In some instances, indemnification is appropriate, but in others it is not.  Before agreeing to indemnify another party, the marketing firm should have some certainty about whether a lawsuit is likely to occur.  For trademark and patent infringement, obtaining the level of comfort before agreeing to indemnify requires some due diligence.  However, generally, if a marketing firm is engaged to develop potential marks, the marketing firm does not conduct a trademark clearance search.  Similarly, marketing firms generally do not conduct freedom to operate searches if the final work product includes some type of invention.  But it is this type of due diligence that marketing firms should conduct before agreeing to indemnify for trademark and patent infringement claims.

So where is the middle ground?  In other words, how should the risk of a trademark or patent infringement claim be apportioned between the parties.  When going into the negotiation, the marketing firm should have a strategy that includes a clear walk away point.  If the price of the contract is small, that walk away point may mean that you do not do business with the other company.  If it is large enough, the marketing firm may be willing to assume the obligation to indemnify for these claims, but before doing so, the marketing firm should review any insurance policies to see if there is some coverage in the event of a lawsuit.  Other strategies should include indemnifying for claims that arise out of certain acts such as patent infringement claims brought by practicing entities, but excluding claims brought by non-practicing entities.  A non-practicing entity is a company merely hold a portfolio of patents but not actually create anything based on the patents.

Whatever the compromise is, marketing firms should not be so quick to indemnify their clients for all types of intellectual property infringement claims.  Spending the time to negotiate the scope of the indemnification obligation can protect you from an unintended or unknown future liability.

United States Copyright owners have recourse to protect their works in foreign countries.  The Berne Convention, for example, requires its signatories to recognize the copyright of works of authors from other signatory countries in the same way as it recognizes the copyright of its own nationals.  Similarly, the World Intellectual Property Organization Copyright Treaty protects computer software in foreign countries.  The problem for copyright owners is having to enforce their copyrights in the country where the pirate is located.  Although this raises the issue of whether U.S. copyright owners should have to incur the cost to enforce their rights in foreign country, the fact is that a U.S. copyright owner may have to enforce its rights domestically too.  SOPA, PIPA, and even the OPEN Act appear to benefit U.S. copyright owners by reducing the costs to enforce their copyrights.  The bills treat foreign and domestic pirates differently, in that the bills apply only to the foreign pirate when domestic pirates can be as elusive as foreign pirates.

And that is the key to any antipiracy legislation, plugging the loophole where pirates can reside in areas beyond a U.S. copyright owners reach.  If a foreign website is operated from a country that is not a member of treaty that recognizes U.S. copyrights, then U.S. copyright owners need some forum in which to lodge complaints and obtain relief.  Moreover, the infringing conduct should not have to be willful before action is taken, but a thorough investigation or hearing should be conducted to preserve due process.  SOPA, PIPA, the OPEN Act are on the right track, but they need to focus on closing the loophole.

The proposals include an individual’s right to be forgotten under which individuals will be able to delete uploaded personal information if there is no legitimate grounds to retain it. There is also an emphasis that consumers must give their express consent for their data to be share. In general, the proposals require explicit consent from the consumer.

Companies that deal with personal identifiable information from EU citizens need to revisit their privacy policies and determine if they need to be strengthened. Companies should also consider the U.S.-EU Safe Harbor Framework to ensure that their privacy policies comply with the EU Privacy Directive. The proposals will be passed on to the European Parliament and EU member states, and will take effect two years after they are adopted.

Companies that have not operated a social media website will need to familiarize themselves with the laws that are unique to these types of websites.  Two bodies of law unique to social media websites are the Digital Millennium Copyright Act and the Communications Decency Act.  Companies will have to develop sound Terms and Conditions of Use agreements to address the new functionality of their social media websites.  Additionally, companies will need to consider whether to house their new social meda website on their premises or in the cloud.  I was recently interviewed by Finance and Commerce on cloud computing and how to integrate it into a company’s IT planning for 2012.  You can read the article here. Operating a social media website requires much more involvement by a company, but it is generally better to ride a trend that to buck it.

