Predictions 2011: IT Law & IT Trends

December 22, 2010

From Bill Jones, SCL Trustee, Of Counsel, Wragge & Co LLP 

All change please, all change – cloud, costs, and commoditisation 

Ever since the American election it has seemed that President Obama has the monopoly on the word ‘change’, albeit anchored in the very positive context of the phrase ‘Yes, we can!’.  The IT sector has never been averse to change but every so often an inflexion point arrives which changes the landscape in a very dramatic way.  The most recent example has been in the arrival of cloud computing. 

While cloud offerings have been the story of 2010, it seems certain that it is a story that will continue next year too.  In 2011 we will see the cloud offerings of major IT vendors continue to grow and mature, but of greater interest is the quiet revolution that has already started in the adoption of cloud products by major corporates.  At first a product that seemed of interest mainly to consumer and SME markets, discreet enquiry and observation already demonstrates an increasing willingness amongst major corporates to reject legacy e-mail and other systems and adopt cloud-based products.  The main driver is the continuing need and opportunity to achieve significant cost savings in markets and economies where top line growth is still hard to achieve.   

Such costs saving opportunities come in many forms and in 2011 we will also witness legal markets responding to intense competition and the appetite of corporate clients to cut costs.  This will continue to drive an appetite for new business models including legal process outsourcing, particularly overseas to gain the advantage of labour cost arbitrage.  It will also fuel a continued increase in the number of boutique legal practices with low overheads and a flat rather than hierarchical structure.   

Environments such as this favour commoditisation as yet another lever to squeeze cost out of as many processes as possible.  Clients will be less willing to pay for tasks that they see as part and parcel of a lawyer’s stock in trade.  By way of example, a big fee for first draft agreements is likely to become increasingly unwelcome, to be replaced by a willingness to pay a smaller amount for the R&D that has gone into the production of a standard form first draft.  

All the tradition and values at the heart of our profession such as ‘certainty under the law’ and ‘precedent’ itself make the change word seem counter-cultural in the legal services market.  But our clients need to work smarter not harder, and our challenge will be to help them achieve this.  Can we do it?  Yes we can!   

From Chris Marsden, Director, Internet Law LL.M. Program at University of Essex School of Law and member of the SCL Media Board 

This will be the year that the ‘Three Wise Monkeys’ of ISP liability ( have their eyes well and truly opened by co-regulation – as copyright and porn policemen, and as gatekeepers of higher-speed Internet access.  Search and social networks may be dragged backwards into the debate by privacy concerns, especially amongst US Tea Party republicans, whose control of the House of Representatives means that privacy replaces competition or free expression as the Beltway ‘hot button’ communications issue.

For a  public lawyer, it is difficult to see far beyond the Digital Economy Act 2010 and its judicial review in March/April. Will the judge admit that ss 9 to 18 are extra-constitutional, on technical grounds via proportionality and human rights – particularly given the Charter of Fundamental Rights? I suspect it will be kicked ‘upstairs’ to the ECJ, which already has a tricky Swedish case to work on (Perfect  Communications AB).

Commissioner Kroes will throw some bombs at national regulators to enforce greater transparency and competition in our connectivity, especially in international data roaming.

Last year, I was wrong about our economy’s ability to bounce back a bit, and the Obama administration’s (in)competence in achieving anything. But I was right about the wide-ranging net neutrality debates, and I will now predict that these will become intimately entwined in the E-Commerce Directive’s revision, as well as the Consumer Acquis reform.

Tim Berners Lee will still disagree with Ed Vaizey about net neutrality and the open Internet – Tim helped design it, Ed wants to allow it to be eroded.

Most important, however, is that 300 million people joined the Internet in  2010 and 400 million more will in 2011. The Internet is increasingly multilingual, multi-platform, non-Roman script and Asian, which will cause significant fragmentation of standards. 

From Kit Burden, Partner at DLA Piper UK LLP and SCL Fellow 

Government procurement will be a key focus, with attempts to institute more shared IT services and moves to implement the G-Cloud. Cloud based initiatives generally will continue to proliferate, albeit with mixed degrees of success. In the meantime, the legal profession will undergo a more marked change in terms of the use of technology to assist with the delivery of legal advice.  

