregated through the functionality of the service provider’s information technology.  The organization accesses its data through Internet portals.

Where’s the Cloud?

The cloud isn’t in the sky.  Data sent over the Internet in a cloud computing arrangement may be (and often will be) stored outside of Canada and may be intermingled with data from other organizations.  In many cases, the cloud computing service provider may subcontract the storage of data to one or more organizations operating data centres.  If these data centres are in the US, well, therein lies the rub.  The data is going to be subject to the laws of the United States, including the Patriot Act.  Actually, if the data is even accessible from the US or by an organization subject to the jurisdiction of the US, the data is likely to be subject to the laws of the United States.

Okay, so the USA Patriot Act may apply, do I have a Canadian privacy problem?

Transfers create legal issues. Organizations have a privacy “problem” every time they transfer data.  This is because under Canadian federal and provincial private sector privacy laws, the organization that collected and is entitled to use the personal information remains responsible for its security throughout its life-cycle.  Indeed, in many cases organizations will have created a contractual obligation with individuals by incorporating the organization’s privacy policy (and privacy commitments) into terms of service or use or other customer e-commerce contracts.  Organizations may wish to consider legal advice to understand how commencing cloud service transfers of personal information will affect existing legal commitments.  It may be necessary, for example, to give special notice to individuals and to provide them with opt-out or termination opportunities.

But organizations aren’t prohibited from using US-based cloud services, if they are only operating in the private sector.  Federal and provincial private sector privacy legislation does not prohibit the transfer of personal information to an organization in another jurisdiction for processing and storage, provided that:

  • The transfer does not entitle the receiving the personal information to use that information for purposes other than those for which individuals expressly or impliedly consented.
  • The transferring organization remains accountable for the protection of the personal information that has been transferred.
  • The organization receiving the personal information provides a comparable level of data security as would be required under Canadian law and the terms on which the collecting organization collected the information.
  • Disclosure is made to individuals.  As a general rule, this disclosure to individuals should include notice that (1) their personal information will be transferred outside of Canada for processing and storage, (2) their personal information will be subject to the laws of the foreign jurisdiction and (3) the laws of the foreign jurisdiction may be different (and less protective) than those of Canada.

The transferring organizations will wish to consider obtaining meaningful contractual commitments to administrative, technological and physical security protections from the organization to which the personal information is being transferred. The transferring organizations will also wish to consider audit or other rights that would permit ongoing diligence of these security protections as well as the use being made of the personal information.

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