Licensing in the Cloud (2013 Rocky Mountain IP and Technology Institute) (May 2013)

Copyright 2012 Bryan CaveCopyright 2013 BryanCave LLP
Copyright 2013 BryanCave LLP
May 30, 2013
Jason D. Haislmaier
jason.haislmaier@bryancave.com
Licensing Issues in the Cloud

This presentation is intended for general informational purposes only and should not
be construed as legal advice or legal opinion on any specific facts or circumstances,
nor is it intended to address specific legal compliance issues that may arise in
particular circumstances. Please consult counsel concerning your own situation and
any specific legal questions you may have.
The thoughts and opinions expressed in this presentation are those of the individual
presenters and do not necessarily reflect the official or unofficial thoughts or opinions
of their employers.
For further information regarding this presentation, please contact the presenter(s)
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What is it?
Cloud

Cloud
What is it?

Steve Ballmer
CEO,
Speaking at a Microsoft
event in Singapore
“I'm not sure my goal for today is going to be to
actually explain it to you, but I do want to make
sure that people understand that I think everybody
in our industry accepts it's the next major
transition point in terms of how IT gets done.”

Established Definitions
Key Characteristics

NIST Definition
• Initial draft – April 24, 2009
• Final draft (v16) – October 25, 2011
• In practice, the definition has continued to evolve
What is Cloud Computing?

• Still emerging and rapidly expanding
• Many models, many providers, many markets
• Computing resources or functionality delivered as a service over a network
• Common traits
– On-demand (self-service)
– Pooled resources (“multi-tenant”)
– Rapid provisioning (high elasticity)
– Dynamically assigned resources (“Infinite” capabilities)
– Broad network access (ubiquitous)
– Location and device-independent
– Thin client interface (e.g., a web browser)
• Increased access to applications, data, and functionality
• Reduced costs (for infrastructure, support, and staffing)
• Reduced need for knowledge and control of resources
Key Characteristics

• Private cloud
– Owned or leased by a single organization (“internal” cloud)
– Operated solely for that organization
• Community cloud
– Shared by several organizations
– Supports a specific user community (often with shared concerns)
• Public cloud
– Owned by a company selling cloud services
– Mass-market model
• Hybrids and combinations abound
Cloud Models - Deployment

• Software as a Service (SaaS)
– User does not manage or control the underlying infrastructure
– Limited user ability to set configuration settings (mass-market software)
• Platform as a Service (PaaS)
– User selects (and even builds) the applications and other software running on the
infrastructure
• Infrastructure as a Service (IaaS)
– User selects and configures the fundamental resources running on the infrastructure
(operating systems, storage, applications, and other networking components)
– User selects and controls (and even builds) the applications and other software running
on the infrastructure
Cloud Models - Delivery

Many similarities
Many differences

Understand the similarities
Understand the differences
Understand why they matter

Many Issues– Some New, Some Not
Licensing in the Cloud
• Cloud computing represents a paradigm shift from the traditional
enterprise software delivery model
• Paradigm shift does not mean an entirely new paradigm
• Cloud computing shares many legal issues in common with legacy
licensing models, but poses new legal challenges
– IP and software rights
– Service levels and performance
– Privacy and security
– Data protection, rights, and usage
– Cross-border issues
– Legal compliance issues
• Lessons learned from traditional software licensing are often applicable

Transparency
and
Understanding

Transparency and Understanding
Cloud

Understand The Nature of the Services
• Cloud services often rely on multiple levels of providers
– Offer expanded cloud service offerings
– Provide additional capacity
– Spread risk
• Conduct diligence and clarify how the services are actually
being provided
• Require responsibility/liability by the primary provider for all
other providers
• Understand how software, IP and data will be affected
• Solidify ownership and rights
• Understand inherent limitations

Rights in
Software and IP

• Cloud services are moving beyond vendor-provided software
– Many permit customer-supplied software in addition to standard applications (BYOS)
– Increasingly allow for the development of software to run on the cloud platform
• Contracting models can vary significantly
– Scope of license
– Ownership of developments
– Pricing (users, processors, actual use, etc.)
– Rights after cloud services end
• Likewise, vendor-provided software is increasingly comprised of third party
and open source software
• Understand how licensing and ownership models may impact the services
Evaluate and Clarify Ownership and Rights
Software and IP

Rights in Data

Do you know where your data is?
Do you know what data is yours?
Does your provider know?

• Increasingly lucrative model for cloud providers to obtain rights in the data
• Define “data” (both existing and generated through the services)
• Specify ownership rights
• Grant provider specific (and limited) rights in the data
– Use as required to provide the services
– Limited (if any) use for other purposes
– Only permitted monitoring and access
• Protect data as confidential information where applicable
Secure Rights in Data
Data

Cross-Border Legal Issues

• Cloud computing services are inherently “stateless”
• Resources are dynamically and constantly re-provisioned
• Servers are located in multiple different locations (and often countries)
• Never anywhere, but always somewhere
• Can and does create jurisdictional and regulatory issues
– Cross-border flows of software, IP, and data
– Compliance with applicable regulations
– Potentially conflicting outcomes
• Obtain transparency and control
– Specified locations
– Limitations/notices regarding changes
– Specified ownership and license rights
– Required audit trail
Inherently Cross-Border
Cross-Border Legal Issues

Performance and
Service Levels

• Cloud provider business models rely on the adoption of a
standard platform
– Standard service offerings
– Standard performance and service levels
• Providers are often (still) reticent to negotiate changes to service levels
• As the sophistication and volume of services grow, so does the need
for flexibility
• At minimum, understand the limitations on the service being received and
how they may impact your requirements and expectations
• Strong parallels to IT outsourcing agreements
Standard Platform, Standard Service Levels
Service Levels

Termination and Transition

• Dependency on cloud services is increasing
• Understand you level of dependency
• Adjust termination triggers as needed
• Understand practical barriers to transitioning to a new service provider
• Obtain necessary visibility into services
– Software and hardware used to provide services
– Applicable software licensing terms
– Relevant subcontractors
– Compatibility and interoperability issues
• Provide for transition assistance where needed
– All services provided during the term of the agreement
– Assistance needed to transition to a new provider
Control Termination and Transition
Termination and Transition

Business Continuity
and
Disaster Recovery

What Happens When the Provider Fails
Business Continuity and Disaster Recovery
• How long could you operate without access to:
– Services?
– Software?
– Data?
• Provide for a business continuity plan (BCP)
– Understand your current BCP
– Diligence provider’s existing BCP
– Set minimum requirements for the BCP in the agreement
– Restrict changes to the BCP
– Include audit rights to ensure implementation of the BCP
• Consider data back-up (or even service back-up) through a secondary
provider

• Cloud services are growing ever more sophisticated
• The importance of cloud services will only increase
• In addition to data, significant software and IP is now developed through
cloud services
• Take the time to understand the nature of the cloud services being
provided
• Leverage legal concepts from traditional software licensing to address
issues that matter to your business
• Having flexibility and additional rights can be important, even if you have
to pay for them
Paradigm Shift, But Many Existing Rules Apply
Closing Thoughts

Thank You.
Jason Haislmaier
jason.haislmaier@bryancave.com
@haislmaier
http://www.linkedin.com/in/haislmaier

Licensing in the Cloud (2013 Rocky Mountain IP and Technology Institute) (May 2013)

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