Future Technology Credit: Shutterstock.com/greenbutterfly

 

As the world faces the challenges of the coronavirus disease 2019 (COVID-19) pandemic, the technology sector has provided essential support to people, businesses and communities as they adapt to changing circumstances. From supporting remote workforces around the world, to operating the backbone of global digital and mobile payment systems, to providing collaborative and innovative care solutions to those impacted by COVID-19, many companies in the technology sector, as well as other sectors, are serving critical functions.

While many technology companies are forging on, it is certainly not business as usual for most. While discussions over force majeure, impossibility, impracticability and frustration of purpose, as well as other contractual remedies, are top of mind for many companies across all sectors, there are a few key considerations that are unique to the technology sector that bear remembering.

Intellectual Property Protection

For nearly all technology companies, development, ownership and exploitation of intellectual property will continue to play a vital role, even in the midst of a global pandemic. However, as a technology company's workforce may be entirely or largely working from home, and using personal laptops and/or mobile devices, there may be a heightened risk for inadvertent disclosure of a company's intellectual property, especially a company's trade secrets and key data assets (as well as personal information).

Companies in the technology sector may take this opportunity to remind their workforce of their obligations regarding their employer's intellectual property. You never know who may be listening in on a conference call or surreptitiously watching a video conference, and the risk of someone posting proprietary company information to social media is all too real.

Also, many states have statutory exceptions that limit a company's ability to assert ownership over developments that an employee makes on their own time without use of any company equipment, supplies, facilities, or trade secret information, unless that development relates to the employer's business, or the employee's work for the employer (for example California Labor Code 2870). It seems that with each day a new shelter-in-place or stay-at-home order is issued or revised; and, as a result, it is not always clear when an employee is working on their own time, or whether or not company equipment is being used.

As government workers and agencies around the world also face the challenges of conducting business from afar, many filing deadlines for prosecution and registration of intellectual property rights have been extended. However, those extensions are not uniform across jurisdictions. Companies in the tech sector that are seeking to register or continue the prosecution of their intellectual property are encouraged to pay careful attention to filing deadlines to ensure that they do not miss a required filing.

Access to Intellectual Property

Access to intellectual property and developments is certain to be important in technology collaboration or joint development projects. If one party to a collaboration or joint development project has not survived the turbulent economy due to the fallout of COVID-19 pandemic, the ability of the other party to either continue the project on its own or transition to another company may be challenging without access to the work product and intellectual property developed to date. Reviewing agreements for transition obligations, robust knowledge transfer obligations, as well as disaster recovery and business continuity plans, are important steps to mitigating the risk that access to its investment in the project.

Source Code Escrows

Software is a key asset of many technology companies. Technology companies who provide software or services are often asked to deposit their software into a third-party escrow account, which provides that the source code of the software will be released on the occurrence of certain specified trigger events. Though software vendors typically seek to negotiate release triggers that are limited to bankruptcy and insolvency, sometimes software vendors must concede broader release triggers that may also include a failure to perform contractual obligations or other financial insecurity short of bankruptcy and insolvency. A software vendor that has engineers sheltering-in-place may have missed a development deliverable or another obligation that could result in a release of source code.

Technology companies facing uncertain times might proactively review their escrow arrangements and take steps to minimize the risk of a source code release, which can often be a red flag in a financing or a prospective sale of the company. Licensees of software, on the other hand, should take the opportunity review their ability to access the software source code if ongoing performance by the software vendor may be at risk.

Cyber Readiness

While it seems that certain aspects of the world have come to a stop (rush hour traffic comes to mind), cybercriminals aren't taking a break and may even be more opportunistic now. As global workforces seemingly moved to remote working in a matter of days (or in some cases overnight), there may have been very little time to lock down systems to ensure confidentiality, availability and integrity of their company's supply chain's critical systems and data. Technology companies with data-centric business models and that need to maintain the confidential nature of key pieces of information (such as pricing, customer lists, bills of materials and other sensitive information) will want to review their cybersecurity practices.

Funding

Startups and emerging growth companies power the technology sector ecosystem. The recently passed stimulus bill in the U.S. may help to shore up that segment of the economy where newly minted graduates are developing the next-generation widget of the future. Where funding sources may now be more uncertain, the potential technology success stories of the future that are today's startups and emerging growth companies are urged to actively seek the funding that is now available from government sources.

Humanitarian Sharing

In many ways, the COVID-19 pandemic has brought the world together. Countries are supporting each other with supplies (such as masks) and additional healthcare workers. Companies are collaborating to share data about the COVID-19 pandemic and information that may lead to new testing and treatment options. We should all be grateful for and proud of the humanitarian effort being demonstrated.

However, as companies look to their toolkits for answers, they may assess whether the impact that sharing solutions has on possible future products and revenue streams. For example, does sharing ideas or solutions provide an advantage to a competitor that may be exploited once the crisis has passed? Given the pace of innovation in the technology sector, an improvement on what may have been considered an outdated pre-existing technology may be the basis of a new product and revenue stream. Thinking through these issues carefully and considering what may be on a technology company's short and long-term product roadmap may mean the difference in securing a future for the company.

We all hope that the COVID-19 pandemic passes quickly and that business and life will resume as we knew it. As we all telework, distance learn and have virtual social gatherings, let us remember that all of this is possible through the innovations, solutions and contributions of businesses in the technology sector. If those companies are diligent in preserving their intellectual property, ensuring that their systems are secure from intrusion, maintaining the value and access to key assets and seeking alternative sources of funding, there is no doubt that the sector will play a central role in helping the world re-emerge from the pandemic and once again power the global economy.

 

Victoria Lee is a Silicon Valley-based partner at global law firm DLA Piper and has been practicing in the firm's Technology and Sourcing group for more than 25 years. She focuses on representation of emerging growth and public companies in complex technology and commercial transactions in the technology sector, as well as a variety of other industry sectors. More information about cybersecurity considerations with a remote workforce and the stimulus bill can be found on DLA Piper's website.