Guidance Software, Inc.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF GUIDANCE SOFTWARE, INC.

CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATIONS OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-4187; File No. 062 3057 Complaint, March 30, 2007 — Decision, March 30, 2007 This consent order addresses representations that respondent Guidance Software, Inc., made as to the security of the sensitive personal information it collected from customers and its failure to actually safeguard the information. Guidance failed to provide reasonable and appropriate security for sensitive personal information stored on its computer network, and in 2005, a hacker exploited vulnerabilities in the respondent’s website to obtain unauthorized access to information for thousands of credit cards. The order prohibits Guidance from misrepresenting the extent to which it maintains and protects the privacy, confidentiality, or security of any personal information collected from or about consumers. The order requires Guidance to establish and maintain a comprehensive information security program to protect the security, confidentiality, and integrity of such information. In addition, the respondent is required to obtain biennial assessments of its security program from a qualified, objective, independent third-party professional. The order also includes certain reporting and compliance provisions.

Participants For the Commission: Katrina A. Blodgett, Kathryn D. Ratté, and Alain Sheer.

For the Respondents: Elaine Kolish and Marc Zwillinger, Sonnenschein Nath & Rosenthal, LLP.

COMPLAINT The Federal Trade Commission, having reason to believe that Guidance Software, Inc. (“respondent”) has violated the provisions of the Federal Trade Commission Act, and it appearing GUIDANCE SOFTWARE, INC. 533 Complaint to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Guidance Software, Inc. is a California corporation with its principal office or place of business at 215 N. Marengo Ave., Pasadena, California, 91101. 2. The acts and practices of respondent as alleged in this complaint have been in or affecting commerce, as “commerce” is defined in Section 4 of the Federal Trade Commission Act.

3. Respondent sells software and related training, materials, and services that customers use to, among other things, investigate and respond to computer breaches and other security incidents. Through its Professional Services Division, respondent also performs forensic examinations of customer computer systems.

4. Respondent operates a computer network that it uses for routine corporate activities and that customers use, in conjunction with respondent’s website (www.guidancesoft ware.com) and web application program (“web application”), to obtain information and to buy respondent’s products and services (hereinafter, Acorporate network”). Respondent also operates a separate computer network that does not connect to the corporate network or the internet and is used only by its Professional Services Division.

5. In selling its products and services, respondent routinely collected sensitive personal information from customers, including name, address, email address, telephone number, and, for customers paying with a credit card, the card number, expiration date, and security code number. It collected this information through its website, sales representatives, and telephone and fax orders. VOLUME 143 Complaint 6. Respondent stored sensitive personal information obtained from customers on the corporate network on a computer accessible through its website. 7. Since at least 2002, respondent has disseminated or caused to be disseminated privacy policies and statements, including, but not necessarily limited to the following statements regarding the privacy and confidentiality of sensitive information collected from customers: Security This website takes every precaution to protect our users' information. When users submit sensitive information via the website, your information is protected both online and off-line. When our registration/order form asks users to enter sensitive information (such as credit card number and/or social security number), that information is encrypted and is protected with the best encryption software in the industry - SSL. While on a secure page, such as our order form, the lock icon on the bottom of Web browsers such as Netscape Navigator and Microsoft Internet Explorer becomes locked, as opposed to unlocked, or open, when you are just 'surfing'. . . . While we use SSL encryption to protect sensitive information online, we also do everything in our power to protect userinformation off-line. . . . (Exhibit A, Guidance Software Privacy Statement accessible through respondent’s corporate website, January 1, 2004 (emphasis in original)). Guidance Software is committed to keeping the data you provide us secure and will take reasonable precautions to protect your information from loss, misuse or alteration. (Exhibit B, Guidance Software Privacy Policy accessible through respondent’s online store, July 19, 2003). 8. Until December 7, 2005, respondent engaged in a number of practices that, taken together, failed to provide GUIDANCE SOFTWARE, INC. 535 Complaint reasonable and appropriate security for sensitive personal information stored on its corporate network. In particular, although it employed SSL encryption, respondent: (1) stored the information in clear readable text; (2) did not adequately assess the vulnerability of its web application and network to certain commonly known or reasonably foreseeable attacks, such as “Structured Query Language” (or “SQL”) injection attacks; (3) did not implement simple, low-cost, and readily available defenses to such attacks; (4) stored in clear readable text network user credentials that facilitate access to sensitive personal information on the network; (5) did not use readily available security measures to monitor and control connections from the network to the internet; and (6) failed to employ sufficient measures to detect unauthorized access to sensitive personal information.

