Suit charges Sony breach caused by poor security

Sony has been hit with what could be the first of many lawsuits related to a recently disclosed breach of its PlayStation Network.

Kristopher Johns of Birmingham, Ala., Wednesday filed a lawsuit against Sony in federal court in San Francisco, alleging negligent data security practices, privacy violations and breach of warranty.

The lawsuit, which seeks to represent all subscribers to Sony's PlayStation Network and Qriocity service, also accuses Sony of not informing consumers quickly enough about the exposure of their personal account information and credit card data due to the breach.

In his complaint, Johns accused Sony of violating the Payment Card Industry Data Security Standard by failing to implement a proper firewall and to encrypt card holder data. Sony also violated the standard by retaining card holder data, the lawsuit charged.

The company's delay in notifying consumers about the breach significantly heightened the risk that the data would be misused, Johns alleged.

Sony has acknowledged that unknown intruders breached the PlayStation Network between April 17 and 19. The intrusion compromised the names, addresses, birth dates, purchase histories, online IDs and in some cases credit card data, of 77 million subscribers to PSN and its Qriocity service, the company said.

Sony disclosed the breach more than six days after it had abruptly shut down PSN.

"As a result of wrongful acts and omissions [by] the Defendant in this case, consumers and merchants have been exposed to what is one of the largest compromises of Internet security and the greatest potential for credit card fraud to ever occur in United States history," the lawsuit claimed.

Johns is seeking compensation for the time and effort consumers will need to spend in monitoring for identity theft and fraud as well for breach of service and warranty.

The lawsuit seeks both compensatory and punitive damages from Sony.

Sony said yesterday that it has begun notifying 77 million affected consumers about the breach.

In a blog post Wednesday, Patrick Seybold, Sony's senior director of corporate communications and social media, said the company started notifying registered account holders by email on Tuesday. "At this time, the majority of emails have been sent and we anticipate that all registered accounts will have received notifications by April 28th," Seybold wrote.

In the post, Seybold contended that all the credit card data of account holders had been encrypted and stored in a password protected file. He reiterated the company's previous claim that there's no evidence that the data has been compromised.

"The personal data table, which is a separate data set, was not encrypted, but was, of course, behind a very sophisticated security system that was breached in a malicious attack," he added.

Seybold gave no indication of when Sony expects the PlayStation network to be back up and running.

If past, similar breaches are any indication. Sony is likely to be hit with multiple lawsuits in the coming months. But the vailidity of the lawsuits remains an open question.

Courts have tended to dismiss lawsuits brought by consumers against breached entities such as Sony.

In most cases, courts have held that consumers cannot claim compensatory damages unless they can show that they suffered real harm, such as actual identity theft, because of a breach.

Many courts have held that the mere likelihood that an individual could become a victim of a future identity theft because of a breach is not sufficient grounds for damages. The fact that consumers usually do not have to pay for fraudulent card charges is another factor that courts have frequently cited when throwing out such cases.

One of the few exceptions was a consumer class action against Heartland after the payment processor disclosed a data breach that exposed data stored on tens of millions of payment cards.

In that case, Heartland agreed to pay $4 million to settle a consumer class action lawsuit based on many of the same issues raised in the Sony lawsuit.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan , or subscribe to Jaikumar's RSS feed . His e-mail address is jvijayan@computerworld.com.

Read more about security in Computerworld's Security Topic Center.

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