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Netflix Is Latest to Face Privacy Lawsuit

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Personal data release could indicate political beliefs, sexual orientation.

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It started innocently enough.

In October 2006, Netflix (NFLX) aimed to improve the suggested titles recommended to customers based on their ratings. The online retailer proposed a contest to its users to design a better recommendation algorithm than its existing system. It wanted to devise a computational method that would predict the customers' movie preferences with 10% better accuracy.

To facilitate the contest, Netflix provided more than 50,000 entrants with the ratings history and customer ID numbers of nearly half a million of its customers. Although the ID numbers were not explicitly matched to the identities of Netflix customers, the information was enough for two University of Texas researchers -- Arvind Narayanan and Vitaly Shmatikov -- to match the anonymous reviews to ones posted on the Internet Movie Database, revealing not only a person's name if provided, but their political leanings or sexual orientation.

The latter was reason enough for one woman to file a lawsuit against Netflix. The woman -- who chooses to remain anonymous -- is a lesbian who has yet to come out of the closet and found the contest to be infringing on her privacy. Filed in a California federal court, the suit contends that fair-trade laws were in violation as well as in breach of federally protected video rental records.

The lead attorney on the case, Joseph Malley, has experience in the area of compromised personal information: He won $9.5 million settlement in a class-action suit against Facebook for the site's Beacon program which published the sales records and Blockbuster (BBI) rentals of users on their profiles.

Netflix also had fair warning to be extra judicious with the distribution of personal information. Two months prior to the contest, AOL (AOL) released logs of search queries which, although stripped of the user identification, were enough to be linked to actual user names.

The suit invokes the "Brokeback Mountain Factor" which notes that leaked information can be matched to existing public information and used by marketers to target or pigeonhole users into specific demographics -- or worse, to determine private lifestyle choices. While the nature of the scenario directly relates to the implied sexual preference of someone renting the gay-themed Brokeback Mountain, more can be said about a person's character if they rented, say, Miss Congeniality 2 or the entire Faces of Death series.

If the case goes to trial -- or more likely is settled out of court -- companies ought to note and limit how much customer information is presented in a public arena. Facebook is continually under fire for its privacy policies but can't seem to take a hint. Perhaps another multimillion-dollar settlement will change its tune and provide its users with the protection they deserve.

That is, until someone in the company inevitably loses one of their laptops.
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