Tech & Sourcing @ Morgan Lewis

In this edition of our Spotlight series, we welcome David Plotinsky to discuss key issues that technology lawyers and professionals should keep in mind regarding tech transactions, foreign investment, and review by the Committee on Foreign Investment in the United States (CFIUS).

Non-fungible tokens (NFTs) have exploded in popularity over the past year. Use cases for NFTs have been growing as more industries are realizing the benefits they present. A report by blockchain specialist Chainalysis found that almost $41 billion was spent on NFTs in 2021—a number that is likely to continue growing.

As technology and the use of the internet continue to evolve, lawmakers remain focused on setting a legal framework for businesses operating “online” in Russia. In 2021, the Russian regulatory landscape underwent significant changes, which will no doubt have an impact on how tech and media companies conduct their business in Russia.

The Law Commission of England and Wales has published a detailed analysis of the application of existing law to smart legal contracts and concluded that the current legal framework is able to facilitate and support the use of smart legal contracts. The Law Commission determined that the jurisdiction of England and Wales "provides an ideal platform for business and innovation, without the need for statutory law reform."

Investment in UK technology companies continues apace, with 2021 marking another record year. The UK government announced in December 2021 that the UK tech sector achieved its “best year ever” in 2021 through investments totaling £29.4 billion, with record IPO capital raising and 37% of all funding coming from the United States. The United Kingdom is creating on average almost one $1 billion “unicorn” technology business a week, primarily fintechs followed by healthtech and enterprise software businesses.

The UK government is considering responses to its proposed reforms to auto-subscription rules for consumer contracts, as part of a broader consultation on reforming UK competition and consumer policy.

The Court of Justice of the European Union (CJEU) has held in Case C-410/19 The Software Incubator Ltd v Computer Associates (UK) Ltd that the supply of software by electronic means, where accompanied by the grant of a perpetual user license in return for a fee, could constitute a “sale of goods” for the purpose of defining a commercial agent under the EU Commercial Agents Directive (the Directive).

Companies are transforming legacy systems, implementing automation and artificial intelligence tools, embedding digital capabilities into their products, shifting to cloud solutions and leveraging technology to better connect to their customers, personnel, and third parties, all at an unprecedented pace. The focus on businesses to get to market faster, reach a broader audience and provide real-time interaction has in turn put pressure on legal and sourcing documents to keep up. The complexity and volume of the numbers of projects (and contracts) can be daunting — especially for companies that have not yet elevated the importance of the technology law function within their organizations.

The Board of the International Organization of Securities Commissions (IOSCO) has published a set of revised outsourcing principles for regulated entities. IOSCO is an international policy forum for securities regulators and a global standard-setter for securities regulation whose membership regulates more than 95% of the world's securities markets.

During the last year, we have seen a significant shift to “as a service” models and cloud solutions, as well as heightened attention on outsourcing as a strategic business tool to enable scalability, improved service, and accelerated access to in-demand technology and resources. This increased reliance on vendor performance to enable business operations has underscored the importance of implementing a solid service level methodology in order to: establish performance metrics that align with the customer’s expectations and business requirements; measure, monitor, and report performance against the metrics; set out the remedies for service level defaults, including service level credits and termination rights; and agree to events that may excuse performance resulting in missed service levels.