From John Yates, Fellow and past Chair of SCL who now runs his own consulting business v-lex: 

In 2011, the public sector motto will be ‘make do and mend’ as there will be no money for new procurements.  Some public authorities will face irresistible pressure to extend existing contracts, running the risk of breaching EU procurement rules.  After the boom years, lawyers face lean pickings in the public sector market.  The canny ones are already reinventing themselves as financial services lawyers, and the ones who remain in the market will face continued downward pressure on fees.  2011 – we’ll be glad when it’s over.

From Chris Reed, Professor of Electronic Commerce Law, Centre for Commercial Law Studies, Queen Mary University of London School of Law and SCL Fellow 

The Cloud will of course be big, but what will be the most pressing legal issue? I think the answer is, perhaps surprisingly, governance. Although major customers will still want to negotiate detailed contracts, the complex network of cloud providers’ own services, working together with those parts they outsource and the interactions with customer and third-party services, means that it will be difficult (and very expensive) to capture everything which is going on in a contract. For consumer/SME cloud use, contracts will be able to do little more than describe what service (if any) is to be provided and limit provider liability.

To resolve these issues the major cloud providers will need to develop a governance model, which sets out self-imposed obligations in respect of such matters as privacy, data ownership, security, interactions with law enforcement, etc. This process will not be completed in 2011, but will need to start and make real progress during the year.

Facebook will be the other big topic of discussion if it is successful in attracting a wide range of activities away from the open access Internet into its walled garden. Brush up on your anti-trust/competition law now. 

From Simon Briskman, Partner, Field Fisher Waterhouse LLP: 

Last year I made three predictions: The cloud, the cloud, the cloud. This year, I think it’s the cloud. As I predicted, sizeable organisations have moved into the cloud, like Rentokil and the Daily Telegraph. Even the government ran pilot schemes. The evolution of IT has been in five steps: Mainframes, personal computing, the internet, the web and now the cloud. 2011 will be about virtualised infrastructure. Agile application development, universal remote access and other benefits will follow. I also look forward to more babies in 2011. (There is a correlation between babies and economic growth.) 

From Lilian Edwards, Professor of Internet Law at the University of Sheffield 

Professor Edwards describes these as her frivolous predictions (though the Editor suspects that at least two of these ‘frivolous’ predictions may prove accurate). 

1. France will pass a law forbidding French companies from using cloud computing companies based anywhere other than France. Germany will ban cloud computing as unfair competition with German companies. Ireland will consider putting its banking in the cloud, but realise there’s no point as they have no money left. 

2. A Google off-shore water-cooled server farm will be kidnapped by Somali pirates, towed to international waters, repurposed as encrypted BitTorrent client and take over 95% of the world’s traffic in infringing file-sharing (with substantial advertising revenue, of course) (thanks to Chris Millard for this one). (Meanwhile the Irish will attempt to nationalise all the Google servers they still host on shore to pay for bailing out the banks.) 

3. TalkTalk will lose their judicial review case against the Digital  Economy Act, but the coalition will find some very good reason to delay bringing in the Initial Obligations code, and the technical measures  stage will quietly wither on the vine, as rights-holders realise it will cost them more to pay for it than they will gain in royalties.

4. 120% of people of the world including unborn children, all except my mother, will join Facebook. Mark Zuckerberg will buy Ireland and turn it into a Farmville theme park, with extra potatoes. 

5. 4chan allied with Anonymous will hack Prince William’s email inbox on the eve of the Royal Wedding, revealing he is secretly in love with an older, plainer and less marriageable woman than Kate Middleton (possibly Irish), and also illicitly downloads Lady Gaga songs. In retaliation, the coalition passes emergency legislation imposing life imprisonment as the maximum penalty for DDOS attacks, and repeals the Digital Economy Act. 

From Robert Buchan, Partner, IP & Technology, Maclay Murray & Spens LLP 

Against the background of budget freezes and cuts, particularly across the public sector, I predict that customers disgruntled with the progress or outcome of large scale IT projects will be more inclined to raise high value litigation following the ruling in the BSkyB and EDS litigation.  Although it remains difficult to successfully rely on misrepresentation from pre-contractual meetings, the judgment opens the door to this and is likely to encourage parties to commence litigation in an effort to recover money or renegotiate a more favourable deal.

