TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

In Part 1, we discussed how, despite widespread usage, termination in the event of bankruptcy clauses (“ipso facto” clauses) are generally unenforceable pursuant to the bankruptcy code. In this second part, we discuss why these clauses are still prevalent in commercial transactions and the exceptions that allow for enforceability in certain situations.

Why Do Ipso Facto Clauses Remain in Most Contracts?

Practically all commercial transactions, including licenses, services agreements, and supply agreements, contain a provision that triggers termination rights, without notice, to a party whenever the other party files for bankruptcy or experiences other insolvency-related event. In Part 1 of a two-part series, we discuss how the commonly used termination-on-insolvency clauses are generally unenforceable despite their widespread use.

The audit section in a services agreement contains the provisions that specify a party’s right to access and review another party’s information in order to determine such party’s compliance with the agreement. Depending on the scope of audit rights, the audit section can range from a single paragraph to an entire exhibit to the contract.

Many considerations go into drafting appropriate audit rights, including the types of services that the customer is receiving, and the industry in which the customer’s business operates. In many cases, the customer is the auditing party and the service provider is the audited party, but there are situations where the roles will be reversed. Below is an overview of several key issues to consider when drafting audit rights for services agreements.

In business process outsourcing (BPO) transactions, some of the toughest negotiation points often involve responsibility for compliance with applicable laws and regulations. If you have negotiated BPO transactions, you know that there is not an industry position that can be applied across the board on all deals. We find key determiners as to how responsibility is allocated to include the type and size of the transaction, whether the service is a “utility” or one to many model, the intended scope of the service offering, impact to fees (if any), vendor capabilities, and negotiating leverage.

Customers in outsourcing arrangements are coming to expect (or starting to demand) that their providers have the resources, technology, and know-how to leverage automation software—whether robotics desktop automation (RDA) or robotics process automation (RPA) software—to enhance the capabilities and efficiencies of IT and business processes. While the software promises big benefits, such as higher levels of accuracy, scalability, and cost-savings, as with the implementation of any new technology, there are new challenges to consider.

In this post we take a look at the top five issues to consider when contemplating the use of automation software in your outsourcing transaction.

When polling fellow tech lawyers about blockchain, most of them seemed to be waiting out getting up to speed on the technology to see if the hype would stick and whether clients would actually implement blockchain solutions at an enterprise level. Would blockchain for business applications, such as supply chain and data transfer, explode like the “cloud” and “automation” or fall by the wayside as other technologies outpaced it?

While the staying power of public cryptocurrency platforms is still in question, the use of blockchain technology to enable business solutions seems to be increasing, with blockchain use cases moving from the innovation lab into implementation.

As 2018 comes to a close, we have once again compiled all 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. If you don’t see a topic you are interested in below, please let us know, and we may feature it in a future Contract Corner.

Picking up where we left off last week, we continue our refresher on common issues to consider when entering into a transaction that will include royalties. Today’s entry focuses on timing and reporting considerations for the calculation and payment of royalties.

It's one of the most commonly utilized commercial structures in various technology and intellectual property licensing deals: the royalty. As everyone's go-to payment mechanism for licensing deals, you may think that the nuances of royalty calculation and payment are well-defined and understood universally. But, time and again, we find that walking through a list of potential royalty "pain points" uncovers certain components of a contemplated royalty-based deal that have neither been considered nor agreed by the parties.

For that reason, we think it's a good time for a refresher on common points to be considered when entering into a transaction that will include royalties. While the specific terms governing a royalty will vary based on numerous factors, including the nature of the products and the underlying licensed materials and the contemplated commercialization structure, many concepts are useful across the board. Today’s entry focuses on issues related to defining the relevant scope of royalty calculations, while a forthcoming post will address issues related to royalty timing and reporting considerations.

There is no “one size fits all” solution when drafting and negotiating the liability provisions relating to data protection obligations and security incidents. Every contract has unique business drivers that will shape the appropriate allocation of liability, such as financial risk and the sensitivity of the data involved. There are, however, common issues that the legal, sourcing, and business teams should carefully consider when structuring the liability framework as it applies to data safeguards. Below we identify some of these key issues.