9. Beginning in September 2005 and continuing through December 7, 2005, a hacker exploited the failures set forth in Paragraph 8 by using SQL injection attacks on respondent’s website and web application to install common hacking programs on respondent’s corporate network. The hacking programs were used to find sensitive personal information, including credit card numbers, expiration dates, and security code numbers, stored on the corporate network and to transmit the information over the internet to computers outside the network. As a result, the hacker obtained unauthorized access to information for thousands of credit cards. 10. Respondent became aware of the breach in December 2005, at which time it took steps to prevent further unauthorized access, sent breach notification letters to customers for whom it had or could obtain addresses, and notified law enforcement.

11. Through the means described in Paragraph 7, respondent represented, expressly or by implication, that it implemented reasonable and appropriate measures to protect VOLUME 143 Complaint sensitive personal information it obtained from customers against unauthorized access.

12. In truth and in fact, respondent did not implement reasonable and appropriate measures to protect sensitive personal information it obtained from customers against unauthorized access. In particular, respondent failed to implement procedures that were reasonable and appropriate to: (1) detect reasonably foreseeable web application vulnerabilities, and (2) prevent attackers from exploiting such vulnerabilities and obtaining unauthorized access to sensitive personal information. Therefore, the representation set forth in Paragraph 7 was, and is, false or misleading. 13. The acts and practices of respondent as alleged in this complaint constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

THEREFORE, the Federal Trade Commission this thirtieth day of March, 2007, has issued this complaint against Respondent.

By the Commission.

GUIDANCE SOFTWARE, INC. 537 Complaint Exhibits Exhibit A © igs ROU | 7 EMTS CALENDAR, {PURGUSE.|4 | Privacy Statement INTELLECTUAL PROPERTY RIGHTS Warning: The elements of this website, including graphics, logos, images, designs, sounds, information, - and documents (the "Materials"), are protected by copyright, trademark, trade dress, trade secret, unfair competition and other laws and are owned by Guidance Software Inc. and its subsidiaries, divisions and affiliates ("Guidance Software"); or its suppliers, vendors or other third parties who have contributed Materials to the website (each a Supplier"). In no event shall any of the Materials be copied, reproduced, distributed, displayed, downloaded, stored in a retrieval system, or transmitted in any form without the prior express written permission of Guidance Software and/or its Supplier. Encase®, the Encase logo, EnScript™ and other Guidance Software products and brands mentioned in this website are registered trademarks or trademarks of Guidance Software in the United States and/or other countries. The names of actual products and companies mentioned in this website may be registered trademarks or trademarks of their respective owners, Any rights not expressly granted herein are reserved, General Disclaimer THE MATERIALS ON THIS WEBSITE COULD INCLUDE INACCURACIES OR TYPOGRAPHICAL ERRORS AND ARE SUBJECT TO CHANGE AT ANY TIME, THE MATERIALS ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, GUIDANCE SOFTWARE AND ITS SUPPLIERS HEREBY DISCLAIM ALL WARRANTIES, EITHER EXPRESSED OR IMPLIED, AND CONDITIONS WITH RESPECT TO THE MATERIALS, THEIR QUALITY, PERFORMANCE, SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT, Links to Other Websites ‘As a convenience to you, this website may contain links to websites controlled by parties other than Guidance Software, Guidance Software is not responsible for and does not endorse the privacy practices or content of these third party websites. Limitation of Liability IN NO EVENT WILL GUIDANCE SOFTWARE AND ITS SUPPLIERS BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER IN AN ACTION OF CONTRACT OR TORT, ARISING OUT OF THE USE OR INABILITY TO USE THE MATERIALS AVAILABLE ON THIS WEBSITE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN PARTICULAR, AND WITHOUT LIMITATION, GUIDANCE SOFTWARE SHALL HAVE NO LIABILITY FOR ANY LOSS OF USE, DATA, INCLUDING THE COSTS OF RECOVERING SUCH DATA, OR PROFITS.

