Tech & Sourcing @ Morgan Lewis

The Federal Trade Commission (FTC) approved a Final Rule on April 23, 2024 banning almost all worker noncompetes. Questions abound regarding the authority of the FTC to create such a rule and the potential implications of its implementation. To help create some clarity, Morgan Lewis lawyers have prepared answers to frequently asked questions (FAQs) related to the Final Rule’s applicability and anticipated impact as well as what businesses can do to prepare.

This blog is the finale to our Cracking AI and Outsourcing Conundrums series, a series in which we’ve discussed thought-provoking topics and set the stage for dynamic discussions with outsourcing customers and providers on the opportunities and risks of generative AI (GenAI) solutions in the outsourcing space. In this Part 4, we examine certain top-of-mind issues arising in connection with ownership and use rights when leveraging GenAI.

Welcome to Part 3 of our Cracking AI and Outsourcing Conundrums series. In Part 1, we discussed at a high level the challenges of requiring outsourcing providers to drive innovation through the use of generative AI (GenAI) while at the same time complying with an outsourcing customer’s AI policies. In Part 2, we dove into the conundrum of balancing a company’s need for enhanced quality checks with the desire (by the company and the outsourcing provider) to drive productivity and realize savings.

In Part 1 of our Cracking AI and Outsourcing Conundrums series, we discussed at a high level the challenges of requiring outsourcing providers to drive generative AI (GenAI) innovation while at the same time complying with companies’ AI policies. One of the challenges we identified was that many outsourcing agreements impose aggressive savings commitments, to be realized through the implementation of technology solutions that enable headcount or other cost reductions.

Innovation: all companies want their outsourcing providers to be at the forefront, whether accomplished by proposing ideas, implementing solutions as part of their business-as-usual services, or offering savings based on productivity commitments or other demonstrable business impact. Some outsourcing providers may even use innovation as a key differentiator during the sales cycle, putting real dollars at risk if innovation projects don’t realize promised savings. And what innovation is more top of mind presently than the use of artificial intelligence?

New ICT incident reporting requirements under Circular 24/847 (Circular) of the Commission de Surveillance du Secteur Financier (CSSF), Luxembourg’s financial regulator, will come into effect on April 1. This introduces a new ICT-related incident reporting framework and underscores the critical importance of proactive measures in safeguarding financial institutions against ICT and cyber threats.

An ever-increasing number of companies are choosing to use chatbots on their website, in their sales organizations, and to help with customer service. In fact, according to Vantage Market Research, the chatbot market will grow over 23% by 2030. A chatbot can provide a useful tool for consumers who are looking for quick and easy access to information as well as companies looking to provide a high level of attention and service, while allowing its employees to focus on other demands. However, companies should remain aware of and monitor the information the chatbot is sharing.

There are many basic contracting principles that can help streamline and create a readable and clear contract, including the proper use of defined terms. Consistent with the phrase, a defined term is a word or term, often capitalized or otherwise distinguished from other text throughout the agreement, that is to be read to include the particular meaning given to it in the agreement.

An indemnification provision serves as a contractual remedy to redress a party’s (or third party’s) financial loss suffered as a result of a claim, breach, or some other event or condition set forth in the provision. Indemnification serves as a risk allocation mechanism derived originally from insurance law. Each term—“indemnify,” “defend,” and “hold harmless”—has a distinct and important role in an indemnity clause, so it is important to understand the nuances and differences among the three terms.

As we reach the end of 2023, we have once again compiled all of the links to our Contract Corner blog posts, a regular feature of Tech & Sourcing @ Morgan Lewis. In these posts, members of our global technology, outsourcing, and commercial transactions practice highlight particular contract provisions, review the issues, and propose negotiating and drafting tips.