Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

Aaron P. Rubin

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Lawrence Gallick

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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Socially Aware is devoted to the law and business of social media, proactively addressing emerging issues and keeping our clients informed of new developments. We cover fields such as artificial intelligence, privacy and data security, Section 230, intellectual property, and much more.

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The cloud computing market is evolving rapidly. New as a service (aaS) platforms are appearing and the dichotomy between public and private cloud domains has be

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Negotiating Cloud Contracts | Socially Aware

Alistair Maughan

The cloud computing market is evolving rapidly. New as a service (aaS) platforms are appearing and the dichotomy between public and private cloud domains has been fractured into many different shades of hybrid cloud alternatives. And while many of the key issues – privacy risk, data location, service commitment – remain the same, service providers’ commercial offerings are becoming more flexible.Over the past 18 months, we have even started to see changes in the “take it or leave it” approach to cloud contracts. Negotiations of cloud contracts have started to occur. But at this stage in cloud computing’s evolution, even more so than for traditional ICT contracting, the key is to know what can be negotiated and how much.Cloud MarketThe global cloud computing market is reportedly worth approximately $157 billion in 2014, and is expected to reach $290 billion by 2018. The market is growing at an annual rate of almost 50%. North America continues to represent the largest share of the global cloud market with over 50% of the market, followed by the EMEA region with approximately 29%.Software as a service (SaaS) is still the biggest sell, followed by infrastructure as a service (IaaS) and platform as a service (PaaS). The Big 3 aaS cloud offerings represent 90% of the global cloud market according to a recent survey.Flexibility and cost savings are still the main drivers for customers selecting cloud services – while security and privacy remain the top concerns. Interestingly, some customers are starting to consider cloud offerings as a means of improving the security of their data, taking the view that leading cloud providers have more expertise in protecting data and are able to invest more heavily in evolving technologies.As the cloud market continues to grow in volume terms, the diversity of the market offerings is also increasing.  There is more competition than ever before in most of the main cloud market segments, with well-publicized price cuts, more service offerings and many, if not most, software providers examining ways to move into service-based offerings. Traditional market leaders, such as Microsoft and IBM, experience year-on-year growth. Reputation and cost are the key factors in cloud vendor selection, followed by performance assurance related issues.In general, most large cloud providers are showing a renewed focus on multinational clients and also want to move up the value chain and target larger institutional clients. Outsourcing arrangements now increasingly encompass a cloud computing element, and some cloud providers are prepared to offer managed services to mimic elements of so-called “traditional” outsourcing.Genuine adoption by regulated entities, especially financial services institutions, is the next big target; although the take-up is not helped by the reticence of regulators in some key global markets (with the notable exception of the United States) to provide a road map to assist regulated entities’ engagement of the cloud model.  Nevertheless, reticence to adopt a multi-tenanted cloud solution in regulated sectors is being eroded by the availability of aaS models available through virtual private cloud services and dedicated servers.Cloud ContractsIt remains axiomatic that contracts for cloud computing services are generally implemented on the provider’s terms. Even projecting forward at the current rate of evolution, it is hard to see that core principle changing.  However, contract terms are increasingly negotiable to some extent; although the degree of negotiability pales in comparison with the contracting model in traditional services-based outsourcing.In our experience there continues to be a (resigned) acceptance from most customers of the providers’ terms, i.e., the terms are what they are, and there’s a general recognition that that is the place to start. After all, if a customer organization expects customization of services and a genuine negotiation of service terms, then maybe the cloud is not the right place to be considered as a solution for those specific services.Nevertheless, we have experienced greater negotiability compared to 18 months ago, and we anticipate that trend continuing in the future. The contracting areas where we perceive the most scope for negotiation tend to be commercially oriented issues such as price, privacy and security, scope and service levels, and liability caps. Technical areas, such as the variability of service elements that depend on specific data center features, do not lend themselves to negotiation because the shared service nature of cloud facilities limits the ability of providers to agree on changes in those areas. These are areas where customers often show their naivety of how cloud computing works by asking for changes that directly contradict the commoditized nature of the service offering.  