VOLUME 143 Complaint Exhibits Exhibit B

VOLUME 143 Decision and Order DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the Respondent named in the caption hereof, and the Respondent having been furnished thereafter with a copy of a draft Complaint that the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge the Respondent with violation of the Federal Trade Commission Act, 15 U.S.C. § 45 et seq; The Respondent, its attorney, and counsel for the Commission having thereafter executed an Agreement Containing Consent Order (“Consent Agreement”), an admission by the Respondent of all the jurisdictional facts set forth in the aforesaid draft Complaint, a statement that the signing of said Consent Agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in such Complaint, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission's Rules; and The Commission having thereafter considered the matter and having determined that it has reason to believe that the Respondent has violated the said Act, and that a Complaint should issue stating its charges in that respect, and having thereupon accepted the executed Consent Agreement and placed such Consent Agreement on the public record for a period of thirty (30) days, and having duly considered the comments filed thereafter by interested persons pursuant to Section 2.34 of its Rules, now in further conformity with the procedure described in Section 2.34 of its Rules, the Commission hereby issues its Complaint, makes the following jurisdictional findings and enters the following Order: 1. Proposed respondent Guidance Software, Inc. is a California corporation with its principal office or place of business at 215 N. Marengo Avenue, Pasadena, California, 91101. GUIDANCE SOFTWARE, INC. 543 Decision and Order 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the Respondent, and the proceeding is in the public interest.

ORDER DEFINITIONS For purposes of this order, the following definitions shall apply:

1. “Personal information” shall mean individually identifiable information from or about a consumer including, but not limited to: (a) a first and last name; (b) a home or other physical address, including street name and name of city or town; (c) an email address or other online contact information, such as an instant messaging user identifier or a screen name that reveals a consumer’s email address; (d) a telephone number; (e) a Social Security number; (f) credit or debit card information, including card number, expiration date, and numerical security code; (g) a persistent identifier, such as a customer number held in a “cookie” or processor serial number, that is combined with other available data that identifies a consumer; or (h) any other information from or about a consumer that is combined with (a) through (g) above. 2. Unless otherwise specified, “respondent” shall mean Guidance Software, Inc. and its successors and assigns, officers, agents, representatives, and employees.

3. “Commerce” shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44. I.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the online advertising, marketing, promotion, offering for sale, or sale of any product or service, in or affecting commerce, VOLUME 143 Decision and Order shall not misrepresent in any manner, expressly or by implication, the extent to which respondent maintains and protects the privacy, confidentiality, security, or integrity of any personal information collected from or about consumers.

II.

IT IS ORDERED that respondent, directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, marketing, promotion, offering for sale, or sale of any product or service, in or affecting commerce, shall, no later than the date of service of this order, establish and implement, and thereafter maintain, a comprehensive information security program that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers. Such program, the content and implementation of which must be fully documented in writing, shall contain administrative, technical, and physical safeguards appropriate to respondent’s size and complexity, the nature and scope of respondent’s activities, and the sensitivity of the personal information collected from or about consumers, including: A. the designation of an employee or employees to coordinate and be accountable for the information security program. B. the identification of material internal and external risks to the security, confidentiality, and integrity of personal information that could result in the unauthorized disclosure, misuse, loss, alteration, destruction, or other compromise of such information, and assessment of the sufficiency of any safeguards in place to control these risks. At a minimum, this risk assessment should include consideration of risks in each area of relevant operation, including, but not limited to: (1) employee training and management; (2) information systems, including network and software design, information processing, storage, transmission, and disposal; and (3) GUIDANCE SOFTWARE, INC. 545 Decision and Order prevention, detection, and response to attacks, intrusions, or other systems failures.

C. the design and implementation of reasonable safeguards to control the risks identified through risk assessment, and regular testing or monitoring of the effectiveness of the safeguards’ key controls, systems, and procedures. D. the development and use of reasonable steps to retain service providers capable of appropriately safeguarding personal information they receive from respondent, requiring service providers by contract to implement and maintain appropriate safeguards, and monitoring their safeguarding of personal information.

E. the evaluation and adjustment of respondent’s information security program in light of the results of the testing and monitoring required by subparagraph C, any material changes to respondent’s operations or business arrangements, or any other circumstances that respondent knows or has reason to know may have a material impact on the effectiveness of its information security program.

III.

