The first of two legal panels on the cloud was early this morning. Jeff Gordon of Andrews Kurth and Jeff Cohen of Cohen and Richardson spoke about how to minimize litigation in your cloud environment. There were some very interesting points in this presentation.
The first, that I repeat always and often is “anyone can sue anyone else at anytime for anything.” It’s simply a fact of life that even if you don’t do something wrong, or think you haven’t, someone can file suit against you. The best way to deal with this issue is the old Boy Scout mantra: be prepared. So from a litigation perspective in the cloud, what is prepared?
Using the definition of cloud computing from Wikipedia, Jeff Gordon pointed out that many judges may not have the level of technical sophistication that you have. As a result, there is a great need that you set out in your contract what cloud computing means to you and the parties you’re contracting with. Jeff Cohen pointed out that many judges don’t have more computing expertise than having a pc on their desktop.
So what cloud computing laws exist? None. With the fact that there are no specific cloud laws, how do you approach litigation risks? You should start with your Service Level Agreement, and actually read it. The first thing you should look at is availability. Not just uptime, but also when will support be available. You should also consider the impact that areas covered by the SLA will have on your business: so will a day credit for downtime make up for the business you’ve lost for that downtime?
Jeff Gordon then segwayed into Jurisdiction. Jurisdiction is the ability of a court to hear a case. The sharing and movement of data within the cloud may lead to some expensive litigation to determine how jurisdiction should be handled in cloud litigation. This may be complicated by the fact that copies of the data are stored in different jurisdictions simply based on the way that the cloud works. You should insert a forum selection clause. This gives you control over where the dispute will be heard and eliminates a lot of uncertainty that you’ll be dragged into a court in another state or even foreign jurisdiction. The key however is to make sure that you actually understand the laws in the state you’ve chosen. So, for example, is the law of Texas more favorable to you than the law in California?
Data Security and Breach. You should adopt your worst case scenario attitude. Does your liability to customers extend to customers of your customers? Specifically, set out the standard of care. Your contract should not contain words like “reasonable.” A court or a jury will look to other things like pre-contract negotiations to determine what reasonable is. So, do you want your sales person’s pre-contract emails used to determine what reasonable is?
So how can you modify your contracts to deal with the litigation risks raised in this panel, Marcus Latzel of Palomino System, Christopher Garcia of Dell, and I will be presenting a cloud contract panel at HostingCon at 3 pm today in room 18 a-b. This panel will be a deep dive into contract negotiation strategy and specific terms and conditions that should be in your contract.