That said, some providers do not help themselves by justifying their refusal of almost every requested change based on the invariability of the technical solution, even when an issue is plainly commercial and not technical.Among the key issues that recur in cloud contract negotiations are:<ul><li>Customer control and visibility over subcontracting: there is a general reluctance of providers to allow approval of, or even to identify, subcontractors.  Often, that can be for very good reasons, especially in a public cloud situation;</li><li>The limitation of the provider’s ability to change the nature of the services provided. Again, there may be very valid reasons for this depending on the nature of the services, but, typically, the negotiation ought to focus on the commercial implications of such changes rather than the basic right itself;</li><li>Privacy and data security commitments by the provider;</li><li>Rights of the provider to suspend services under circumstances such as non-payment or violation of an acceptable use policy;</li><li>Limitation of liability;</li><li>Termination assistance provisions allowing the customer to extend service for a period after termination or expiration to allow migration to the replacement solution; and</li><li>The stretching of some common contracting provisions into some pretty unfamiliar directions. One motto to bear in mind when reviewing cloud terms is “never assume that you know what’s in a provision based on its heading.” Force majeure provisions are a good example. You may have thought that it would be hard to reinvent force majeure, but in some cloud instances force majeure seems to be elastic-sided enough to capture “changes in the taxation basis of services delivered via the Internet” as a force majeure event.</li></ul>Another area where some providers have not helped their industry’s cause is in the proliferation of complex, multi-document contract structures which are often poorly updated and oddly worded. Customers need to wade through the many pieces of paper and URL links, and with a lack of consistency among the documents frustration mounts and patience wears thin. These multi-layered contract structures are unwieldy and often, when quizzed, even the providers’ representatives cannot navigate their way around them. It would be beneficial if the cloud industry generally – and some notable large cloud providers specifically – were to address this contracting approach over the next couple of years.Privacy and SecurityMoFo’s <a href="https://www.mofo.com/capabilities/privacy-data-security" target="_self" rel="noopener">Global Privacy Group</a> has already written extensively about the <a href="http://www.sociallyawareblog.com/2014/10/29/privacy-in-the-cloud-a-legal-framework-for-moving-personal-data-to-the-cloud/" target="_blank" rel="noopener">privacy implications of moving data to the cloud</a>. The conjoined issues of privacy and security remain center stage in most cloud contract negotiations. The key issues generally are who is responsible for data security and how obligations should be allocated between service provider and customer. Importantly, there may be a different analysis between different types of cloud services, e.g., between IaaS and SaaS for example. But it is worth understanding the exact commercial and legal implications of a provider that commits only to be responsible for the “security of our network” and expects its customer to be responsible for the “security of its data.”Typically, of course, providers are more willing to take responsibility for the integrity of their networks, while attempting to steer clear of obligations in relation to data. However, some service providers now accept that a failure to improve their privacy offerings may compromise future growth in certain markets and be a competitive disadvantage.So, for example, there is an increased willingness to adopt the EU model clauses for data transfer, and most of the large cloud providers are reacting to commercial pressures from Europe-based clients to offer services from ring-fenced European data centers. Despite this, there is still a lack of appreciation among many customers of the difference between commitments in relation to data “at rest” (i.e., where the data are stored) and where data can be accessed from.PerformanceIn general, most cloud contracts are still relatively light in terms of service level commitments, with availability being the main measurement metric. There is no sign yet of widespread (or, indeed, early stage) acceptance of the EU’s standardized SLA suggestions.In terms of remedies for service failure, the concept of providing credit via further services or contract extension is still prevalent despite the illogicality (from a customer perspective) of accepting more of the same as a service remedy.ConclusionThe old maxim “Be careful what you wish for” applies to the cloud market at this stage of development. Many commercial users of cloud services have chafed at the “take it or leave it” approach to cloud contracts. But, now that some degree of negotiation is becoming possible in some areas of the cloud market, it is clear that users need to understand more than ever what can realistically be negotiated.At the same time, users need to clearly distinguish their reasons for adopting cloud solutions in the first place and understand the specific sector of the market that they are seeking to access. If users perceive the risks to be so great that contract negotiation seems essential before putting services in the cloud, it is possible that they need to consider whether the services that they have in mind properly belong there in the first place.In general, customers need to approach cloud computing transactions with realistic expectations. It is unrealistic to expect to re-negotiate a provider’s cloud contract terms materially on a project with a relatively low cost/value.  Providers are either technically constricted or simply commercially unwilling to devote expensive commercial management time or legal resources to negotiate the terms of a project with a relatively low margin or revenue generation.