Sitting somewhere in between the corporate lawyer and the IP lawyer is the technology lawyer. Often misunderstood, the technology lawyer goes about his or her business without much hype or fanfare, seeking instead the accolades that accompany the negotiation of meaningful service levels, the closing of a data center outsourcing deal, or the successful transfer of technology assets as part of a merger or acquisition. These accolades normally take the form of a “deal toy,” typically an ill-fitting, logo-ridden polo shirt or a strangely-shaped paperweight / knife sharpener.
While it’s true that a technology lawyer’s practice can seem alien to most lawyers, it’s also true that the role of the technology lawyer in today’s business climate has never been more critical. Over the past decade, this area of legal expertise has evolved from an odd niche to a sought-after skill set as more and more companies have recognized the value of either retaining outside technology lawyers in addition to the familiar cadre of corporate and IP lawyers or simply adding one or two technology lawyers to their in-house staff. Many top law schools have also responded to this trend by adding “information technology law” courses to their curriculum.
Technology Lawyers Understand Technology
The range of transactions handled by experienced technology lawyers spans basic software license and maintenance agreements to application service provider (ASP) agreements (i.e., where the software application and customer data resides on the service provider’s computers) to complex global outsourcings. And while the lawyer’s role differs in each of these types of transactions, the expertise required is generally the same. Not surprisingly, the key area of expertise for a technology lawyer is understanding the technology and business drivers behind a deal.
As an example, in an ASP transaction, the service provider will likely be configuring its servers and performing application customizations so that it can provide the customer with access to the application and its data.The lawyer representing the customer must be able to understand concepts such as how these servers will be configured, whether such application customizations comply with the client’s timelines and security and data processing needs, and what standards are appropriate to measure the service providers’ performance of these services. Without a complete understanding of these types of issues, the lawyer cannot place a critical eye on the service provider’s proposals or adequately translate the client’s requirements for the services into contractual language. A lawyer lacking these skills is relegated to the role of simply “papering” the deal agreed to by the service provider’s sales team and the client’s IT personnel, which may not be in the best interests of his or her client.
In the arena of technology outsourcing, there is no disputing the fact that experienced lawyers with a background in both technology and large corporate transactions are the most qualified to represent a party in an outsourcing agreement. These transactions often require six to ten months to complete and involve most, if not all, aspects of a company’s technology infrastructure. The team of technology lawyers on an outsourcing deal will typically comprise a partner who is responsible for structuring and negotiating the main body of the outsourcing agreement, pricing schedules, and other schedules such as employment terms (for the employees being transferred to the service provider), and equipment inventories; a senior associate who is responsible for working with the client’s IT personnel to structure and negotiate the services schedule (or “statement of work”) and associated service levels; and one or two junior associates who assist both the partner and the senior associate in their respective tasks.
Each of these roles involves heavy client contact, primarily with non-legal personnel. Unless the lawyers have a deep understanding of both the client’s business and the various technologies that are the subject of the outsourcing, and can “talk-the-talk” with IT personnel from both the client and the adverse party, it will be extremely difficult to structure and negotiate contract documents that best reflect the client’s requirements for the outsourcing initiative.
A final example of the unique value of dedicated technology lawyers is in corporate transactions such as those involving the sale or purchase of all or any part of a business. In these deals, the parties must resolve several critical issues concerning technology assets as early as possible in order to minimize each party’s risks and technology transfer costs — and generally help ensure the success of the transaction.
Handling “Purchased Assets”
One of the first steps in a corporate transaction involving technology assets is to determine which assets will be included as “purchased assets” in the deal. These assets may include agreements relating to software (including third-party and custom software), hardware, voice and data telecommunications equipment (including agreements relating to Internet access), data and databases, and any other related agreements in the client’s intellectual property portfolio. Once the parties have identified these technology assets, technology lawyers will systematically review contractual and operational information about each asset, including who owns the asset, who uses the asset, who supplies the technology, and what, if any, post-closing obligations the parties will have with respect to the asset. Ideally, this process should run parallel to the main transaction, as it typically requires the lawyer to spend significant amounts of time with the client’s procurement and/or contracts management group, IT personnel, and users of the assets in order to determine the best method of transitioning the assets from one party to the other. Technology lawyers will know where to look and what questions to ask and will be able anticipate how each asset will be utilized in the post-closing environment.
Dividing up a company’s technology assets (upon a sale or when outsourcing) can be a difficult, time-consuming, and expensive exercise. If the process reveals that certain contracts require reworking or renegotiation in order to achieve the strategic goals of the transaction, a technology lawyer is in the best position to manage such reworking or renegotiation. By including a technology lawyer as an integral part of the deal team from the earliest stages, the parties can resolves these kinds of issues correctly and efficiently, thereby minimizing the risk of the client’s technology requirements interfering with operational strategies.
Each of these examples illustrates the unique role technology lawyers play in today’s legal and business climate. For clients, the bottom line is that lawyers with expertise in the relevant technologies and an understanding of the business drivers can bridge the gap between business personnel and the technical personnel, thereby bringing an efficiency to a transaction that would otherwise be difficult to achieve.
Kevin E. Colangelo is a senior attorney in the Technology Transactions and Outsourcing Group at Kramer Levin Naftalis & Frankel LLP. www.kramerlevin.com
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].