Yo Ho Ho And A Bottle of Rum

The Pirate Party of Canada has been granted political party status in Canada. While this may not resonate with the vast majority of Canadian landlubbers, a quick viewing of their Internet available material proved interesting.

Apparently the concept of the Pirate Party started in Sweden, home of Pirate Bay, and has chapters in other countries (e.g. England). Its international platform advocates inter alia a substantial expansion of use rights of copyrighted material, the abolition of pharmaceutical patents, the abolition of software copyright, and changes to the way the Internet is being commercialized. In other words, the Pirate Party “movement” wants to drastically alter intellectual property rights.

I agree that with respect to copyright law Canada is behind in terms of implementing the changes to its domestic laws to keep up with current international treaties and conventions of which it is a signatory. This is not entirely a bad thing: Canada has had the benefit of observing the perceived shortcomings of other countries’ legislative approaches (e.g. the U.S.’s overreaching Digital Millennium Copyright Act) and the advantages of other countries’ legislative approaches (e.g. parts of Australia’s Copyright Amendment Act 2006).

However, the feds have now twice failed to enact updated legislation and they should really be making this a priority rather than just paying lip service to the importance of the technology/information/digital economy in Canada. Perhaps the new status of the Pirate Party of Canada will move this higher up on the political agenda.

At first glance it seems that the starting point of some of the Pirate Party’s “manifesto” reflects the position of most Canadian scholarship on copyright law reform regarding protecting fair use / fair dealings rights in the context of new technology. However, as is the case with most single issue political movements, where the Pirate Party fails – both domestically and internationally – is it goes too far.

For example, I generally agree with the position that if I purchase a copy of copyrighted materials such as an e-book or a downloaded song, I should be able to use these materials on any medium of my choosing that remains within my control and I should be able to make multiple copies for my own private use. In other words if I pay for a downloaded song, I should be able to have a copy on my computer, my iPod, my iPad, my phone etc. I should also be able to lend a copy of the copyrighted material to another individual for his or her private use. Other enshrined fair use rights – particularly those related to educational purposes - need to be properly protected in new legislation. DRM and TPMs should not be permitted to be used to expand the scope of copyright protection.

New technology, however, does not mean I should get additional rights in copyrighted material. For example, I should not be able to “lend” a copy, or part, of the copyrighted material and continue to use the copyrighted material myself in any form while it is “lent” to someone else.

I should not be able to use another person’s copyrighted material to create “my own” material other than in accordance with the currently accepted fair use rights. New technology should not make plagiarism an acceptable form of “freedom of expression”.

Reducing the period of copyright protection, from the current standard of the author’s life plus 50 to 70 years to 5 - 15 years total, is punitive and ludicrous.

The fundamental principle of copyright is that it protects the expression of an idea, but not the idea itself. Copyright protection was created to protect and encourage the creativity of the authors of original works by providing them with rights to control the exploitation of their works for a certain period of time. Just because new technology makes the infringement of copyright easy does not mean that the law should pardon it.

If the Pirate Party of Canada wants to actually help move intellectual property reform forward, they need to modulate the international movement’s positions, and think about re-branding. Piracy by definition is an act of robbery. It is not something that any person that has anything to lose should be condoning.

Just a Random Thought

On the subway this morning I was crushed up against the door and looking up at a print ad for Icelandair.

Per usual with airline advertising, a deceptively low airfare was emphasised – taxes, security fees, fuel charges, snacks etc. weren’t included at which point we all know that the fare is two to three times higher. The apparent only additional catch was a stop over in Iceland on the way to and from various European capitals.

And maybe it was because the caffeine hadn't kicked in yet, my reaction was: given that friends and family have been (and still are) stuck on both sides of the Atlantic due to the unpronounceable Icelandic volcano’s eruption, I am thinking that Icelandair might be better served if its saved its advertising dollars for a while, at least until people have forgotten this debacle.