Clearly the role of and liability of ISPs remains a hot topic.  The judicial review of the Digital Economy Act expected in February next year will be a battle ground between copyright owners, the Government and ISPs.  The rushing through of the legislation in the wash-up period may give more scope for ISPs to challenge the extent of their obligation to take action against suspected illegal file sharers.  I suspect that the effect of the legislation will survive largely intact and the key next steps setting the arena for the next few years will be the release of the much anticipated Ofcom code.  ISPs may well challenge the requirement for them to meet 25% of the costs of the regime as proposed in the draft Online Infringement of Copyright (Initial Obligations) (Sharing of Costs) Order 12011, perhaps on the basis that in terms of the E-Commerce Directive ISPs are not intended to bear financial liability for online infringement where they are mere hosts or mere conduits. 

Another hot topic will be the possibility of the UK government moving away from the principle of net neutrality and thus consumers having to pay extra for premium broadband access to the most popular websites.  I suspect that at least initially this is more likely to result in changes to advertising and revenue generating models on those sites rather than the costs being directly passed on to individual customers by the ISPs.

Lastly, on a happier gadget based note, I suspect we will all be very friendly to our IT teams to encourage them to let us have first access to the Blackberry Playbook! 

From Beverley Flynn, Partner in the IT and Regulatory team at Stevens & Bolton LLP 

Cookies, cookies cookies! Could there be the possibility of the law catching up with technology? In order to respond to technological changes, the European Commission has published a communication to revise the legal framework applicable to personal data. One of the main thrusts of the changes will be aimed at Internet businesses, and in particular behavioural advertising, with the imposition of stricter controls on what amounts to consent. In addition, the Department for Business, Innovation and Skills has issued a consultation on the implementation of the EU communications framework (more law!), including the suggestion of a specific opt-in requirement for selective preference cookies. Given the increased powers to impose fines, the ICO has seen larger fines imposed and higher profile prosecutions (as I predicted last year). This, coupled with the new legislation on the horizon, can only serve to put businesses on the alert and then consider their policies and review the use of harvesting technology. This change in the wings is presumably aimed at protecting the Internet and e- commerce consumer against the perceived Internet barons. But the prediction is that, notwithstanding the consultation and implementation of new laws, technology and innovation will still outpace the law and carry on notwithstanding it !  

From Stephen Mason, Barister and leading writer on electronic evidence and electronic signatures: 

For seasoned observers, the use of cloud computing is neither a surprise nor worthy of a great deal of jumping up and down. Many millions of people already use a cloud computing service of one sort or another. E-mail and social networking sites are the most common. Without going into detail, the term cloud computing describes the provision of services (including the storage of digital data) by a third party on hardware other than your computer or computer network. The IT Committee of the Council of Bars and Law Societies of Europe has recently discussed this matter, and concluded that they ought to issue a paper on the topic to lawyers. During discussions, it emerged that the German Bar prohibits its members from using cloud computing services, although it is debatable whether all lawyers in Germany actually know what cloud computing is, and where they are not aware of what it comprises, whether they are (as in the UK) using a form of cloud computing services in any event.

I predict:
1. That more lawyers will take up some of form of cloud computing service, but will probably never read the terms and conditions first.
2. Digital evidence from cloud computing applications will continue to be used in legal proceedings, although until the world decides to make suitable arrangements to enable investigating authorities to request evidence between jurisdictions at a faster pace,  prosecuting authorities will continue to experience difficulties obtaining evidence from other jurisdictions.
3. There will come a day when data held on a cloud computing platform might not be available (perhaps because a party has gone bankrupt), and a judge will have to decide whether to order the cloud computing provider to deliver up the data to the other side. Then costs will have to be discussed.
4. Finally, I further predict that universities and the profession will continue to certify lawyers as fit to practice without any knowledge of digital evidence, even though digital evidence is now the most prevalent form of evidence across all types of law. 

From Shireen Smith, Principal at Azrights Solicitors: 

In 2011 legal process outsourcing in the UK as an alternative to off shoring to far flung places like India will take off.  We have an ever growing pool of talented law graduates looking for training contracts and opportunities to get relevant work experience.  This availability of a well qualified, motivated labour force, combined with the affordable access to IT efficiencies that Software as a Service provides, will enable UK based businesses to offer attractive outsourcing solutions to law firms and others looking to create efficiencies in their legal work. 

