Recent hacker attacks — including the first successful attack on an Apple computer, and several attacks on U.S. and Canadian hospitals — have reminded Canadian businesses of the need to be vigilant about the danger posed by ransomware.

Ransomware is a species of malware that locks a user’s computer or files until the user performs actions demanded by the software. At its most benign this could mean completing a survey;1 at its most insidious, it means paying an actual ransom, typically in the nationless and virtually untraceable currency of Bitcoin. Ransomware can encrypt a user’s files until the hacker’s demands are met, though there is never any guarantee that meeting these demands will result in files being freed.

Threat Expands to Apple iOS

In early March 2016, Apple Inc. shut down what appears to have been the first ransomware to successfully attack an Apple computer, i.e. a computer using Apple’s iOS operating system—thankfully, before large numbers of computers were affected. Ransomware has plagued PCs for years; the CryptoLocker program successfully extorted USD $3M before it was shut down in 2014 by the U.S. government.2 More recently, Crowti (a.k.a. CryptoWall) and FakeBsod were detected by Microsoft on at least 850,000 PCs between June and November 2015;3 CryptoWall alone had cost users USD $18 M by the middle of last year.4

Ransomware often gains access to a computer system when the user clicks on unfamiliar links or attachments, but the program behind the attack on iOS machines (called KeRanger) was one of a growing number of programs to infect via the download of legitimate applications; in this case, a tainted version of a peer-to-peer file sharing program, downloaded from the developer’s own site and bearing a legitimate Apple developer’s certificate.5

Increasingly Targeting Business

While early ransomware programs targeted individuals for relatively small sums of money, hackers are increasingly targeting businesses. A recent report by the Online Trust Association (OTA)6 reveals that attacks aimed at businesses through their employees are not only becoming more common, but are taking a more sophisticated approach to the ransom itself, tailoring the amount demanded according to the size and value of the corporate target.7 While attacks against individuals threatened victims’ photos and other treasured personal data, corporate clients face the possible destruction of client and proprietary data as well as intellectual property,8 with reputational risk compounding more immediate business losses.

Attacks on public institutions are also increasing as ransomware attacks on hospitals—which have the ability to temporarily cripple hospital functions9—have become increasingly common.10 In early March 2016, an Ontario hospital became the second in Canada to join the list of such institutions known to have been attacked.11

Reporting Obligations for Ransomware Targets

Companies may face reporting obligations when ransomware strikes. As noted by a recent advisory from the Office of the Information and Privacy Commissioner of Alberta,12 personal information may be accessed by hackers during ransomware attacks, and Alberta companies have a positive obligation to report breaches of personal information to the provincial privacy commissioner where the breach results in a “real risk of significant harm” to an individual, and the commissioner may require the company to report to the affected individuals (i.e. clients, in the case of a breach of client personal information).13 Moreover, recent amendments to the Personal Information Protection and Electronic Documents Act (PIPEDA) will require the companies to notify the federal privacy commissioner, the affected individual, and any other organization or government institution that may reduce or mitigate the risk of harm, where a breach of personal information “creates a real risk of significant harm to the individual,” which can include risk of economic loss by the person whose personal data is breached, as well as physical and reputational harms.14 These requirements will extend to Ontario companies, and will come into in force once regulations setting out the necessary details for compliance are complete and filed.

Reporting a ransomware hack is obviously highly problematic for businesses, particularly those for whom superior data security is a key element of brand identity. Recent hacks have shaken consumer confidence and resulted in profound turmoil for the targeted businesses, including resignations by top executives.15

Legal Remedies for Ransomware Targets?

What might a civil action against a ransomware hacker look like?

Ransomware hacks are unique in that they do not typically result in the appropriation and use of the target’s data; they instead paralyze the data to prevent its use by the target.

Causes of action for such a hack might include:

  • Conversion, which includes liability for the destruction of another’s goods in a manner inconsistent with that person’s right of possession (and thus doesn’t require that the data held for ransom be stolen by the hacker / ransomware);
  • Intimidation, which requires a threat to the plaintiff, an intention to injure the plaintiff, and compliance with the threat (or the foregoing of some action as a result of the threat);16
  • Trespass to chattels, which imputes liability for destroying another’s goods, or depriving them of the possession of those goods;
  • Detinue, normally a suit for the return of goods wrongfully detained by another, which could be used to compel the release or decryption of data (query whether it would require an extension of the tort in the ransomware scenario where data isn’t “taken” from its owner but is, in effect, detained);
  • Interference with economic relations (i.e. the “’unlawful means’ tort”17), which would require harm to a third party giving rise to a cause of action against the plaintiff (in a ransomware scenario, this could arise where there is a loss of or damage to the third party’s personal or other data in the attack—e.g. the loss of access to the only copy of such data—or perhaps where a party in a business relationship with the target is harmed by the loss of access to the data because it rendered the target unable to perform duties owed to the third party);
  • Intrusion upon seclusion, which may or may not apply as it requires an invasion of privacy which arguably may not exist in the context of a ransomware attack where no human even views the data18;
  • Targets may also have a cause of action for breach of the Copyright Act, which makes it an offence under the Act to “circumvent a technological protection measure” that “controls access to a work.”19 This would include attempts to “avoid, bypass, remove, deactivate or impair the technological protection measure.”20

The fact that a ransomware attack usually paralyzes or destroys rather than stealing data simplifies the issue of damages as it does not rely on an accounting of profits made from the data by the hacker (except, of course, in the scenario where the target pays the ransom, loses the data regardless, and sues, in which case the ransom forms part of the claim). The measure of damages instead becomes the quantum of the target’s loss connected to the loss of the data. This may include lost profits resulting from lost customers or the loss of future customers / opportunities; operating losses connected with the temporary or permanent loss of the data (e.g. the direct or indirect cost of projects stalled or abandoned); and possibly also losses due to claims by customers or others whose data was put at risk (though this would seem to arise only where the only copy of the data is lost, or where there is at least uncertainty as to whether such parties’ private information was also accessed or taken in the attack resulting in a privacy breach).

Practically speaking, the legal remedies for a business targeted by ransomware are slim. The activity is obviously illegal and should be reported (the RCMP recommends reporting to the Canadian Anti-Fraud Centre ), but there appear to be no reported prosecutions in Canada of hackers for ransomware attacks, despite the fact that such attacks have been taking place for over a decade. The often-remote nature of the crime (in the few cases where attacks have been traced to individuals or even just countries, the hacks have typically come from foreign states like Russia) puts criminal and civil remedies largely out of reach. For example, the Russian hacker indicted by the FBI for his alleged involvement with CryptoLocker remains at large years later. Civil proceedings against foreign nationals are most likely to result in default judgments that are difficult if not impossible to collect on. For this reason, businesses are advised to focus their efforts on prevention and loss mitigation (some Canadian insurers now offer services to assist insureds targeted by ransomware attacks21 ).