Talking SMAC: Contracting for Social, Mobile, Analytics and Computing

Transcription

1 Talking SMAC: Contracting for Social, Mobile, Analytics and Computing Brad Peterson and Paul Roy, Partners, Mayer Brown LLP

2 Today s Topics Today s technology revolution: social, mobile, analytics and cloud. How do you contract for SMAC services? Who gets the benefits of insights created through SMAC? What traditional contracting assumptions fail with SMAC? Which risks increase? Which diminish? How do you comply with privacy and other regulations that aren t keeping up with changing technology?

3 The SMAC Revolution Mobile phones, cars and other devices capturing data constantly Analytical tools allow analysis of data with staggering volume, variety and velocity Social media as primary way for humans to communicate with humans Big Data Cloud platforms allowing low-cost testing and use of algorithms to generate insight

4 Society is Unprepared Privacy laws assume that users know how data is collected and used. Few understand how much companies know and how well they use what they know. Americans were shocked at the NSA s big data project. Big data companies are growing at unprecedented rates.

5 Your Company Can Lose Big For example, in Amazon s early days it signed a deal with AOL to run the technology behind AOL s e-commerce site. To most people, it looked like an ordinary outsourcing deal. But what really interested Amazon, explains Andreas Weigend, Amazon s former chief scientist, was getting hold of data on what AOL users were looking at and buying, which would improve the performance of [Amazon s] recommendation engine. Poor AOL never realized this. It only saw the data s value in terms of its primary purpose sales. Clever Amazon knew it could reap benefits by putting the data to a secondary use. From Big Data: A Revolution That Will Transform How We Live, Work, and Think, Viktor Mayer-Schonberger and Kenneth Cukier (Houghton Mifflin Harcourt 013), p. 105.

6 Or Your Company Can Win Big New insights into your customers, competitors and costs Provider s data trove Provider s data scientists Provider s data gathering capability Royalties on new uses of your data Governance that s built on better data and more immediate

7 Your Data Strategy Can Make the Difference What data will drive the value of your business? What data must you collect, own and protect? What data must you acquire?

8 The SMAC Services Value Chain Providing software and devices collecting social, mobile, Internet of Things, web and other data Collecting or acquiring data Pre-processing to reduce duplication and error Integrating data into a data warehouse with connections between various databases Identifying correlations using data analysis tools Interpreting to identify meaningful results Creating models and algorithms to generate meaningful results on new data at high velocity Production of insights and recommendations

9 Five Key Contracting Risks For Buyers of SMAC Services While you re focused on costs and service levels, SMAC providers waltz away with free use, or even exclusive free use, of data collected through your business activities. Activities of SMAC providers place you in breach of laws and contracts. SMAC providers interfere with your relationships with your customers and suppliers. The service that you receive is the SMAC provider s shifting standard, designed for its benefit not yours. You come to depend on data or output that may be incomplete, wrong, misleading or discontinued.

10 Don t Rely on Standard Intellectual Property Clauses IP clauses in outsourcing contracts allocate rights under intellectual property laws US intellectual property laws generally don t protect the rights you want in your data You generally are not the author or inventor of the data that you gather The sweat of the brow in collecting data is generally not protected under US IP rights Europe and other jurisdictions do have database protection laws, but those likely do not protect your US business

11 Don t Assume that SMAC Business Models Comply With Laws Informed consent Access / participation Anonymization / de-identification Do Not Target Legitimate business purposes Data minimization Profiling

12 Don t Assume That NDAs Protect You from SMAC Risks Non-disclosure is not non-use, and non-use may not be non-analysis NDAs commonly exclude: Available from other sources Required to be disclosed under law Value in direct vs. derived information Exceptions for use to improve our services

13 Don t Even Assume That Your Data Clause Protects You Data ownership clauses generally protect rights in data related to your business, not the digital exhaust that may be of primary value Data ownership clauses rarely offer rights in co-mingled data or the provider s data

14 Do Retain and Obtain Data Rights Learn: What data your company sees now and will see in the future What data you provide to other companies What data you need from other companies Obtain: Rights to continued use of data that you need, including right to provide that data to outsiders for data analysis, license fees, etc. Rights to prevent use of data by others, either for competitive advantage or to obtain license fees to permit use Rights to prevent uses that would be disturbing to your customers and suppliers Rights to other data in provider s possession Rights to findings from analysis of aggregated data

15 Do Use Incentives to Drive Results Key challenges in contracting for data services: Difficulty in specifying outcomes Difficulty in specifying skills Difficulty in specifying activities Rapidly evolving technology and laws Sourcing solutions: Ongoing multi-supplier competitive model Gain share or other outcome-based model

16 Do Allocate Liability Collection in violation of law or contract Illegal retention of data Improper or unwanted disclosure Inaccurate, incomplete or misleading data Incorrect analysis or recommendations Use of analysis and recommendations

17 Do Protect Against Change Get a long-term commitment to provide the data you expect Require consent for harmful changes in services Obtain options to rights to new data streams or analytical tools as they become available.

18 Summary Today, the big winners are those with big data skills and mindsets. Long term, those will become common skills and the big winners will be those who control data that allows them to predict and shape the future. Inventory your data assets and which providers have access to those data assets. Get legal protections in your contracts now, before you lose to counterparties who get smart about big data and SMAC.