No industry is immune to litigation, but for the tech sector, it appears that intellectual property (IP) and patent disputes, followed by cybersecurity and data protection issues, are among the top legal issues holding wake up the managers of these companies.
According to the 17el Annual Survey of Litigation Trends by Norton Rose Fulbright which surveys hundreds of internal litigation leaders from global corporations, labor disputes also figure prominently.
Startup teams, legal advisors, and other internal stakeholders seeking to address these legal challenges must consider three key factors impacting the industry.
Intellectual property disputes: the main conflict concern for the sector
Technology respondents were more likely to be concerned about intellectual property disputes than any other potential source of disputes, with 46% ranking them among the most concerning, compared to 16% across all other industries.
Since the central function of most technology companies is to develop and commercialize technology and innovative solutions, it is not surprising that technology companies listed IP disputes as the most relevant and important to them. Respondents cited the critical nature of IP assets to their business as the reason why disputes were so relevant.
The costs associated with these disputes, particularly when defending against charges of patent infringement, were top of mind for respondents. Defending against intellectual property disputes can be a waste of resources, particularly given the ongoing cost and presence of disputes initiated by "patent trolls" (entities whose primary business is obtaining and enforcing patents against technology companies) far outweigh the costs associated with leveraging the patent to provide goods and services.
According to the report, many of those surveyed are expanding legal teams. Strategies include adding additional in-house legal staff, hiring outside counsel to focus on specific IP strategies, expanding investigative and enforcement actions against potentially infringing activity, improving the protection of the company's patents, and building a review and drafting process for more mature and robust contracts for IP.
Tech companies feel exposed to cybersecurity and data protection disputes
Technology respondents cited cybersecurity and data protection issues as the most concerning dispute trend, more than any other industry: 71% reported feeling more exposed to cybersecurity/data protection disputes, compared to the previous 12 months. They said that protecting both their own proprietary information and their customers' information was critical, particularly in an increasingly global marketplace.
However, compared to their peers in other industries, tech companies were less likely to see these issues as a major new source of disputes, presumably because the tech industry is well aware and already familiar with the risk associated with such disputes.
As technology companies consider how to safeguard and protect their information, it is not surprising that many are looking, as before, to grow their legal teams. According to a legal disputes leader at an IT services company that manages and hosts data for its clients outside the United States, a top priority in 2022 is to expand internal legal capabilities and hire outside counsel to address privacy concerns. and data protection.
The lawyer can help balance regulatory, legal and strategic considerations around data protection issues. For example, protecting IP and trade secret information from unauthorized users is not only a strategic concern, but can also undermine arguments in legal disputes about whether the company has taken adequate steps to protect its IP from misappropriation. .
Similarly, an increasing number of regulators require companies to implement policies, procedures, and security measures to protect nonpublic business information and personal information.
In particular, the New York Department of Financial Services (NYDFS) requires entities under its regulation to develop procedures for the secure deletion of "any non-public information" no longer needed for a legitimate business purpose. With the growth of digital payment services showing no signs of abating, this may be of particular interest and consideration for this market.
Several respondents identified the growing mosaic and maturing of data protection regulations around the world as a growing legal concern on the horizon. They reported concern about the increasing maturity of GDPR and the patchwork of emerging data protection regulations both in the United States and abroad, as well as the additional regulatory scrutiny that has occurred in recent years around cybersecurity.
Improving data security and assessing IT vulnerabilities is another way respondents have chosen to address data protection concerns. In anticipation of increased scrutiny and customer-initiated privacy disputes regarding the security of their data, controllers report taking steps to increase IT security, conduct internal and independent audits of their security practices, and comply with guidelines. industry around information security.
Labor and labor disputes remain expensive and frequent
Labor and related disputes are among the most numerous among respondents in the technology sector, with almost half reporting that labor disputes were among their highest volume matters. This increase in frequency indicates increased concern year over year, as 27% of 2021 respondents listed labor disputes as one of their top concerns, compared to 19% in 2020.
Respondents identified diversity, equity, and inclusion (DEI) as the largest non-legal factor influencing employment dispute trends. Managers made a connection between conflicts related to discrimination and social justice as a potential new source of workplace conflicts, noting that such conflicts have been on the rise in recent years.
Although employment disputes are not a new legal concern, these disputes and arbitrations remain a significant volume of key costs for most managers. Respondents reported that some of the actions they planned to take to address these employment disputes included maturing their internal policies and procedures and reporting, as well as expanding the use of alternative dispute resolution methods.
Respondents reported that their concerns about labor disputes, including class action lawsuits, also overlapped with data protection issues, as the theft of employees' personal data can lead to class action lawsuits and increased third-party audit and regulatory scrutiny. .
