BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1116


                                                                    Page  1





          Date of Hearing:  April 21, 2015


                ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION


                                  Mike Gatto, Chair


          AB 1116  
          (Committee on Privacy and Consumer Protection) - As Amended  
          April 13, 2015


          SUBJECT:  Connected televisions


          SUMMARY: Limits how spoken words and conversations captured by  
          Internet-connected televisions, commonly known as "smart TVs,"  
          can be used; requires notice and consent from consumers before  
          the voice recognition (VR) feature of a smart TV is enabled; and  
          requires smart TVs to have mechanisms to help consumers actively  
          control VR features.   Specifically, this bill:  


          1)Prohibits smart TVs with VR features from being used to  
            collect, record, store, analyze, or transmit spoken words for  
            any purpose not essential to the function of the application  
            with the VR feature that the consumer used;   

          2)Specifies that advertising and the analysis of household  
            conversations are not essential to the function of an  
            application;



          3)Requires a one-time opt-in consent with a separate notice to  
            the consumer before a VR feature on a smart TV is enabled;  









                                                                    AB 1116


                                                                    Page  2







          4)Requires smart TVs with VR features to have mechanisms that  
            allow consumers to: 



                  a)        Affirmatively choose to use of the VR feature;

                  b)        Start and stop the VR feature; and



                  c)        Understand when the VR feature is on and  
                    collecting or transmitting spoken words or sounds. 



          5)Defines "connected television" as a device that can be  
            connected to the Internet, receives television signals used to  
            broadcast programs for entertainment, information, and  
            education, and reproduces them on a screen, but excludes  
            personal computers, tablets, and mobile phones.

          6)Defines "voice recognition feature" as the function of a  
            connected television that allows the collection, recording,  
            storage, analysis, transmission, interpretation, or other use  
            of spoken words or other sounds, but excludes voice commands  
            not recorded or transmitted beyond TV.





          7)Gives the Attorney General or a district attorney the power to  
            prosecute a manufacturer that violates or proposes to violate  
            these provisions by seeking injunctive relief or a civil  
            penalty of up to $2,500 per violation, or both, and are  
            cumulative. 








                                                                    AB 1116


                                                                    Page  3






          8)Specifies that there is no private right of action for  
            violation of these provisions.



          9)Declares that the provisions of this bill are severable. 



          10)Invalidates any waiver of this bill's provisions as contrary  
            to public policy.


          EXISTING LAW:  


          1)Bans, under the Electronic Communications Privacy Act of 1986,  
            the interception of electronic communications, such as e-mail,  
            radio-paging devices, cell phones, private communications  
            carriers, and computer transmissions. (18 United States Code  
            (U.S.C.) Sections 2510-2522, 2701-2711, 3121, and 1367)

          2)Requires, under the federal Cable Communications Policy Act of  
            1984, cable TV operators to obtain written or electronic  
            consent before collecting or sharing individually identifiable  
            information about cable TV subscribers. (47 U.S.C. 601-639)

          3)Gives citizens an "inalienable right" to privacy. (California  
            Constitution, Article 1, Section 1)



          4)Prohibits, with exceptions, electronic eavesdropping or  
            recording of private communications by telephone, radio  
            telephone, cellular radio telephone, cable or any other device  
            or in any other manner.  Violation can result in penalties of  
            up to $10,000 and imprisonment in county jail or state prison  
            for up to one year.  (Penal Code (PC) Sections 630-638)








                                                                    AB 1116


                                                                    Page  4










          5)Prohibits cable TV and satellite TV operators from monitoring  
            or recording conversations in a subscriber's residence, or  
            from sharing individually identifiable information on  
            subscriber viewing habits or other personal information  
            without written consent.  (PC 637.5)



          6)Establishes criminal and civil penalties for a violation of  
            cable and satellite television privacy laws, including :



             a)   A misdemeanor, punishable by a fine not exceeding  
               $3,000, or by imprisonment in the county jail not exceeding  
               one year, or by both such fine and imprisonment.  (PC  
               637.5, subds. (a) and (j)); and 

             b)   A private right of action, which any aggrieved person  
               may commence, for damages for invasion of privacy.  (PC  
               637.5(i))


          FISCAL EFFECT:  Unknown


          COMMENTS:  


           1)Purpose of this bill  .  This bill is intended to protect the  
            privacy of people inside their homes by requiring  
            manufacturers to add privacy features to smart TVs, such as  
            requirements for consumers notice and obtain consent before  
            capturing and transmitting spoken words and conversations,,  








                                                                    AB 1116


                                                                    Page  5





            and restrictions on the secondary use of voice data for  
            marketing, advertising and other nonessential uses.  This bill  
            is authored and sponsored by the Assembly Privacy and Consumer  
            Protection Committee. 