IT IS FURTHER ORDERED that, in connection with its compliance with Paragraph II of this order, respondent shall obtain initial and biennial assessments and reports (“Assessments”) from a qualified, objective, independent thirdparty professional, using procedures and standards generally accepted in the profession. The reporting period for the Assessments shall cover: (1) the first one hundred and eighty (180) days after service of the order for the initial Assessment, and (2) each two (2) year period thereafter for ten (10) years after service of the order for the biennial Assessments. Each Assessment shall:

VOLUME 143 Decision and Order A. set forth the specific administrative, technical, and physical safeguards that respondent has implemented and maintained during the reporting period;

B. explain how such safeguards are appropriate to respondent’s size and complexity, the nature and scope of respondent’s activities, and the sensitivity of the personal information collected from or about consumers; C. explain how the safeguards that have been implemented meet or exceed the protections required by Paragraph II of this order; and D. certify that respondent’s security program is operating with sufficient effectiveness to provide reasonable assurance that the security, confidentiality, and integrity of personal information is protected and has so operated throughout the reporting period.

Each Assessment shall be prepared and completed within sixty (60) days after the end of the reporting period to which the Assessment applies by a person qualified as a Certified Information System Security Professional (CISSP) or as a Certified Information Systems Auditor (CISA); a person holding Global Information Assurance Certification (GIAC) from the SysAdmin, Audit, Network, Security (SANS) Institute; or a similarly qualified person or organization approved by the Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580. Respondent shall provide the initial Assessment, as well as all: plans, reports, studies, reviews, audits, audit trails, policies, training materials, and assessments, whether prepared by or on behalf of respondent, relied upon to prepare such Assessment to the Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580, within ten (10) days after the Assessment has been prepared. All GUIDANCE SOFTWARE, INC. 547 Decision and Order subsequent biennial Assessments shall be retained by respondent until the order is terminated and provided to the Associate Director of Enforcement within ten (10) days of request. IV.

IT IS FURTHER ORDERED that respondent shall maintain, and upon request make available to the Federal Trade Commission for inspection and copying, a print or electronic copy of each document relating to compliance, including but not limited to:

A. for a period of five (5) years: any documents, whether prepared by or on behalf of respondent, that contradict, qualify, or call into question respondent’s compliance with this order; and B. for a period of three (3) years after the date of preparation of each biennial Assessment required under Paragraph III of this order: all plans, reports, studies, reviews, audits, audit trails, policies, training materials, and assessments, whether prepared by or on behalf of respondent, relating to respondent’s compliance with Paragraphs II and III of this order for the compliance period covered by such biennial Assessment.

V.

IT IS FURTHER ORDERED that respondent shall deliver a copy of this order to all current and future principals, officers, directors, and managers, and to all current and future employees, agents, and representatives having managerial responsibilities relating to the subject matter of this order. Respondent shall deliver this order to such current personnel within thirty (30) days after service of this order, and to such future personnel within thirty (30) days after the person assumes such position or responsibilities.

VOLUME 143 Decision and Order VI.

IT IS FURTHER ORDERED that respondent shall notify the Commission at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including, but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in either corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Paragraph shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580.

VII.

IT IS FURTHER ORDERED that respondent shall, within one hundred and eighty (180) days after service of this order, and at such other times as the Commission may require, file with the Commission an initial report, in writing, setting forth in detail the manner and form in which it has complied with this order. VIII.

This order will terminate on March 30, 2027, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of: GUIDANCE SOFTWARE, INC. 549 Analysis to Aid Public Comment A. any Paragraph in this order that terminates in less than twenty (20) years;

B. this order’s application to any respondent that is not named as a defendant in such complaint; and C. this order if such complaint is filed after the order has terminated pursuant to this Paragraph.

Provided, further, that if such complaint is dismissed or a federal court rules that respondent did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Paragraph as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal. By the Commission.

ANALYSIS OF PROPOSED CONSENT ORDER TO AID PUBLIC COMMENT The Federal Trade Commission has accepted, subject to final approval, a consent agreement from Guidance Software Inc. (“Guidance”).

