• by Wendy Davis  @wendyndavis, March 17, 2011

Netflix has been hit with a potential class-action lawsuit for allegedly breaking a federal law aimed at protecting the privacy of people who rent movies. In papers filed with the U.S. District Court for the Northern District of California, Virginia resident Peter Comstock argues that Netflix runs afoul of the Video Privacy Protection Act by retaining data about users' movie rental history and recommendations.

Netflix "purposefully retains confidential information regarding both payment and video viewing habits for millions of individuals -- even after their subscriptions are canceled," Comstock alleges. Comstock seeks to represent a class of all Netflix users who canceled their accounts more than one year ago.

A Netflix spokesperson declined to comment on the lawsuit, which was quietly filed last week.

The federal video privacy law, which dates to 1988, specifically prohibits "videotape service providers" from releasing consumers' records without their permission. Congress passed the measure after a newspaper obtained and printed the video rental records of Judge Robert Bork in conjunction with his ill-fated nomination to the U.S. Supreme Court.

The law also requires providers to destroy consumers' video rental records within a year of the time the provider no longer needs the data. One purpose of that provision was to minimize the privacy risk to consumers, says Marc Rotenberg, director of the Electronic Privacy Information Center and former counsel to Sen. Patrick Leahy, who drafted the Video Privacy Protection Act.

But the law's wording leaves some room for doubt about whether it applies online.

The Video Privacy Protection Act law defines videotape providers as companies that sell or rent video cassette tapes "or similar audio visual materials." Questions about whether companies that stream video or rent DVDs are covered by the law have come up in other lawsuits, including class-actions stemming from Facebook's Beacon program, which shared information about users' Blockbuster.com rentals with their friends. But those cases were settled before judges decided whether the video privacy law also applied to online movie services.

This case marks the second recent privacy-related lawsuit for Netflix. Last year, the company settled another case by dropping plans to release a trove of "anonymous" data about consumers. The company had intended to make publicly available consumers' ages, ZIP codes, gender and previously rented movies, in hopes that researchers would use that data to create a better recommendation engine. But critics said that such information could allow researchers to associate people's names with the movies they had rented.