           2)Author's statement  .  According to Assemblymember Gatto, the  
            lead author, "AB 1116 protects California consumers by  
            requiring manufacturers to ensure that a TV's VR features  
            cannot be enabled or activated without a consumer's knowledge  
            or consent and also by banning the secondary use of voice  
            data, for example for marketing and advertising purposes." 

          "This bill affirms the fundamental right to privacy established  
            in the California constitution.  Nowhere is privacy more  
            sacred than in the comfort of a person's home.  As Justice  
            Scalia noted in Kyllo v. United States, when speaking about  
            the home, 'all details are intimate details, because the  
            entire area is held safe from prying government eyes.'   
            People's intimate details must be kept safe from the prying  
            eyes of corporations as well."

           3)What are smart TVs?   Smart TVs are home entertainment systems  
            that are connected to the Internet.  Some smart TVs now have  
            technology that can respond to human voices, which allows  
            consumers not only to speak basic commands but also to search  
            for content on the Internet or TV, rather than use a standard  
            remote control to find and select options.  Manufacturers have  
            been producing smart TVs with built-in VR features since 2012.  
             The primary manufacturers of smart TVs sold in the United  
            States are Samsung Electronics, LG, Sony, Philips, and  
            Panasonic.  According to Statistica.com, about 52 million  
            Smart TVs were sold worldwide in 2011, and that figure is  
            expected to reach 141 million in 2015.   












                                                                    AB 1116


                                                                    Page  6






           4)How does VR technology work?   One well-known example of a  
            smart TV is Samsung's own SmartTV system.  According to the  
            Samsung Electronics Official Global Blog, Samsung Tomorrow,  
            the SmartTV has two separate VR features:



             a)   A microphone embedded inside the TV set that responds to  
               commands to perform simple functions, such as changing the  
               channel and increasing the volume; and 

             b)   A microphone inside the TV's remote control that can be  
               used to search for TV or Internet content (e.g., "Recommend  
               a good Sci-Fi movie.")  


            According to Samsung, voice data for the predetermined  
            commands is neither stored nor transmitted.  However, the VR  
            search feature captures, records, stores and transmits spoken  
            words and conversations and transmits them to a third party  
            for analysis (in this case, Nuance Communications).  



            According to Samsung, to activate the VR feature, consumers  
            must: 
             a)   Enable the feature when initially installing and setting  
               up the TV; and 

             b)   Press a button on the remote control or on the TV screen  
               before speaking search terms out loud. 


            Nuance Communications provides the speech-recognition  
            technology behind most, if not all, smart TVs. Nuance is also  
            the speech-recognition engine behind Apple's Siri personal  
            assistant on iPhones, and the VR telematics systems of Audi,  
            Lexus, BMW and Mercedes cars.  Nuance also plans to bring its  








                                                                    AB 1116


                                                                    Page  7





            technology to "smart" home appliances and devices, such as  
            refrigerators, coffee makers, and home alarm systems.   


           1)What are the privacy concerns with TV VR features?   Once  
            considered a novelty, VR technology has become a standard  
            feature of many consumer electronics.  From telephones that  
            capture and interpret our voices to enable hands-free texting  
            to televisions that allow users to change channels or search  
            for content via voice commands, speech recognition features  
            have evolved in ways that promote ease of use and safety for  
            consumers.  

          Critics, however, question the price of this progress.  Recent  
            news reports have alleged that smart TVs with VR features can  
            unintentionally record and transmit sounds and private  
            conversations inside the room where the TV is located.  ("It's  
            not just Samsung TVs - lots of other gadgets are spying on  
            you," Fusion, February 17, 2015; and "Be careful what you say  
            when your smart TV is on, Samsung warns customers," ABA  
            Journal, February 9, 2015.)

          While some manufacturers have warnings in their user manuals and  
            privacy policies, many consumers are unaware that their TVs  
            can capture conversations inside the home and transmit them  
            back to the manufacturer or to a third-party service provider.  
             



            On February 24, 2015, the Electronic Privacy Information  
            Center (EPIC) filed a formal complaint to the Federal Trade  
            Commission (FTC) about Samsung Electronics SmartTVs.   
            According to the EPIC complaint, "Samsung routinely intercepts  
            and records the private communications of consumers in their  
            homes."  In addition, while Samsung initially claimed that it  
            encrypted all voice communications during transmission, the  
            EPIC complaint pointed out that in February 2015 Samsung  
            admitted it did not encrypt all voice recordings it transmits  








                                                                    AB 1116


                                                                    Page  8





            over the Internet.  





