We at InnovaCounsel recently asked several software company execs this question: “What are the big issues that are costing you sleep these nights?”

In Parts 1 and 2 of this series, we addressed these issues:

1. “Use of [independent] contractors and having various taxing agencies dictate that they are employees instead.”

2. “How to protect the company from software ownership claims when employees or contractors reuse code from a prior job or customer engagement when you have agreed that the software your company provides is work-made-for-hire.”

Here is CEO Issue #3, along with our suggestions for dealing with it.  Please note that our suggestions are not intended as legal advice!

Issue: Limiting our exposure to privacy liability when working with large enterprise customers.

Suggestions:

1. Before doing business with a large enterprise customer, be sure your company is “ready for prime time.”

This means, among other things, having a well thought-out Disaster Recovery Program (DRP). Your own IT service provider almost certainly has a robust DRP.  Ask them for a copy of it. This will give you a feel for what goes into a DRP.

If your company isn’t ready to do the things you find in the DRP, you may not yet be ready to work with large enterprise customers.

2. If you do have a robust DRP and feel you are ready to serve a large company, speak with several people inside that company to comprehend their views on data privacy and security. Understand what the company expects from its technology providers.

3. In parallel with suggestion #2, cultivate a relationship with a professional Risk and Insurance firm. This firm can help you deepen your understanding of this risk landscape. It can also educate you about various means, including cybersecurity insurance, for managing those risks.

4. Make sure your standard sales contract includes provisions that reasonably allocate these risks among your company and the customer. Some large customers are willing to use the supplier’s form as a starting point, but they will quickly reject a clause that attempts to shift all the risk onto the customer. Then, you will almost certainly hate the customer’s standard clause that comes back to you in the first round of redlines!

5. As early as you can during the sales process, get a feel for whether the customer is going to insist on using its own contract form. If that’s the case, get a copy as soon as you can and have your General Counsel review and give you feedback on it. Don’t wait until all of the business terms have been negotiated and the sales person has already mentally cashed the commission check!

If you don’t have a General Counsel, contact us to schedule a complimentary 30 minute consultation on managing your company’s privacy liability.

Stuart Blake

Mobile – (949) 842-9379

sblake@innovacounsel.com

Michael Oswald

Mobile – 208.914.3086

moswald@innovacounsel.com

www.innovacounsel.com