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Fast-paced innovation is exciting, but what are the risks?

Fast-paced innovation is exciting, but what are the risks?
  • United Kingdom
  • Technology, Media and Telecoms

22-06-2018

Eversheds Sutherland recently hosted an SCL IT Disputes Group seminar that explored the latest technology dispute trends and where the future fall-outs may be. The event was attended by leading professions from private practice and in-house.

After opening remarks from the session’s chair, Simon Gamlin, Partner and Head of the Technology Group internationally, there were presentations and discussions regarding the following: complex IT procurement, IT outsourcing, software licensing, data security breaches, AI and IOT.

The speakers were: James Hyde, Partner and Head of TMT disputes (ES), Chris O’Sullivan, Principal Associate, Commercial Disputes (ES), Terence Bergin QC (4 Pump Court) and Quentin Tannock (4 Pump Court).

Brief summaries follow:

Complex IT procurement: James outlined that with projects and programmes of significant scale, investment and often regulation, combined with novel tech, applications and agile development, the potential for disputes seems greater than ever. The frequency and size of tech disputes is set to rise. In relation to complex IT procurement, the dispute triggers can be a combination of the old and the new, such as: poor requirement setting, delays, defective performance, cost escalation, lack of scalability, poor contract governance, sub-contractor conflict, access to escrow, lack of definition around material breach and termination triggers, liability cap ambiguity, absence of termination for convenience, and a lack of focus on exit planning more generally.

IT outsourcing/managed services: the benefits of outsourcing are obvious and many, but with the increasingly business-critical nature of those services the likelihood of disputes arising is greater. There is a rightly a greater focus on providing for all parties clear triggers for remedies and eventual termination, centred on KPI/SLA performance. However, James stated that we continue to see disputes arising from ambiguity in KPI/SLA definition, measurement and reporting. That is despite clear prior case law too ‘ PCH decision: Eversheds wins ICT outsourcing dispute’ . In addition, dispute triggers continue to focus around lack of definition and clarity around technical schedules, sub-contractor alignment, rights to terminate and material breach. Contract governance remains a persistent issue too. Some escalation routes and their form can sometimes hinder not promote settlement. Lastly, the scope of post-termination assistance tends not to fully consider what will be required and there is hardly ever a contractual ‘exit plan’. For public contracts, the duration of exit/transition can sometimes not take into account the public procurement regime, the result of which can limit options and cause additional practical difficulties.

Software licensing: James outlined that software licensors rightly want to protect their IP and licensees need to have certainty and avoid situations where they face unexpected multi-million dollar claims. The potential for conflict arises due to both sides’ pursuit of innovation. Customers seek to improve margins and customer experience through things such as automation, self-service, the cloud, and novel applications. Inadvertently these changes can lead to claims of non-compliance, through ambiguity of initial advice and recommendations, rights required and purchased, licence types and packages, the role of resellers, as well as indirect access and use. Limitations of liability and reporting requirements are other issues that are not given sufficient focus. The importance of regular internal audits cannot be overstated, as well as the need for lawyers to be involved in the process.

Data security breaches: Terence Bergin QC and Quentin Tannock discussed the legal tools that companies could use to handle data breaches. As the audience followed the fortunes of Best FinTech plc, Terrence and Quentin reviewed the options to deal with a major data breach, and the resulting consequences that may arise. This contained an examination of recent case law relating to Norwich Pharmacal orders, freezing orders, unlawful means conspiracy and vicarious liability, as well as an examination of liability and the impact which could result from the GDPR.

The Internet of Things and Autonomous vehicles: Chris O’Sullivan outlined a number of trends and sources of liability that we are seeing from the current fast pace of technological advancement. There is already significant debate in relation to the definition of automated systems and automation. Potential liabilities that arise from the move towards automation include bugs in the software, deliberate choices coded into the software which result in death or injury, defective code or sensors or poor interaction between the two, and the question as to who is in control during a handover from system to human. There is a clear need for legal reform to deal with the issue of liability from automation more generally. This included a discussion on the current UK legal and regulatory framework and the new UK Government Review on self-driving vehicles. Chris also explored potential risks that are arising from the Internet of Things – including the extensive amount of data which is being captured by the IoT and the potential impact for disputes lawyers dealing with disclosure.

Discover how our experienced technology and communications disputes legal team can assist you.

James Hyde, Senior Partner
Chris O’Sullivan, Principal Associate

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