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

In a prior series of posts, we discussed issues relating to intellectual property indemnification, including some exceptions, remedies, and allocation of liability. Given that these provisions often involve taxing negotiations and that many technologies have become intertwined, below we explore some nuanced—and frequently sticky—issues regarding third-party products and how they can be resolved.

In the wake of the reinvigorated call for equality and greater diversity and inclusion, many companies—largely through their procurement organizations—are taking the opportunity to revisit their diversity supplier programs, including assessing impact and reevaluating best practices for pursuing supplier diversity and tracking the impact of these programs.

Most major companies include a supplier diversity program or mission statement as part of their procurement guidelines, often highlighting such programs on their external supplier portals. Some companies flow these guidelines down to their vendors in large procurement/services contracts, requiring compliance by such vendors with respect to their subcontractors.

Following the US Department of Justice’s recent recommendations to reform Section 230 of the Communications Decency Act (CDA) to provide incentives for online platforms to address illicit material on their platforms, two US senators have proposed the Platform Accountability and Consumer Transparency Act (PACT), legislation aimed at reforming Section 230 of the CDA.

In an ideal outsourcing relationship, technology transformation through innovation, continuous improvement, and future project work is never really “over.” When documenting an initial transformation program and individual project statements of work, however, there are typically specific end dates in mind to achieve the desired outcomes. But defining when transformation is “done” is not as simple as agreeing on the end date or even the final deliverable.

Earlier this month, we discussed the significance of the transformation workstream in outsourcing transactions and outlined important topics and points to consider when documenting the overall transformation methodology exhibit. Depending on the scope and timing of the transformation, there may be a need to document individual projects in separate statements of work or project schedules.

The July 1 enforcement of the California Consumer Privacy Act (CCPA) is one week away. Despite calls by the business community and trade associations to push back the enforcement date to January 2021 due to the coronavirus (COVID-19) pandemic and related disruptions to compliance efforts, the California state attorney general issued a press release on June 2 stating, “Businesses have had since January 1 to comply with the law, and we are committed to enforcing it starting July 1.”

Additionally, on June 1, the attorney general took action to finalize the CCPA regulations by submitting the final text of the proposed regulations to the California Office of Administrative Law, requesting expedited review in an attempt to have the regulations adopted and enforceable by July 1.

Transition services agreements (TSAs) are often an integral part of a transaction when a buyer or a seller needs to use the other’s services, infrastructure, or resources for an agreed-upon period of time after an acquisition.

Key Considerations

The following is a list of key considerations for both buyers and sellers in connection with negotiating a TSA.

  • Definition of Services. The definition of “services” should include all the services the parties agree will be included as transition services. The schedules should also set forth the length of time the services will be provided, and any specific fees for each service. A party that is receiving services should consider adding a “catch-all” phrase to ensure that any services that are necessary for the operation of the business in the 12-month period prior to the closing will be included, regardless of whether or not the services are accurately listed on the schedule. The parties should also document any specifically agreed-upon exclusions to the definition of services.

In April, we shared a LawFlash Outsourcing and Managed Services Agreements During COVID-19: Our Perspective. With the continued and unprecedented impact of the coronavirus (COVID-19) pandemic on business operations, we thought it would be timely to provide a brief update on five top-of-mind issues that we are addressing with outsourcing and managed services clients.

Remote Working

  • Many outsourcing and managed services agreements include strict requirements on the location of personnel, including the location of certain personnel onsite at a customer site and/or the location of offshore personnel at secure delivery centers with no permitted remote working. These physical location restrictions often are coupled with requirements with respect to the type of technology that can be used when connecting to or accessing the customer’s systems or interacting with end users (such as hardened desktops only, no personal devices), security requirements and detailed connectivity and bandwidth requirements (particularly if there are end user facing activities such as call centers).

Transformation is often a critical component of outsourcing and managed services transactions. The transition of core or non-core functions to a third-party provider can provide an opportunity for the customer to leverage the service provider’s expertise and experience to transform its underlying systems to more modernized and flexible technology. For instance, a customer running a business platform on old mainframe technology may want to move off the mainframe to a cloud solution that enables the customer to better respond to market needs and offer enhanced services and products to its clients.

In case you missed it, the Morgan Lewis COVID-19 Legal Issue Compendium provides an overview of our firm’s key publications covering the legal and regulatory landscape relating to the coronavirus (COVID-19) pandemic. It includes both business management and industry-specific issues challenging executives and in-house legal teams around the world. Links to our publications are embedded within the compendium.