Convergence of Mainstream Business, Big Data and CleanTech Convergence of Mainstream Business, Big Data and CleanTech

William A. TanenbaumChair, Technology, Intellectual Property & Outsourcing Group

Chair, GreenTech and Sustainability Group

Kaye Scholer LLP

New York and Palo Alto Offices

Key Points Key Points

• Business drivers for convergence

• Business models will change

• IT-enabled technology and business practices

• Big Data

• Energy efficiency

• Water is an energy problem, too

• Supply Chain Sustainability

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Key Points (2) Key Points (2)

• Outsourcing as a problem, solution and replacement business model

• Cloud as infrastructure

• Social Media as business tool

• New Due Diligence

• Drafting agreements

• Offensive and Defensive IP

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Business Drivers Business Drivers

• Key indicator is that sustainability is moving from CSR to CFO

– Does not depend on whether global warming exists

– Not solely for reputational purposes

• Key driver is economics

• Perfect recessionary strategy

– Increase efficiency, reduce costs, improve competitiveness

• Parallels E-Commerce revolution

– Energy/power

– Water

– Logistics

– Supply chain savings

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What are the Phases in Convergence?What are the Phases in Convergence?

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• Phase 1 – avoid EPA fines

• Phase 2 – certain industries wanted to be carbon neutral to gain customers

• Phase 3 – mainstream companies opportunistically adopt GreenTech to reduce costs

• Phase 4 – mainstream companies strategically adopt GreenTech to gain competitive advantage

• Phase 5 – innovations lead to IP issues

–Especially collaborate improvements in outsourcing model

Business Models Will ChangeBusiness Models Will Change

• “Just-in-time” business model as exemplar of what will change

–Assumed fuel was inexpensive and emissions were free

• Replaced with new delivery models

• IT-enabled logistics scheduling

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Big Data and Sustainability Big Data and Sustainability

• What is “Big” about “Big Data”?

• “Moneyball” vs. “Big Data”

• What are examples of Big Data?

• What is new about Big Data?

• Technology implications

• Social media implications

– Privacy; terms of use

• Integrated with “Cloud as Infrastructure”

• Contract implications

• Outsourcing implications

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Green IT -- Data Center Operations Green IT -- Data Center Operations

• Data centers are often a corporation’s single largest source of energy consumption and, for some, the largest source of carbon emissions

• EDS report called data centers the “SUVs” of high tech: accomplish much, but energy inefficient

• If data centers were considered a separate industry, they would be the sixth largest electricity user (The 451 Group)

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The Need for Useable Metrics Contract in Green Outsourcing Contracts The Need for Useable Metrics Contract in Green Outsourcing Contracts

• Adapt EPEAT and DOE’s DC PRO software tool from Federal contracts and use them in private sector Green IT and outsourcing agreements

– EPEAT = Electronic Protection Environmental Assessment Tool

– DC PRO = Data center software assessment tool to benchmark data center energy use and efficiency

• Advantages of EPEAT and DC PRO:

– minimize contract negotiation time

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Water: The New Scarce ResourceWater: The New Scarce Resource

• Global Warming, now Global Drying

• Carbon Footprint, now Water Footprint

• Business risks include

– Scarcity – not enough

– Quality – not good enough, and costs to improve it

– Competition – among industry, agriculture, household use

• Will increase costs

– Regulatory compliance – will increase costs

– Regulatory risks – loss of permits for water rights and discharge rights

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• Geo-social risks – cannot relocate factory

• New Due Diligence questions

– Adequate supply of water, now and in future

– What are weather and climate change risks?

– Cost of water treatment technology

– Can permits be maintained or obtained?

• These ripple through supply chain

• Outsourcing as model for acquiring water treatment technology and services

Water: Supply Chain and Outsourcing RisksWater: Supply Chain and Outsourcing Risks

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• More efficient use of available water requires adapting “smart grid” technology for water infrastructure

• Water efficiency means factories will recycle and treat water

• Water management technologies are energy intensive

• For overall corporate sustainability, cannot adopt water treatment technology without considering energy efficiency

• Next practice (or best practice) = combine water audits with energy audits

• Audits using outsourcing

Convergence of Water and Energy Efficiency Convergence of Water and Energy Efficiency

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• Outsourcing is source of water problems

• Outsourcing is also a solution to water problems

Water, Supply Chains and Outsourcing Water, Supply Chains and Outsourcing

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Sustainability in the Supply Chain -- The Tip of an IcebergSustainability in the Supply Chain -- The Tip of an Iceberg

• Mainstream convergence means increasing sustainability in the supply chain

• Customer perspective

• Supplier perspective

• A “customer” can also be supplier in larger supply chain

CDP Supply Chain ReportCDP Supply Chain Report

• CDP commissioned A.T. Kearney to produce Supply Chain Report 2010 (www.cdproject.com)

• 89% have strategy for addressing suppliers’ sustainability and emissions practices

• 6% of those identified as leading companies in the CDP have already “deselected” suppliers for failure to be sustainable

• 56% expect to deselect failing suppliers

• Customers are beginning to rewrite contracts to impose sustainability requirements

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Social Media as a Business ToolSocial Media as a Business Tool

• Big Data – source of information

• Key is analytics and decision making

• Terms of use and privacy issues

• Social Media and Outsourcing to Reduce Liability

– HR outsourcing

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Cloud Computing in SustainabilityCloud Computing in Sustainability

• “Cloud” = “Infrastructure as a Service”

• Data from sensors, social media, supply chain, smartphones and mobile devices

• Special cloud computing agreement issues

– New Due Diligence questions

– “Security as a Service”

• Is Cloud robust enough for Big Data?

