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Proposed McCain-Kerry Online Privacy bill could harm innovation

Next week,  Senators John Kerry (D-Mass.) and Senators John McCain (R-Ariz.) plan to team up to introduce  ”online privacy bill of rights”  legislation that would require companies to seek permission before sharing a user’s data with third parties, and would give consumers the right to view any data collected on them.

The bipartisan bill would cover personal financial, medical and other electronic data.  The Kerry-McCain bill would create the nation’s first comprehensive privacy law that would govern data in all industries, different from now where only certain personal data is protected.

The bill is expected to be introduced ahead of a Senate Commerce Committee hearing next Wednesday on online privacy.  While several lawmakers have been mulling over enacting a comprehensive privacy bill for several months now, the issue really came to light a few months ago when it was revealed that several smartphone apps shared users’ personal information with advertising companies without the user’s consent.

Needless to say, the technology and application development industries are not necessarily happy about this bill, and not just because it would limit their ability to make money off their apps from advertisers.  Some say the law could be over inclusive and could slow down the technological aspect of processing certain applications, software and programs.   The practical impact of a law that would require  approval for the collection of electronic data could be a  slowing down of ingenuity.

“This is not a small fix. This is not a small problem. It’s complex, ” said York Eggleston,  Founder and Chair of the National Association of Multicultural Digital Entrepreneurs.  ”There is a trade off of consumer privacy for consumer benefits and most folks do not understand where that line is and what they are trading off.”  Many apps are free because developers recoup costs and make money off of ad revenues.  Removing their ability to sell ads could mean higher fees for apps for consumers.

Also, though the details of the bill have yet to be revealed, the law could also strip an application or software developers ability to encode passive data mining, a process that enables the efficient running of several innovative applications already in the work and yet to be designed.

Eggleston said the best technology is that which can take personal information and apply  it in real time. “That is what separates the good from the grit,” he said.  Requiring manual opting-in  can slow down technology tremendously, he added.

Politico’s “Morning Tech” obtained a copy of the working draft with language that allows for an opt-out standard on personally identifiable information that’s not sensitive, and an opt-in feature when the data is especially sensitive.  The bill would require users to opt in to any data transferred to third parties unless the company using the information is pare of a safe-harbor set up approved by the FTC – then in which case it would be an opt out standard.  The bill would  also empower Attorney Generals and federal regulators to seek civil penalties when companies do serious wrong, but does not give consumers a private right of action to sue independently a company that violates the law.

Further, the law, while well-intended to empower consumers, could have the unintended consequence of impeding the White House’s goals on winning the future, encouraging innovation, rewarding developers and the brightest thinkers and minimizing government intrusion and regulation that impeded these goals.

That message is what some of those attending next week’s hearing may articulate to lawmakers.

“I just hope the hearing is  inclusive of people who understand technology and can thoroughly articulate what’s at stake in all this, ” Eggleston added.  ”There are market based solutions that can solve these concerns that do not need to be regulated which simply another layer of having to monitor more sites and can stagnate advancement.”

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