            According to EPIC, "When the [VR] feature is enabled,  
            everything a user says in front of the Samsung SmartTV is  
            recorded and transmitted over the Internet to a third party  
            regardless of whether it is related to the provision of the  
            service."  EPIC compiled numerous statements from Samsung  
            SmartTV customers who stated they had no idea the TVs were  
            recording conversations occurring in their homes.   
            Furthermore, EPIC argued that "privacy notices" do not  
            diminish the harm to American consumers.  The EPIC complaint  
            claimed, therefore, that Samsung had surreptitiously recorded  
            private communications in the home and therefore violated  
            several federal privacy laws, including the Children's Online  
            Privacy Protection Act, The Cable Act, and the Electronic  
            Communications Privacy Act.  EPIC asked the FTC to enjoin  
            Samsung and other companies that engage in similar practices.   
            That complaint is currently pending before the FTC.





            The Center for Privacy and Technology at Georgetown Law School  
            and Consumer Reports analyzed the privacy policies and public  
            statements of Samsung and LG regarding their smart TVs and  
            concluded that "The privacy policies that cover smart TVs  
            aren't respecting [the privacy of your own home] the way they  
            should.  The Samsung and LG policies say that you need to give  
            their TVs permission to collect voice data.  That much is  
            clear.  Everything else isn't." ("Samsung and LG smart TVs  
            share your voice data with a third party," Consumer Reports,  
            February 9, 2015.   
            www.consumerreports.org/cro/news/2015/02/who-s-the-third-party- 
            that-samsung-and-lg-smart-tvs-are-sharing-your-voice-data-with/ 








                                                                    AB 1116


                                                                    Page  9





            index.htm)



           2)Activation with the consumer's knowledge or consent  . Current  
            law prohibits cable and satellite TV operators from recording  
            or transmitting conversations that occur in a subscriber's  
            home without notice and consent.  This bill is similar to the  
            laws governing cable and satellite TV providers because it  
            also requires notice and consent before recording or  
            transmitting conversations that occur inside a consumer's  
            home. 

          In the case of Samsung's SmartTV, the company has argued that it  
            already obtains consent from consumers by requiring them to  
            activate the VR feature in the SmartTV and also agree to the  
            manufacturer's privacy policy (which explains the recording  
            and transmission of conversations) before using the VR  
            features.  

          However, current law does not require all smart TV manufacturers  
            to meet this opt-in notice and consent standard.  In addition,  
            current law does not protect against secondary uses of voice  
            data collected by smart TVs.  This bill requires consent  
            before the collection of voice data and also prohibits any  
            secondary uses of voice data. 

           3)Arguments in support  .  The Privacy Rights Clearinghouse states  
            in support of the bill, "AB 1116 will protect the privacy of  
            people in the sanctity of their homes?While manufacturers have  
            warnings tucked away in their privacy policies and service  
            agreements, consumers have been largely unaware that whatever  
            they say can be captured, recorded and transmitted to the  
            manufacturer or a third party service provider."













                                                                    AB 1116


                                                                    Page  10





           4)Industry concerns  .  The Consumer Electronics Association (CEA)  
            submitted a letter of concern stating, "Companies need to be  
            transparent about the information they may collect, and inform  
            consumers about the data-collection capabilities and features  
            of their devices.  Also, manufacturers should provide  
            protections for sensitive information and offer their  
            customers an easy means of turning off data-collection  
            features.  The [consumer electronics] industry is working to  
            improve the transparency and consumer education regarding the  
            connected functions of consumer electronics devices.  AB 1116  
            could have unintended consequences [that] inhibit the use of  
            accessibility features for people with disabilities like voice  
            recognition and gesture control.  We are also concerned that  
            the definitions in the bill could be interpreted to extend  
            past the Committee's intended functions to limit other audio  
            and visual related capabilities."  

           5)Prior legislation  .  SB 1090 (Bowen), Chapter 731, Statutes of  
            2001, gave satellite TV subscribers the same privacy rights  
            afforded to cable TV subscribers under state law by  
            prohibiting satellite TV operators from recording or  
            transmitting conversations in a person's residence and  
            required satellite TV operators to get written or electronic  
            consent before collecting or sharing subscribers personal  
            information or television viewing habits.   





           6)Double referral  .  AB 1116 has been double-referred to the  
            Assembly Judiciary Committee where it will be heard if it  
            passes this committee. 
          REGISTERED SUPPORT / OPPOSITION:




          Support








                                                                    AB 1116


                                                                    Page  11









          Privacy Rights Clearinghouse




          Opposition


          None received. 




          Analysis Prepared by:Jennie Bretschneider / P. & C.P. / (916)  
          319-2200