“Cloud Computing”, “Private Cloud Computing”, “Hybrid Cloud Computing”

At the risk of oversimplifying this model, cloud computing is basically an outsourcing arrangement with a backbone of software as a service (SaaS) – or vice versa – accessed through the Internet. There are some really basic considerations that everyone should address before considering any of these types of arrangements that are not unique to “the cloud”.

As a purchaser of these services you should make certain that your contracting arrangement protects your data/content from both a technological security perspective and from an ownership perspective. In a SaaS/cloud computing service model you will not have a lasting license to the software and may not know where your data is stored. At a minimum you should ensure that your data/content is properly backed up, in a format that can be transferred to another service or brought “in-house”. You cannot abdicate responsibility for doing the due diligence to ensure that the cloud computing model will fulfill your current and future business needs and regulatory requirements.

From a service provider perspective, you need to ensure that if you do not actually own the hardware of the cloud that you have an unrestricted ability to access them wherever they are located, and if necessary shut down other parties’ access to the content and retrieve all copies on very short notice. You need to make certain that from a technological security perspective that your software and your customers’ data/content are properly protected. You may not actually own the equipment and / or the software providing the services, but you need to be able to exercise control to the greatest extent possible.

Those are some basic guidelines to consider when using or providing these types of services.

Now for the key legal issue raised by SaaS/outsourcing/cloud computing: unless the hardware, software and back up of data are guaranteed to be located in and limited to specific countr(ies)/legal jurisdiction(s), then neither the customer nor the service provider can fully assess what laws may be applicable to them.

The protections afforded personal information, proprietary information (e.g. intellectual property rights) and confidential business information vary between jurisdictions. Moreover the interpretation of laws will vary within a jurisdiction depending upon the political agenda of the then current government.

Countries have different libel and slander laws. What might not be considered to be libel in one jurisdiction could be considered libelous in another jurisdiction. The responsibilities and liabilities associated with defamatory matters is also not uniform between countries; in some jurisdictions, intermediaries (such as ISPs, social networking services etc.) have more onerous responsibilities to assess and deal with defamation that is being disseminated utilizing their systems.

Prohibited activities, and restrictions on activities, vary from jurisdiction to jurisdiction. For example if you sign up for a cloud service that streams advertising as part of its standard business, will the advertising comply with the laws where you are providing the services?

Because cloud computing is an evolution of SaaS and outsourcing, many aspects of the legal concerns it raises are “déjà vu all over again” (Yogi Berra). That doesn’t mean that they have been properly addressed by legislators and / or the courts; so in contracting for the services, the parties will need to make sure that they deal with them to their satisfaction.

Your Outsourcing Team –Consultants

I have been asked by a few clients what I perceive to be the value of having non-lawyer independent outsourcing consultants in the RFP and contracting process. So here are my two cents worth by way of an analogy.

In the early 2000’s I bought a very rundown house – basically a slum - with two other co-purchasers to renovate and move into. We were renovation newbies: three lawyers with no knowledge whatsoever relevant to renovations, and arguably anything else practical.

We hired an architect who drew up beautiful plans with appropriately detailed scope and materials documentation. We interviewed a few general contractors, and ended up hiring a general contractor recommended by the architect.

In consultation with the architect, we gave the general contractor a high level budget and a copy of the plans and the scope and materials documents, asking him to give us firm quote for each phase of work. After discussions and paring down some of the plans/scope, we entered into an agreement with the contractor with a budget and a delivery time frame. We mentally built in a 10% to 15% cost and time overrun.

Then the fun began.

While the plans were lovely, what we did not understand is that they required a lot of customized work - as opposed to “off the shelf” materials - to implement. We were unaware of the level of hostility of the neighborhood association to anything that smacked in anyway of post-1900 architecture, and the fact that they will lie to the by-law and planning authorities at regular intervals about perceived “violations” in order to deter renovations. And don’t get me started about the City’s planning process.

The general contractor was appallingly incompetent and unremittingly dishonest. He deserves a Mike Holmes @$$whooping.

For the second round of renovation/re-renovation we worked with a highly competent and scrupulously honest general contractor.

