BILL ANALYSIS Ó AB 2720 Page 1 Date of Hearing: April 5, 2016 ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION Ed Chau, Chair AB 2720 (Chau) - As Amended March 17, 2016 SUBJECT: State government: Office of Information Security: cybersecurity vulnerability reporting SUMMARY: Authorizes the state Office of Information Security (OIS) to establish a Cybersecurity Vulnerability Reporting Reward Program (Program) that would provide a monetary reward to eligible individuals who identify and report previously unknown vulnerabilities in state computer networks. Specifically, this bill: 1) Authorizes OIS, subject to appropriation, to establish a Program for the purpose of soliciting eligible individuals to identify and report previously unknown vulnerabilities in state computer networks and making a monetary award for an eligible report. 2) Grants the Chief Information Security Officer (CISO) sole discretion to determine the eligibility of a reported vulnerability and the individual reporting the vulnerability, whether or not to make an award, and if so, in what amount. AB 2720 Page 2 3) Requires OIS to develop policies, standards, and procedures for the administration of the Program, including eligibility and award criteria, subject to the following requirements: a) The priority of the Program must be to identify vulnerabilities in state networks that could compromise the integrity of user data, circumvent the privacy protections in use to protect user data, or enable unauthorized access to state networks or infrastructure; b) The eligible state agencies and departments included in the Program must be specified; c) The eligible types of vulnerabilities must be specified; d) The minimum award for a qualifying vulnerability shall be one hundred dollars ($100), and the maximum award shall be five thousand dollars ($5,000); e) The determination of the award amount within the given range shall be solely at the discretion of the CISO, based upon the sensitivity of the reported vulnerability, the specificity of the report, and any other factor that the chief may deem to be relevant. AB 2720 Page 3 4) Specifies that a vulnerability report may be eligible for an award only if both of the following requirements are met: a) The vulnerability was not previously known or reported to OIS; and, b) The vulnerability report contained all necessary information and is in the required format, as specified by the office. 5) Specifies that an individual may receive an award for submitting an eligible vulnerability report only if all of the following requirements are met: a) He or she has not attempted to access another person's data, or has not otherwise engaged in any unlawful, disruptive, or damaging activity in the course of investigating the existence of the suspected vulnerability; b) He or she is not on any federal sanctions list, or located in a country that is on any federal sanctions list; c) He or she submits a vulnerability report that includes, but is not limited to, a description of the vulnerability, the specific risks involved, and at least one valid description of the circumstances under which the vulnerability could be exploited; AB 2720 Page 4 d) He or she is not a state employee or contractor, or the spouse or immediate family member of a state employee or contractor; and, e) He or she does not knowingly make any false, fictitious, or fraudulent statements or representations to the office when submitting information under this section, or knowingly include any false, fictitious, or fraudulent writing, document, statement, or entry therein. 6) Clarifies that no provision of this bill shall be construed to authorize or immunize a violation of law or agreement in any way, or to otherwise disrupt, damage, or compromise the data or systems of another person. 7) Provides that any reward that remains unclaimed after a period of 12 months shall be deposited into the General Fund. EXISTING LAW: 1)Establishes, within the Department of Technology, the OIS to ensure the confidentiality, integrity, and availability of state systems and applications, and to promote and protect privacy as part of the development and operations of state systems and applications to ensure the trust of the residents of this state. (Government Code (GC) Section 11549) 2)Authorizes, pursuant to the Merit Award Program (MAP), the Department of Human Resources to make awards to current or retired state employees for proposing procedures or ideas that are adopted and put into effect and result in eliminating or reducing state expenditures or improving operations, or for making exceptional contributions to the efficiency, economy, AB 2720 Page 5 or other improvement in the operations of state government. (GC 19823) 3)Requires the Governor to designate three state agencies to participate in a pilot program in 2015 to award up to $75,000 in cash prizes to eligible participants in innovation contests. Each designated state agency would establish and administer an innovation contest, and, on or before January 1, 2016, award a prize of up to $25,000 to a participant the state agency determines to have submitted the entry that best addresses the subject of the contest, in accordance with standards established by the state agency, and has the highest likelihood of being adopted and placed in effect. (GC 12045) FISCAL EFFECT: Unknown COMMENTS: 1)Purpose of this bill . This bill is intended to improve the cybersecurity of state networks by creating a monetary incentive for private individuals to report confidentially network vulnerabilities to state cybersecurity experts so that they can be fixed before they are exploited by hackers, a program commonly referred to as a "bug bounty." This bill is author-sponsored. 2)Author's statement . According to the author, "In recent years, many tech companies have established vulnerability reporting programs, also called 'bug bounty' programs, to encourage and facilitate the reporting of cybersecurity flaws by creating a means to communicate - and reward - information about those vulnerabilities. Private sector 'bug bounty' programs, such as those at Google, Facebook, and Netflix, even honor security researchers who report serious flaws in AB 2720 Page 6 software or websites by giving out monetary rewards and posting names on a public 'hall of fame' website. This bill would borrow an industry best practice from Silicon Valley and apply it state government, establishing a first-of-its-kind program to improve the cybersecurity of state websites, networks and online services." 