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أكاديمية الحكومة اإللكترونية الفلسطينية

The Palestinian eGovernment Academy

www.egovacademy.ps

Dr. Samer Najjar

Tutorial 6: The Legal Framework of New Technologies

Session7

IT Contract عقود تكنولوجيا المعلومات

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About

This tutorial is part of the PalGov project, funded by the TEMPUS IV program of the

Commission of the European Communities, grant agreement 511159-TEMPUS-1-

2010-1-PS-TEMPUS-JPHES. The project website: www.egovacademy.ps

University of Trento, Italy

University of Namur, Belgium

Vrije Universiteit Brussel, Belgium

TrueTrust, UK

Birzeit University, Palestine

(Coordinator )

Palestine Polytechnic University, Palestine

Palestine Technical University, PalestineUniversité de Savoie, France

Ministry of Local Government, Palestine

Ministry of Telecom and IT, Palestine

Ministry of Interior, Palestine

Project Consortium:

Coordinator:

Dr. Mustafa Jarrar

Birzeit University, P.O.Box 14- Birzeit, Palestine

Telfax:+972 2 2982935 mjarrar@birzeit.edu

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© Copyright Notes

Everyone is encouraged to use this material, or part of it, but should properly

cite the project (logo and website), and the author of that part.

No part of this tutorial may be reproduced or modified in any form or by any

means, without prior written permission from the project, who have the full

copyrights on the material.

Attribution-NonCommercial-ShareAlike

CC-BY-NC-SA

This license lets others remix, tweak, and build upon your work non-

commercially, as long as they credit you and license their new creations

under the identical terms.

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Session’s ILOs

• a1: understand the legal frame for access

management

• a11: Enhance knowledge of e-contract

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Difference between IT contract

and other contracts

• In many aspects IT contract (contract

about an IT product/service) is similar to

any other contract:

- Offer and acceptance االيجاب والقبول

- Legal purpose الغرض المشروع قانونا

- Mutuality of obligation االلتزام المشترك

- Consideration

- Competent parties اطراف العقد المؤهلة قانونيا

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IT Contact

• Examples:

- Software Development,

- Web design,

- Web hosting,

- IT services

- Etc ……

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Legal framework of contracts

in general

• The Ottoman Majjalah Ahkam-Adlieh of

1876, (The Code Civil)

• Regulates the main principles in civil

transactions and contractual

obligations

• Freedom of Contract is guaranteed.

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Webhosting & Renting (store)

an example

IT product Renting warehouse

Accessibility …… keys

Maintenance Complicated Landlord or tenant,

easy to define

Backup Vital Not needed

other many few

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So what’s special about IT Contracts

• Ownership of IT products ملكية المنتج

Example:

While the implied legal meaning of buying a

tangible product is somehow straight

forward, the same thing cannot be said

about buying a software

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Deliverables of IT are different

• Output: المخرجات المطلوبة من المنتج

It is easy to design an IT product to get

certain output from it but:

- What are the needed resources ?

- How efficient is the procedure ?

- How stable are they ?

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Ownership considerations in IT contract

• Issues like:

- IP (intellectual property)

- Reselling

- Using

- Customising

- Maintenance & Upgrade

- Etc …

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Main Considerations of IT Contract

When Buying or Producing an IT product contract needs to specify clearly:

First deciding to buy generic IT (off shelf) product or ordering bespoke product is very important since the implications are very different in terms of serviceability, ownership, upgrade …, all need to be addressed correctly in the contract

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Are you an IT producer?

• Think you are legally safe within your

firm / organisation?

- Copyright is transferred from employee

to the firm

- Patents: have you got clear IP policy

signed by employees

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Whether Buying or Ordering

- Different aspects of ownership

• IP (Intellectual Property):

• Source Code ownership (in case of

ordering)

• Selling

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Other Aspect of IT contract

• Maintenance

- Fixing unforeseen problems (procedure

& time scale)

- Upgrades

- Future Compatibility (e.g. new OS)

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Acquiring IT Product

• Buying off the shelf

• Outsourcing

• In-house (making the product)

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Buying off the shelf

• Buying off the shelf

- Normally straight forward

- Cannot change terms & conditions of

seller

- Yet might need to negotiate support

and upgrades etc.. (these need to be

defined well in legal terms)

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Outsourcing

Outsourcing means the client has to

include certain legal clauses about:

• Audit

• Benchmarking

• Reversibility

• Maintenance

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Audit

• Vendor can audit the buyer use within

licence terms and conditions

• Buyer can audit transfer of sensitive

technology to third parties

(competitors)

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Audit - Elements

• Advance notification

• Frequency (should be kept reasonable)

• Who pays the cost

• Purpose (Regulatory, Contractual)

• Right to use services of third parties

(ensure confidentiality & impatiality)

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Audit - Consequences

What should happen in case of proved

violation to regulations or contractual

obligations

• Financial compensation

• Termination of contract

• Right to renegotiate contract terms

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Benchmarking

• Fast changes in technology means

changes in prices and service levels in

long term contracts.

• Hence the need for benchmarking to

ensure competitiveness, client should

insist on this right

• Benchmarking costs money, hence the

need to balance benefits with cost

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Benchmarking - Procedure

• Who decides which benchmarker

• Is there a right to refuse

• Who is going to pay

• Scope of benchmarking (Whole or

Parts)

• Criterion ( Cost or Quality …)

• Tolerance

• Reporting ( with conclusions?)

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Benchmarking - Consequences

• Thorny issue !!

- Accept conclusions automatically?

- Re-discussion, re-negotiation

- Right to opt out (early termination), and

which contract party has the right

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Reversibility

• Reversibility clause can take many

forms but, in essence, it just outlines

what the responsibilities of the contract

parties are should the contract

terminate

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Service Level Agreement - Procedure

• Objective description of service

• Measureable parameters

• Key indicators

• Supplying underlying data

• Period of measurement

• Glossary of terms might be useful

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Service Level Considerations

• Mechanism should be specified

• Measurability

• Failure to reach targets:

- Automatic penalties? Immediate?

Capped?

• Exceeding targets:

- Bonuses

• Liability: normally capped, ensure right to

claim other damages

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Making your IT product

IP consideration

Parties involved: employees,

consultants, subcontrators ….

• Copy right of employees work

• Patents resulted form employees work

• IP rights when using consultants

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Making your IT product

Legal Address

• Include provision in employment

agreements

• Provisions should be legal

• Consider legal consequences of using

open source programs

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Conclusions

• Close coordination between technical and legal staff in drawing IT contract (going for specialised law firms might be a good option for complicated jobs)

• Lawyers and managers need to understand each other language

• Comprehensive TOR (terms of reference) is a must

• Technical annexes very likely need to be added

• Definitions are always useful

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Conclusions

• Indemnity as a result of using the IT

product due to failure towards buyer

and third parties, need to be specified

• Service level agreements specified

correctly in terms of level (to control

cost) and procedure (to insure

efficiency)

• Benchmarking ( to insure

competitiveness) especially in long

term contract

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References

• François Coppens, Some specific issues of IT-related

projects, June 9th, 2011, Crids , Namur University

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Session End