By Mike Scott
Legal News
The way in which businesses today can store important digital information can become a “cloudy” affair.
That is particularly true for businesses that don’t understand the way in which cloud computing work.
Intellectual property, business and litigation lawyers have a unique opportunity to not only provide advice and recommendations on how to handle cloud computing but also help design contract language to ensure that any vendors providing such storage adhere to specific requirements.
With cloud computing, data is stored in a “cloud” or in a location other than a physical server.
There is debate whether this can lead to data being more prevalent to attacks from outside influences or hackers, said Kathryn Ossian, a principal with Miller, Canfield, Paddock and Stone P.L.C. in Detroit.
The main reasons that cloud computing is used are cost and convenience.
It can eliminate many of the maintenance and cost expenses associated with physical servers, which include environmental considerations such as maintaining a set temperature for a server room, along with the intellectual capital required to manage the servers.
A basic example of cloud computing is data that is communicated using email through search engine giants Google and Yahoo.
Some companies have policies restricting the sharing of such data, Ossian said. SalesForce.com, a popular customer relationship management (CRM) tool also stores information in a “cloud.”
“The concern is that there may be more of an underlying risk with cloud computing,” Ossian said. “Businesses and even individual consumers may have information stored on a cloud and not even know it. They often won’t have direct contact with service providers or understand how the information is handled.”
Cloud computing is also a less expensive option for businesses and it allows companies to avoid the costs of various hardware and software products, both of which are often required for maintenance, said Suzanne Nolan, an IP and business attorney with Frank, Haron, Weiner and Navarro, P.L.C. in Troy.
One industry where it can be particularly beneficial is in health care, where electronic medical records (EMRs) are required by HIPAA to adhere to specific characteristics.
What is necessary though is that businesses need to have data encrypted so that there is a much stronger degree of protection available, something required in the health care field by HIPAA. That can help protect other businesses against intentional espionage.
“You do have situations where corporations have planted people with a vendor in an effort to spy,” Nolan said. “They can take advantage of a non-secure cloud computing system. We see this frequently with celebrities whose (health and personal) information is often leaked to media.”
Lawyers can help clients become more aware of the benefits and drawbacks of cloud computing, Ossian said.
For example if a company wanted to turn over payroll processing to an outside vendor, they might consider cloud computing as a way to handle that functionality.
It is important to understand that the decision whether to use cloud computing may not be as simple as a yes or no response, Ossian said. “It is a question of how you can wisely use it to protect your information and data,” she said. “Internet providers may be using it without your being aware of the fact so you should at least know the (consequences).”
An issue that is perhaps of more interest to some businesses is the role that cloud computing data plays in litigation.
The question is who has control over such data — the company or the Internet provider?
“There could be issues with retrieval and how far back you can go to get data,” Ossian said. “The laws are still being developed to handle how data is treated.”
For example when a user signs up for Google Mail, they are agreeing to terms of use set forth by the online information leader, she added.
It is also important for businesses to be mindful of protecting customer data, or customers won’t deal with them.
In fact, customer lists can be considered as sacred as trade secrets. Businesses also need to comply with a federal law known as Red Flags that forces them to take specific steps to protect financial data Nolan said.
“The government is very serious about keeping financial information secure,” Nolan said.
Lawyers can help clients to determine how to use cloud computing is to make them aware of the potential issues related to storing data on a “cloud.”
Companies should consider which applications, and what type of information they might feel more comfortable treating in this way.
Lawyers help ensure that their clients are appropriately complying with applicable laws and indemnify issues.
“Cloud computing is not new but how it is used and applied changes constantly,” Ossian said. “You can build in some protections but you can’t fully mitigate the risks.”
Lawyers have another important role, Nolan said.
That is to identify the type of data that can be stored in cloud computing.
They also can help clients word contract language with a cloud computing vendor to ensure a number of services will be available to them, including data accessibility, efficient service, the requirement to bear costs in case of downtime and more.
“You have to remember that many cloud computing vendors are small start-ups and they may not have the sufficient money or funding to meet client needs,” Nolan said. “You want HIPAA regulations and other laws to be spelled out in an agreement and that cloud computing vendors adhere to federal laws.”
Without such specific language, vendors can include words like meeting “industry standards” within a contract.
But industry standards can have a very vague meaning that doesn’t benefit clients.
As a lawyer, Nolan can help her clients ensure that any cloud computing vendors have access to storage capabilities that will effectively meet client needs.
And she can help clients put the legal requirements in place so that vendors have no choice but to comply with such client requests.
“You need to think of ways to hold the cloud computing provider’s feet to the fire,” Nolan said. “We can often best help our clients by insuring proper wording in a contract.”
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