It also means that businesses and consumers will have to become more familiar with service level agreements and how these agreements differ from traditional software licenses.  It will also require businesses and consumers to understand how to work with cloud providers and structure their relationships.  I have posted several times on the differences these cloud relationships have to the traditional relationships with software developers. 

One thing end users of cloud computing services need to become more comfortable with is negotiating fair and balanced agreements.  End users need to have the resolve to walk away from a cloud provider if that provider is unwilling to negotiate the terms of a service level agreement.  Unfortunately, given the low price of most cloud computing services, this is the only leverage an end user has.  But being pressured into an agreement is usually a red flag and an early indication of what any future dealings with the cloud provider will be like.  But like negotiating the price of a car, there will be another cloud provider that will be willing to accommodate your concerns.

When you scale down, data is left on the server that is no longer in use. What happens to this data? I have not encountered a service level agreement from a cloud provider that addresses this issue. Arguably, the data belongs to the cloud provider since it is the owner of the server. However, this data should remain the property of the customer. As the customer, you should negotiate in the service level agreement that when you scale down the cloud provider will send you any data residing on the servers that are no longer in use and then reformat the hard drive and re-install the operating system to make sure that all of your data is wiped from the server.

Reputable cloud providers will have gone through an information technology security audit such as SSAE 16 (which has replaced the SAS 70), but has your company done the same? The fact is that a company’s data may actually be more vulnerable to a breach than if it was stored in the cloud. After all, data security is ancillary to the business of most companies whereas it is part and parcel to most cloud computing businesses.

More importantly, even if a company is confident that its internal data security measures would pass a SSAE 16 audit, the chances are that your employees are using less secure cloud computing resources without your knowledge. For example, many people use Dropbox or Google Docs store files, sometimes sensitive files, so they are accessible by others or from a location away from the office. These cloud computing options may be less secure than the company’s security measures.

Like the social media policies that most companies have adopted, companies should consider adopting cloud computing policies as well. These policies should include, among others, lists of approved providers, a process for approving new providers, and guidelines governing what information may be used with a cloud computing vendor. An ounce of prevention is always worth a pound of cure.

Microsoft’s move is not surprising given that business is routinely conducted on a global scope, but it is somewhat concerning because it means that the Chinese market for cloud computing services is significant enough to attract the attention of big companies like Microsoft.  This also means that if Microsoft wants to launch its cloud computing architecture in China, that China has the infrastructure to support Microsoft’s cloud computing architecture and the consumer demand for it. The infrastructure for cloud computing services is broadband connections and data centers.

Like many other products that are manufactured in China at lower costs, the Chinese cloud computing infrastructure could ultimately cost less that the U.S. cloud computing infrastructure.  If this happens, cloud computing providers may elect to operate their services from China to take advantage of the lower costs and increase profits.  This move would impact U.S. consumers in a number of ways including customer service when there are periods of downtown, access to any data stored in the cloud, and the security of any data stored in the cloud. Just another thing the cloud computing consumer needs to keep its eye on and be aware of when selecting a cloud computing provider.

Over the years, the increase in Internet use and projections for future Internet use caused a boom in the construction of data centers. Data centers house and link the servers and other hardware that form the backbone of the Internet.  And many companies and states want a part of the action. Minnesota, for example, passed a bill during its special session giving tax exempt status to “qualified” data centers. There was a time when the construction of data centers could not keep up with demand, but now the data center space may have reached a peak.  

In key markets for data centers, there are signs that supply is catching up with demand.  For the tenant of data center space or the end user of a cloud computing service this should be a welcome sight.  As supply and demand in the data center space approach equilibrium, prices will fall. As an end user of a cloud computing service, the hope would be that the cloud provider will pass these lower prices on to the end user of its service and most likely this will happen if competition exists for the cloud service. These are all signs of an industry that continues to mature.