In computer terminology, a honeypot is a computer system set to detect, deflect, or, in some manner, counteract attempts at unauthorized use of IT systems. Generally, a honeypot appears to be part of a network, but is actually isolated and monitored, and which seems to contain information or a resource of value to attackers.
Lance Spitzner covers this topic from his (admittedly) non-legal perspective.
Is it entrapment?
Honeypots are not a form of entrapment. For some reason, many people have this misconception that if they deploy honeypots, they can be prosecuted for entrapping the bad guys. Entrapment, by definition is “a law-enforcement officer’s or government agent’s inducement of a person to commit a crime, by means of fraud or undue persuasion, in an attempt to later bring a criminal prosecution against that person.”
Does it violate privacy laws?
Privacy laws in the US may limit your right to capture data about an attacker, even when the attacker is breaking into your honeypot but the exemption under Service Provider Protection is key. What this exemption means is that security technologies can collect information on people (and attackers), as long as that technology is being used to protect or secure your environment. In other words, these technologies are now exempt from privacy restrictions. For example, an IDS sensor that is used for detection and captures network activity is doing so to detect (and thus enable organizations to respond to) unauthorized activity. Such a technology is most likely not considered a violation of privacy as the technology is being used to help protect the organization, so it falls under the exemption of Service Provider Protection. Honeypots that are used to protect an organization would fall under this exemption.
Does it expose us to liability?
Liability is not a criminal issue, but civil. Liability implies you could be sued if your honeypot is used to harm others. For example, if it is used to attack other systems or resources, the owners of those may sue. The argument being that if you had taken proper precautions to keep your systems secure, the attacker would not have been able to harm my systems, so you share the fault for any damage occurred to me during the attack. The issue of liability is one of risk. First, anytime you deploy a security technology (even one without an IP stack), that technology comes with risk. For example, there have been numerous vulnerabilities discovered in firewalls, IDS systems, and network sniffers. Honeypots are no different.
Obviously this blog entry is not legal advice and should not be construed as such.