Businesses operating in today’s global marketplace face serious business and legal issues related to intellectual property ownership, the Foreign Corrupt Practices Act, bribery, data privacy, patent trolls and remote working. The world-wide pandemic has added to uncertainty in the marketplace.
IP ownership: The lower courts have heard some important legal issues, including whether software code can be copyrighted and when fair use applies. With regard to fair use, U.S. copyright law allows limited use of copyrighted materials for purposes of news reporting, research and criticism (to name just a few) without permission or payments to the copyright holder. Fair use determinations are generally made by state courts. The problem, however, is that state judges have had difficulty determining what constitutes fair use, so there have been varying decisions. Judges in the Southern District of New York are considering some social media-related fair use issues, i.e., what it means to embed an Instagram post versus just displaying the picture used in the post. Hopefully, the Supreme Court will set some new guidelines for the courts. A critical artificial intelligence ownership issue is that many developers are using the same underlying AI technology to develop their products, so the question becomes “who owns what”?
The Patent Office is currently reviewing the patent laws with the objective of updating them to recognize today’s technology. Also, under a recently implemented interim export regulation, developers may need a license to export certain AI software and/or related services referred to as “emerging technology” to a foreign country or to a foreign national employee. Additionally, a presidential executive order was implemented in February 2019 setting forth rules and regulations governing the development and use of AI.
Foreign Corrupt Practices Act (FCPA): The FCPA is a federal criminal statute related to making unlawful payments or giving things of value to a foreign official in return for getting business from that government. A violation could result in very severe financial penalties, as well as possible prison time.
There are two settlement options offered by Department of Justice and the Security and Exchange Commission that companies can use to good advantage: a deferred prosecution agreement or a non-prosecution agreement. Management needs to fully understand the consequences of accepting either of these two agreements. Many other countries have implemented similar bribery laws, so a company can be hit from both ends.
Data privacy: In 2018, the European Union implemented a complex General Data Protection Regulation (GDPR) which protects EU consumers’ data. U.S. companies that export EU consumers’ personal data must comply strictly via the EU-U.S. Privacy Shield. However, in July 2020, the European Court of Justice invalidated the Privacy Shield, claiming it was not strong enough to provide the protection required. The EU and U.S. Commerce Department are currently in talks to come up with stronger protection rules. In the meantime, U.S. companies will need to sign the old standard contractual clauses or have binding corporate rules in place.
Patent trolls: Trolls buy patents from distressed and bankrupt companies with the intent of suing companies, claiming that they are infringing on those patents. Many of their claims are baseless. Companies without the financial resources to defend themselves find it cheaper to pay. Various industry groups have formed non-profit consortiums to help ward off trolls. Joining one that fits your business model is easy.
Remote working: The Covid crisis has caused many businesses to resort to remote work for their employees and contractors. If employees and contractors will be using their own devices to conduct company business, it is important to make sure that all parties understand and acknowledge that the company is the sole and exclusive owner of all confidential and proprietary business information residing on those devices. Therefore, a strong Bring Your Own Device policy should be implemented. Remote working may be the future, so this becomes critical.
Engaging in best practices and being innovative will certainly help to mitigate a company’s financial and legal exposure.
By Joe Valof
Joe Valof, Esq. is founder of OnLine CounselSM, an alternative legal service provider. He advises high tech companies on their contract, licensing and corporate needs. He also founded the Association of Independent General Counsel.