However, and this is key, we also hired a skilled project manager to manage the whole process. He is an architect and designer who also specializes in supervising commercial and residential space renovations and coordinating commercial space moves. He understands the City’s planning process and building standards; he can talk “architecture” and rein in an architect’s flights of fancy to make the plans more practical; he can give realistic time and cost estimates. He was a godsend and worth every penny.

You outsource something because it is not a “core competency”, and you are looking to someone to bring their expertise to make the outsourced function work more effectively while you concentrate on your core business. If you can do it more effectively in-house for less you don’t outsource it. This is not only true for the outsourcing of a service or business function, but also for getting the outsourcing contract into place.

More often than not, in the first outsourcing of a business or technology system or service, you will not have a comprehensive grasp of the scope of the system or services that are being provided by your in-house capabilities, nor will you have consistently measured performance metrics. Often you will not know what you should be entitled to expect from an outsourcing service provider.

For an initial outsourcing, an advisor who has “been there done that” will be able to help you to assess your internal systems and approximate initial metrics, and translate this into a RFP process through which you can more effectively evaluate service providers' proposals. In concert with legal counsel, they can assist with the contract negotiations.

There are cons to using third party consultants, particularly if you do not understand and control their mandate. There will further posts about outsourcing that will address this.

If I ever again go temporarily insane and buy a “fixer upper” – increasingly unlikely in this current real estate bubble – I will know what to do. I will use my second general contractor again, I will use my project manager again (and I will try to persuade him to do the renovation plans as well), but I will also be able to give clearer instructions about what I expect. As with most of life’s experiences, you often learn the most from a trial by fire.

Employee versus Independent Contractor

It appears - based on his very confused “manifesto” - that when Robert. Stack flew his plane into the IRS’ offices in Austin Texas earlier this year one of the focuses of his rage was the tax treatment of consultants versus employees, and the wrongs he perceived had been done to him in his dealings with the IRS.

While I know none of you will take drastic action, be advised that the tax consequences if an individual is found to be an employee when both parties were operating on the assumption that she or he was an independent contractor can be severe: all of the employment related deductions and taxes associated with an employer employee relationship are back-owed, often with penalties, and to the extent the individual filed using certain business deductions she or he will also be reassessed. In short, it will be painful for the organization and for the individual.

Why not avoid the issue in the first place? Short term specific assignments are not the concern. It is when an individual is working chiefly for one organization for a longer period of time when the problems arise.

Here are some guidelines to bear in mind:

Degree of control

If the individual reports frequently to a manager within an organization and operates only upon instructions given by the organization, then that is indicative of being an employee. An independent contractor is given guidance as to what his or her mandate is and what the deliverables should be, but is expected to work more autonomously.

When working on a independent contractor basis, both the organization and the individual should make it clear that the arrangements are not exclusive and the individual is permitted to work for other organizations provided that she or he adheres to obligations of confidentiality and protection of proprietary information.

Work Space and Tools

An independent contractor can be provided with temporary office space and access to office systems and equipment – in fact some organizations for security reasons insist that only a computer issued and controlled by their IT group be used for company business - however office space arrangements should not be longer term. Further, if an organization does require that people use computers issued and controlled by them, that equipment should only be used for the work the contractor does for that organization and she or he should have his or her own technology and office space elsewhere.

Compensation

A contractor can be put on a retainer for specified services and deliverables, and there can be additional compensation that rewards specific achievement (e.g. an additional fee on completed sales), or the compensation can be strictly results-based (a fee based on a successful sale or completed task). However an independent contractor’s compensation should not be comparable to the compensation plans for an organization’s employees, nor should it reward the contractor based on overall corporate financial results.

Integration of activities into the business

Bringing in a consultant for a limited period of time who specializes in one or two areas of an enterprise’s business to help organize and/or take the business to the “next level” is not indicative of employment. However if she or he remains for too long and/or starts to take over the actual management of the proposed solutions that she or he has provided, then you are straying into employment territory.

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There are a number of fail safes that can be built into these arrangements to keep the status clearer, but they only work if they are adhered to. No matter how you "paper it", if it looks like a duck, and it walks like a duck, Revenue Canada will start hunting!