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Friday, 29 April 2011 - Sony faces global legal action over data theft |
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    Edition: U.S. Article Comments (0) Follow Reuters Facebook Twitter RSS YouTube Read Casey Abrams proves too quirky for "American Idol" 28 Apr 2011 UPDATE 10-Tornadoes tear across US South, killing over 300 28 Apr 2011 Exclusive: Facebook investors look for exits 28 Apr 2011 Wedding broadcast expected to set viewership record 28 Apr 2011 U.S. says Gaddafi troops raping, issued Viagra: envoys 28 Apr 2011 Discussed 141 Obama sees no magic bullet to push down gas prices 94 White House releases longer Obama birth certificate 56 Factbox: Arizona-style immigration crackdowns in U.S. Watched Fire ants form rafts to defy floods Tue, Apr 26 2011 Nokia announces layoffs, outsourcing Wed, Apr 27 2011 Alabama tornado damage Thu, Apr 28 2011 Sony faces global legal action over data theft Tweet Share this By Nathan Layne and Tom Hals TOKYO/WILMINGTON, Delaware (Reuters) - Sony Corp could face legal action across the globe after it delayed disclosing a security breach of its popular PlayStation Network, infuriating gamers and sending the firm's shares... Email Print Related News Sony breach could cost card lenders $300 million Thu, Apr 28 2011 Analysis: What's so special about Sony's massive data breach? Thu, Apr 28 2011 Sony faces global legal scrutiny over breach Thu, Apr 28 2011 Sony gamers threaten to leave after hack Wed, Apr 27 2011 Apple denies tracking iPhone customers Wed, Apr 27 2011 Analysis & Opinion Tech wrap: Microsoft earnings fail to excite Tech wrap: Privacy storm strikes Sony, passes Apple Related Topics Technology » Media » Stocks     A person plays a video game at a Sony Playstation in the Sony's flagship store in Berlin, April 27, 2011. Credit: Reuters/Thomas Peter By Nathan Layne and Tom Hals TOKYO/WILMINGTON, Delaware | Thu Apr 28, 2011 10:02pm EDT TOKYO/WILMINGTON, Delaware (Reuters) - Sony Corp could face legal action across the globe after it delayed disclosing a security breach of its popular PlayStation Network, infuriating gamers and sending the firm's shares down nearly 5 percent in Tokyo Thursday. Sony shut down the network on April 19 after discovering the breach, one of the biggest online data infiltrations ever. But it was not until Tuesday that the company said the system had been hacked and that users' data could have been stolen. In the United States, several members of Congress seized on the breach, in which hackers stole names, addresses and possibly credit card details from 77 million users. One U.S. law firm filed a lawsuit in California on behalf of consumers. "Gamers are angry that Sony's CEO hasn't come out to explain the situation and investors are disappointed over the company's corporate governance," said Michael Wang, manager of overseas funds at Prudential Financials in Taipei, which owns shares in Sony. Sony's PlayStation Network, a service that produces an estimated $500 million in annual revenues, provides access to online games, movies and TV shows. Nine out of 10 of PlayStation's users are based in the United States or Europe. Gamers could ditch Sony and analysts said people looking to buy a video game console could steer toward Microsoft Corp's Xbox, which has its own popular online network. "I am outraged that my personal information may have been accessed by hackers," said Rich Chiang, a PlayStation and Xbox user in Shanghai. Security experts said Sony would need to account for the loss of business -- as well as damage to its brand -- when it tallies up the cost. Other costs include notifying customers of the attack and bringing in experts to cleanse its network. Larry Ponemon, chairman and founder of the Ponemon Institute, said the theft could cost Sony more than $1.5 billion, or an average of $20 for each of the 77 million customers whose data was potentially compromised. Poneman's firm specializes in securing information on computer networks. Sony said the delay in notifying the public was needed to conduct a forensic investigation but it is fast becoming a public relations nightmare akin to Toyota Motor's bungled response to a giant vehicle recall last year, fuelling criticism of corporate Japan's standards of disclosure. Neither Sony CEO Howard Stringer nor Kazuo Hirai, who was appointed to the company's No. 2 position last month after building up Sony's networked services, have commented publicly. Sony shares closed down 4.5 percent after falling more than 5 percent at one stage, while the broad market rose 1.6 percent. The stock has now lost more than 8 percent this week. Some fund managers said the impact might be contained. "Shares of Sony have already reached the low since the earthquake so I think further downside is limited. Investors who buy Sony are buying on its growth in PlayStation. Gamers usually will not stop playing just because a single incident," said Prudential Financial's Wang. Sony has struggled for years to control the activities of the hackers, who make up a portion of PlayStation's fanbase. Earlier this month, games fan website PlayStation Lifestyle said a group calling itself Anonymous had conducted attacks on Sony websites and online services, motivated by revenge for the company's attempts to clamp down on hacking. "Sony's strategy in defending its intellectual property was heavy handed and has triggered the "nuclear option" with those that it engaged," IT security expert, Phil Lieberman, CEO and founder of Lieberman Software, said. INTERNATIONAL SCRUTINY In the United States, attorneys general, who act as consumer advocates, had begun investigating the matter or reviewing it with staff in several states, including in Iowa, Connecticut, Florida and Massachusetts, according to their offices. U.S. regulators could get involved as well. The Federal Trade Commission has been known to pursue companies that failed to safeguard consumer data. It could investigate if it determines Sony failed to tell its customers about the company's privacy policies. A spokeswoman for the agency declined to comment. Sony reported the breach to the FBI's cybercrimes unit in San Diego, which is investigating, a person familiar with the probe told Reuters. The person was not authorized to discuss the matter publicly. Late Wednesday, Rothken Law Firm filed a lawsuit on behalf of an individual plaintiff named Kristopher Johns against Sony in the Northern District of California court. "This suit seeks to redress Sony's failure to adequately provide service to PlayStation consoles and PlayStation Network," the lawyers for the plaintiff said in a court filing. The plaintiff has requested the court to certify this case as a class action and has also sought unspecified monetary damages, according to the filing. Sony did not return a call in the United States seeking comment. Games developers voiced concerns about the ramifications of the data theft. "What's potentially pretty damaging for people is passwords, because people may use the same password for logging into this network that they use for other things," said Jonathan Chey, a games developer and PlayStation user. "Security questions (used for recovering passwords)too. My understanding from what they said is that stuff was compromised and was not encrypted." In Britain, a government watchdog launched an investigation of the incident. Britain's Information Commissioner's Office said it had contacted Sony and was investigating whether it violated laws that require it to safeguard personal information. The commissioner's investigation would depend in part on whether Sony stored user information in Britain. Indeed, Sony may come under the toughest scrutiny from non-U.S. regulators, which have stricter consumer privacy laws. "European countries are going to go crazy and be all over this," said Dan Burk, a professor at the University of California, Irvine School of Law. "They are absolutely obsessed about companies holding personal information." (Additional reporting by Clare Jim in TAIPEI, Melanie Lee in SHANGHAI; Tarmo Virki in HELSINKI and Sonali Paul in Melbourne; Writing by Anshuman Daga, Editing by Dean Yates) Technology Media Tweet this Share this Link this Digg this Email Reprints   We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language, all capital letters or appear to be spam, and we review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. Comments (0) Be the first to comment on reuters.com. Add yours using the box above. Social Stream (What's this?) © Copyright 2011 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Reader Feedback   Mobile Newsletters RSS Podcasts Widgets Your View Analyst Research Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts Venture Capital Journal International Financing Review Project Finance International PEhub.com PE Week FindLaw Super Lawyers Attorney Rating Service Reuters on Facebook Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

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