• Combing cloud computing agreements with IT outsourcing agreements

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Cloud RisksCloud Risks

• Subcontractors

• Financial viability

• Good technology?

• The risks introduced by technology

• IP risks

• Data access risk

• Data sharing risks

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New Due DiligenceNew Due Diligence

• Multiparty financial risk

• Technology rights

• Duration of validation of great withdrawal of data access privileges

• Triggers for loss of key license rights

• Data segregation

• Litigation holds

• Document retention

• Regulatory Compliance

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IP IssuesIP Issues

• Different IP rights apply simultaneously to licensed subject matter

• Patent

• Copyright

• Trade Secret

• Trademark and Service Mark

Problem No. 1: Work Made for HireProblem No. 1: Work Made for Hire

• Limitations of the Work Made for Hire Rule

• Why getting an assignment is often best

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Problem No. 2: IP IndemnitiesProblem No. 2: IP Indemnities

• Provider’s right to terminate in event of IP claim can be a bridge too far

• When provider will ask the customer to provide an indemnity

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Problem No. 3: Joint OwnershipProblem No. 3: Joint Ownership

• Collaborate improvements

• Unexpected license by one co-owner to competitor of the other co-owner

• Difference between patent inventorship and copyright authorship

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Problem No. 4: Covenants Not to Sue Problem No. 4: Covenants Not to Sue

• When they are needed

• How to document them

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Problem No. 5: Scope of License Grants Problem No. 5: Scope of License Grants

• If there are multiple providers, which provider needs a license from another to provide services to the common customer?

• Avoid territorial limitations to allow use at DR site and/or by another entity

• Advantages of contractual definition of “Use”

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Problem No. 6: Software EscrowProblem No. 6: Software Escrow

• Source escrow in cloud computing

• Do you need software escrow?

• If so, what goes in escrow?

– Programmer’s names and contact info

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Prediction about Contract Carbon Rights Prediction about Contract Carbon Rights

• Commercial agreements evolved from having no IP provisions to having IP provisions

• Similarly, commercial agreements should expressly allocate carbon and water ownership rights (and the right to sell and trade them)

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Questions and Answers Questions and Answers

William A. Tanenbaum

Chair, Technology, Intellectual Property & Outsourcing Group

Chair, GreenTech and Sustainability Group

Kaye Scholer LLP, New York and Palo Alto

wtanenbaum@kayescholer.com

212-836-7661

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William A. Tanenbaumwtanenbaum@kayescholer.comWilliam A. Tanenbaumwtanenbaum@kayescholer.com

• William A. Tanenbaum is the international chair of Kaye Scholer’s Technology, Intellectual Property & Outsourcing Group and its GreenTech and Sustainability Group. Chambers found that he “built one of New York City’s most outstanding transactional IT practices,” that he is a “well-respected attorney, with a well-informed approach [who] provides litigation, transaction work and strategic counseling on a range of technology issues,” that he is “efficient, solution-driven and makes excellent judgment calls,” and that he is an “internationally recognized intellectual property, technology and outsourcing lawyer”. He is recognized as a “Leading Individual” and was awarded “Recommended” ratings in both “Technology and IT Outsourcing” and “Business Process Outsourcing,” and named as a “Notable Practitioner” at the national level in Outsourcing. He was voted one of the world’s top 250 IP strategists (IAM client survey) and he was selected as one of the country’s top 25 pre-eminent IT practitioners in the Best of the Best USA. He regularly advises clients on strategic intellectual property concerns, privacy, data security, data transfer, information life cycle management and competitive intelligence matters, in both transactional and litigation contexts.

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William A. Tanenbaum (cont’d)William A. Tanenbaum (cont’d)

• Mr. Tanenbaum is the founder and co-chair of PLI’s annual Outsourcing Conference, the founder and chair of its Green Technology conference, and a regular lecturer at industry outsourcing conferences. He chairs Kaye Scholer’s GreenTech breakfast seminar series and presents a webcasts on IT, IP and GreenTech topics. He has contributed to Bloomberg’s Energy Sustainability Law Report. He is a past President of the International Technology Law Association (formerly the Computer Law Association) and is listed in Who’s Who in America, the International Who’s Who of Business Lawyers, the Guide to the World’s Leading Litigation Experts and the Guide to the World’s Leading Patent Law Experts. He is the privacy and data protection columnist for the New York Law Journal, co-author of a book on privacy law and has been quoted in The Economist magazine as an expert on IP law. His articles have been used at Harvard and other law schools. He graduated from Brown University (degree with highest honors and Phi Beta Kappa) and Cornell Law School.

Copyright ©2011 by Kaye Scholer LLP. All Rights Reserved. This publication is intended as a general guide only. It does not contain a general legal analysis or constitute an opinion of Kaye Scholer LLP or any member of the firm on legal issues described. It is recommended that readers not rely on this general guide in structuring individual transactions but that professional advice be sought in connection with individual transactions. References herein to “Kaye Scholer LLP & Affiliates,” “Kaye Scholer,” “Kaye Scholer LLP,” “the firm” and terms of similar import refer to Kaye Scholer LLP and its affiliates operating in various jurisdictions.

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