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UK: Demystifying IT Law

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A. AUDIENCE, PURPOSE AND SCOPE

Audience for Demystifying IT Law. The primary audience for this practice note it is the in-house lawyer at an organisation that acquires IT and that is not an IT provider company, and who is not an IT specialist but who is responsible (perhaps for the first time) for lawyering the IT and related aspects of the business. A secondary audience is any other in-house lawyer at an IT acquirer company looking after IT and related aspects of the business. A tertiary audience is an in-house lawyer at an IT provider company on the sales side who wishes to understand what her or his counterpart at their IT acquirer customer will be thinking or looking out for.
Purpose and scope. The purpose of this practice note, which is in three parts, is to provide an introduction to what to look out for in lawyering the organisation’s procurement, deployment and governance of the IT it uses. Section B (this Part I) overviews by way of introduction the five main ‘flavours’ of IT and communications procurement and deployment – equipment, software, data, services and telecommunications. IT is driven by change – advances in technology and the commercial application of that technology – and Part II (section C) briefly looks at some of the current trends in IT as they affect the organisation. Part III considers the remit and role of the legal department and the IT lawyer in lawyering the organisation’s IT and provides practical pointers and tips in the areas of intellectual property rights, IT contracting, IT regulation and IT governance (sections E, F, G and H). This practice note is intended as an introduction and is not intended to be comprehensive. Reference should be made to other Practical Law resources shown in the hyperlinks.

B. TYPES OF IT/COMMUNICATIONS PROCUREMENT AND DEPLOYMENT

Introduction. To those unfamiliar with it, the range of IT contracts and related legal matters may seem rather daunting and impenetrable. In demystifying this inaccessibility, it is therefore convenient to break the area down into its key component parts, of which there are essentially five – equipment, software, data, services and telecoms.

Equipment. This divides down into two main types – user, and other, equipment.
User equipment covers PCs, laptops, tablets, smart phones, and related computer equipment that the organisation’s people use in their day-to-day work – in network terminology, “client-side”.
The other equipment is “server-side” and consists of servers, storage devices, cabled and wifi networking, back-up power sources, routers and the like. Other equipment also includes the organisation’s telephones and communications equipment together with document production and other office equipment.
Software. Computer software (programs) is a set of instructions that tells the computer what to do. It can be categorised by type of code; development model; whether product or bespoke; type of function; licensing and distribution; and delivery model.

As to code type, a computer program is generally written as source code, a form in which it is understandable when read by the individual programmer. For source code to be understood by and run on a computer it needs to be compiled (translated) into machine code, a version of the program in binary format (consisting of 0s and 1s) that is not readable by the human eye. Machine code is also known as object, binary or machine readable code and the program in this form is known as an executable.

As to type of development model:
software was traditionally developed in a highly organised (“cathedral”) way and on a proprietary model by developers whose ownership of the copyright in the code is the asset they license and monetise. Proprietary developers typically just license the object code and are loath to license source code (except through a mechanism called escrow where the source code is deposited with a trusted third party escrow agent authorised to release the source code to licensees in limited circumstances like the developer’s insolvency).
More recently, this model has been challenged by open source software (“OSS”), a development model that is much less structured (“bazaar”) and where the underlying source code is made freely available under standard licences.
As OSS has become mainstream many organisations now operate in a mixed environment using both proprietary and OSS software.
The key OSS risk to be aware of is that some OSS licences (like GPL or LGPL) operate an ‘inheritance’ (or ‘copyleft’) requirement where proprietary software that operates with this kind of OSS may itself become compulsorily open sourced as a condition of using the OSS in the first place.
Software can be either product (off-the-shelf), bespoke (customised or developed – for developed software see services at paragraph 7.a) below) or a mix of product and bespoke. Increasingly, for enterprise (large organisation) and SME (small to medium enterprise) customers, off-the-shelf software needs to be tailored (tuned or parameterised) ‘out of the box’ to make it suitable for use.

By functionality type, software is either operating system, application or middleware.
The operating system (OS) controls how the computer’s resources – input, processing, memory, storage and output – are used in the most efficient way, a bit like a traffic cop;
Application software is the software functionality you use on your individual device (like an Office document on your laptop or an app on your smartphone) or through a server-based network across the enterprise (like Oracle, SAP or other enterprise resource planning (ERP) software). The application requests the OS to use the computer’s resources to perform tasks that the application does not have permission to execute directly. These requests are made through application programming interfaces (APIs) or system calls. An API is a specification which the application must comply with in order to obtain a particular service from the OS. A system call is a specific service request made directly by the application to the OS.
In ERP/enterprise applications, middleware sits between the application and the operating system to provide a further set of resources to support the application.
Software is protected as a literary work by copyright and so is licensed. A licence in this context is permission to do something that the law would otherwise stop you doing. Software licences are typically on a subscription (periodical, e.g. monthly or annually) or a perpetual basis. Product software, as software licences (whether subscription or perpetual), is distributed directly by the developer itself and indirectly through the developer’s ‘channel’.