From Susan Atkinson, Legal Director, gallenalliance Solicitors 

A paradigm shift is currently taking place in the way that organisations manage projects for the development of new/innovative products (such as software) and services (such as the transformational element of business process outsourcing). Today we are experiencing unprecedented levels of change, and organisations across all sectors are increasingly turning to the principles of agile and lean to accommodate change. As Damon Darlin famously said ‘innovate or die’.

Initially agile and lean practices were considered to be relevant to IT projects only. But it is no longer possible to ring-fence many projects as ‘IT specific’. It is only when an organisation exploits its IT capabilities to the full that it gains a competitive edge, so it is essential that such projects receive the full attention of the business.

The adoption of agile and lean requires a change in approach across the whole of an organisation. It impacts on the business practices, management structure and corporate culture. But, notwithstanding these challenges, many organisations, regardless of their size, are embracing this new way of working.

This in turn is feeding through to how organisations contract with their suppliers and customers. Contracts should accurately reflect the underlying business practices, and therefore need to reflect the agile and lean practices. Traditional contract models are brittle, do not readily embrace change and are unsuited for agile and lean practices. Instead a new contract model, based on the supply of capacity is required.

I anticipate that over the next couple of years there will be a large shake-up in the way that contracts for the development of new products and services are procured, drafted and negotiated, to reflect this new way of working. 

From Toby Crick, Partner at Bristows: 

The move by cloud vendors to compete in the enterprise market will continue. This will have a number of impacts on pricing and risk allocation across the technology supply industry as established market participants try and develop cloud or SaaS offerings and suppliers across the board use the switch by customers toward more ‘off the shelf’ and cloud-based solutions to resist the trend of the last few years of customers seeking to push almost all contractual risks (eg due diligence, TUPE risk, customer dependencies etc) onto vendors. 

From Jane Seager, Counsel, Hogan Lovells: 

The proposed launch of potentially hundreds of new generic Top Level Domains (gTLDs) has been under discussion since June 2008 and ICANN has now published the fifth version of the draft applicant guidebook setting out the procedures which should allow this to happen, including the proposed Rights Protection Mechanisms (RPMs) for brand owners. One would think then that 2011 would finally be the year that the launch takes place and that we finally see a seismic shift in the way the internet works, with .GENERIC (shop, sport, green, the list is endless), .BRAND or .CITY proliferating instead of the current dominance of .COM.  However, I predictably predict that the launch will be postponed again and the planned opening of applications in May 2011 will be pushed back until the end of the year or possibly even 2012, not least because of the continuing debate on whether the current list of proposed RPMs is sufficient. What may cause more of a stir in the domain name world in 2011 is the current roll out of internationalised country code Top Level Domains (for example .??, for the Russian Federation), meaning that internet users may now write domain names entirely in their own script, both before and after the dot. Whether this will make the Internet less anglo-centric and accessible to a wider audience remains to be seen.

Moving away from domain names, I also predict that more and more Internet content providers will start erecting paywalls and that 2011 will perhaps be the year when paying for content becomes the norm rather than the exception.  Unlike generation X, present at the dawn of the Internet and seemingly wedded to the idea that everything should be free, generation Y has grown up with the Internet and is generally more open to the idea that content costs money, whether obtained offline or online.  It is perhaps only a matter of time before more of the traditional media start to charge users for access, albeit a modest sum, as well as certain online social networking sites.

As far as accessing such content is concerned, in 2011 tablets such as the iPad will increase their market share and law firms in particular will have to address issues of data security as it becomes the norm to carry a single device destined for both work and leisure.  

From Andrew Tibber, Senior Associate in the Intellectual Property and Technology Team at Burges Salmon: 

In the October 2010 Strategic Defence and Security Review, the Government announced a new £650 million National Cyber Security Programme. Details of where this money will be spent are yet to be finalised, but we can expect significant investment in the raising of awareness among the public and businesses, and the announcement of strategic partnerships between Government and computer security companies. Elsewhere the Government’s plans to tackle online file-sharing will be thrown into disarray following a successful judicial review of the Digital Economy Act by BT and Talk Talk.