The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw from the agreement and take appropriate action or make final the agreement’s proposed order. VOLUME 143 Analysis to Aid Public Comment Guidance sells software and related training, materials, and services that customers use to, among other things, investigate and respond to computer breaches and other security incidents. In selling its products and services, Guidance routinely collected sensitive personal information from customers, including name, address, email address, telephone number, and, for customers paying with a credit card, the card number, expiration date, and security code number. It collected this information through its website, sales representatives, and telephone and fax orders and stored the information on its computer network. This matter concerns alleged false or misleading representations Guidance made about the security it provided for this information. The Commission’s proposed complaint alleges that Guidance represented that it implemented reasonable and appropriate security measures to protect the privacy and confidentiality of personal information. The complaint alleges this representation was false because Guidance engaged in a number of practices that, taken together, failed to provide reasonable and appropriate security for sensitive personal information stored on its computer network. In particular, although it employed SSL encryption, Guidance: (1) stored the information in clear readable text; (2) did not adequately assess the vulnerability of its web application and network to certain commonly known or reasonably foreseeable attacks, such as “Structured Query Language” (or “SQL”) injection attacks; (3) did not implement simple, low-cost, and readily available defenses to such attacks; (4) stored in clear readable text network user credentials that facilitate access to sensitive personal information on the network; (5) did not use readily available security measures to monitor and control connections from the network to the internet; and (6) failed to employ sufficient measures to detect unauthorized access to sensitive personal information.

The complaint further alleges that beginning in September 2005 and continuing through December 7, 2005, a hacker GUIDANCE SOFTWARE, INC. 551 Analysis to Aid Public Comment exploited these vulnerabilities by using SQL injection attacks on Guidance’s website and web application to install common hacking programs on Guidance’s computer network. The hacking programs were used to find sensitive personal information, including credit card numbers, expiration dates, and security code numbers, stored on the network and to transmit the information over the internet to computers outside the network. As a result, the hacker obtained unauthorized access to information for thousands of credit cards.

The proposed order applies to personal information Guidance obtains from consumers. It contains provisions designed to prevent Guidance from engaging in the future in practices similar to those alleged in the complaint.

Part I of the proposed order prohibits Guidance, in connection with the online advertising, marketing, promotion, offering for sale, or sale of any product or service, from misrepresenting the extent to which it maintains and protects the privacy, confidentiality, or security of any personal information collected from or about consumers.

Part II of the proposed order requires Guidance to establish and maintain a comprehensive information security program in writing that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers. The security program must contain administrative, technical, and physical safeguards appropriate to Guidance’s size and complexity, the nature and scope of its activities, and the sensitivity of the personal information collected from or about consumers. Specifically, the order requires Guidance to:

 Designate an employee or employees to coordinate and be accountable for the information security program. VOLUME 143 Analysis to Aid Public Comment  Identify material internal and external risks to the security, confidentiality, and integrity of customer information that could result in the unauthorized disclosure, misuse, loss, alteration, destruction, or other compromise of such information, and assess the sufficiency of any safeguards in place to control these risks.

 Design and implement reasonable safeguards to control the risks identified through risk assessment, and regularly test or monitor the effectiveness of the safeguards’ key controls, systems, and procedures.

 Develop and use reasonable steps to retain service providers capable of appropriately safeguarding personal information they receive from Guidance, require service providers by contract to implement and maintain appropriate safeguards, and monitor their safeguarding of personal information.

 Evaluate and adjust its information security program in light of the results of testing and monitoring, any material changes to its operations or business arrangements, or any other circumstances that it knows or has reason to know may have material impact on its information security program.

Part III of the proposed order requires that Guidance obtain within 180 days, and on a biennial basis thereafter for a period of ten (10) years, an assessment and report from a qualified, objective, independent third-party professional, certifying, among other things, that: (1) it has in place a security program that provides protections that meet or exceed the protections required by Part II of the proposed order; and (2) its security program is operating with sufficient effectiveness to provide reasonable assurance that the security, confidentiality, and integrity of consumers’ personal information has been protected. GUIDANCE SOFTWARE, INC. 553 Analysis to Aid Public Comment Parts IV through VIII of the proposed order are reporting and compliance provisions. Part IV requires Guidance to retain documents relating to their compliance with the order. For most records, the order requires that the documents be retained for a five-year period. For the third-party assessments and supporting documents, Guidance must retain the documents for a period of three years after the date that each assessment is prepared. Part V requires dissemination of the order now and in the future to persons with responsibilities relating to the subject matter of the order. Part VI ensures notification to the FTC of changes in corporate status. Part VII mandates that Guidance submit compliance reports to the FTC. Part VIII is a provision Asunsetting” the order after twenty (20) years, with certain exceptions.

The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the proposed order or to modify their terms in any way.

VOLUME 143 Complaint