3)Bug bounty programs in the private sector . Bug bounty programs have been in existence in the private sector reportedly since 1996, when one was invented by a fledgling Internet browser company as a way to harness the knowledge and energy of outside users for the purpose of identifying "bugs," or vulnerabilities in the software. The term is now used to describe any program offered by websites or software companies to give compensation and recognition for reporting vulnerabilities, which allows the company to resolve the problem early before awareness of the flaw spreads and is exploited. Bug bounty programs are now widely used in the tech industry, with major companies such as Google, Facebook, and Microsoft, having their own programs. For example, Google's Vulnerability Rewards Program has operated since 2010, and grants awards ranging from $100 to $20,000 for qualifying vulnerabilities. Individuals can only target their own accounts, and awards are made based on the severity of the threat and the sensitivity of the target. Facebook has operated a similar program since 2011, and the program has grown consistently since its inception. According to an August 2014 blog post, the company had received 14,763 submissions in 2013 alone, 6% of which it categorized as high severity, and paid out $1.5 million that year to 330 researchers across the globe (average award was $2,204). Facebook's program also makes good use of researchers in other AB 2720 Page 7 countries, with Facebook noting that US-based programmers only came in third in total reports: "Researchers in Russia earned the highest amount per report in 2013, receiving an average of $3,961 for 38 bugs. India contributed the largest number of valid bugs at 136, with an average reward of $1,353. The USA reported 92 issues and averaged $2,272 in rewards. Brazil and the UK were third and fourth by volume, with 53 bugs and 40 bugs, respectively, and average rewards of $3,853 and $2,950." As noted above, there is a large and organized community of security researchers that participate in bug bounty programs. The website Bugcrowd, which serves as central resource for the security researcher community, describes its purpose this way: "Companies are in an unfair fight when it comes to cybersecurity. Regardless of how robust security efforts are, companies will always be outnumbered by the thousands of malicious hackers worldwide. We bring thousands of good hackers to the fight, helping companies even the odds and find bugs before the bad guys do." Bugcrowd lists 473 individual bug bounty programs, with each program offering some combination of rewards including cash prizes, branded merchandise or "swag," and recognition in the company's "Hall of Fame." 4)Existing governmental award programs . Since 1950, California has had MAP, operated by the Department of Human Resources, designed to operate as an "incentive award system to recognize employee's contributions to state government and its operations. MAP incorporates three different awards, each funded by the agency/department that benefit from the idea or nomination: the Employee Suggestion Program (awards from $50 to $50,000), the Superior/Sustained Accomplishment Award ($50 to $250 per person), and a Special Act/Special Service Award Nomination (lapel pin, certificate and citation). Awards exceeding $5,000 are required to be approved by concurrent resolution of the Legislature. In 2014, AB 2138 (Gatto), Chapter 678, Statutes of 2014, created a one-year "innovation awards" contest in state government for AB 2720 Page 8 the purpose of awarding up to $75,000 in cash prizes to eligible California participants who are not employees of the State. Three state agencies were chosen to participate in the pilot program and set their own standards for the contest. The underlying purpose was to solicit new procedures, plans, designs, or ideas that would "contribute to the efficiency, economy, or other improvement in the operations of the state agency, including, but not limited to, streamlining an existing process or system of the state agency or the design of a feedback system for the state agency." Ultimately named the "$25K Find a New Way" contest, the Governor's Office named the Department of Transportation (CalTrans), the Department of Alcoholic Beverage Control (ABC), and the Department of General Services (DGS) as the participating entities. Caltrans ultimately issued three $7,000 awards for a suggestion related to improving highway signs and a $4,000 award for an idea to develop a smart phone application to enable smart travel habits. ABC awarded $7,500 for the development of a smart phone application to anonymously report the sale of alcohol to minors. DGS focused its program on "green government," and awarded first place to another application developed during its first ever "GreenGov Challenge" code-a-thon that would track how state agencies perform in buying "greener, environmentally preferable products." The federal government has also recently announced its own cybersecurity bug bounty program. In March 2016, the US Department of Defense (DoD) announced that it would be launching a new program that would invite hackers to test DoD websites for possible financial rewards - the first such bug bounty program in the federal government. The program would involve the selection of a group of hackers from a pool of applicants and giving those selected specific targets to test. The hackers would then report back on what they found and assist the DoD in patching the identified weaknesses in exchange for a monetary reward. AB 2720 Page 9 5)This bill in practice . In its current form, this bill authorizes, but does not require, the CISO to establish a bug bounty pilot program for state networks. In order to administer the program, the CISO would be required to develop eligibility and reward criteria, and would have the discretion to award prizes to eligible researchers for eligible vulnerabilities in an amount ranging from $100 to $5,000, depending on the sensitivity of the flaw and the completeness of the report. Eligible vulnerabilities would need to be previously unknown, actionable, and fully reported. Eligible participants cannot attempt to access another person's data or otherwise engage in unlawful, disruptive or damaging activity. A participant is also not allowed to be from a country on a federal sanctions list, be a state employee or immediate family member thereof, and cannot make any false, fictitious or fraudulent representation. The bill also makes clear that the program does not authorize or immunize any violation of law or contract, or otherwise permit the disruption, damage or compromise of data or systems of another person. The bill does not specify the total amount appropriated for the program, although the author's office expects to amend the bill in the Assembly Appropriations Committee to set the specific amount. 6)Arguments in support . According to the California Chamber of Commerce, "[p]rivate entities at the forefront of cybersecurity practices utilize bug bounty programs as part of vulnerability management strategies. These programs provide monetary incentives to individuals who identify and disclose system vulnerabilities. The program's goal is to maximize the number of outside security researchers that are probing AB 2720 Page 10 systems in order to discover issues before they are exploited by hackers. AB 2720 creates a state bug bounty program modeled after the successful programs utilized by private companies. As such, this legislation will reduce vulnerabilities in the state's technology infrastructure by leveraging outside resources and experts." 7)Previous legislation . AB 2138 (Gatto), Chapter 678, Statutes of 2014, created a one-year "innovation awards" contest in state government for the purpose of awarding up to $75,000 in cash prizes to eligible California participants who are not employees of the State. REGISTERED SUPPORT / OPPOSITION: Support California Chamber of Commerce Opposition None on file. Analysis Prepared by:Hank Dempsey / P. & C.P. / (916) 319-2200 AB 2720 Page 11