Cloud Computing: Common Legal Concerns in Cloud Transactions

Having recently examined scalability as a key motivation to founders’ use of cloud computing funding, we will now take a look at the various legal issues that may arise from cloud computing-based transactions.

The implementation of cloud computing infrastructure implicates several issues inherent to the technology – most notably data control and regulatory compliance. The simple act of contracting with a cloud computing service provider, for example, requires a company to delegate significant control over its data and computing infrastructure to that service provider. Because the purchasing company likely continues to have responsibility for that core business data, ensuring that the cloud relationship addresses this responsibility remains an important operational consideration.

Moreover, data stored “in the cloud” may cross jurisdictional and operational barriers, subjecting a company to multiple regulatory requirements and compliance risks – many of which may be totally unanticipated or completely unfamiliar.

When these factors converge, the resulting legal issues typically cluster around the following three scenarios relating to the purchasing company’s relationship with its service providers and others:

  1. Researching and establishing the contractual relationship with a cloud service provider – the close working relationship between a purchasing company and a cloud provider produces specific contractual issues that companies should consider when preparing to enter into a cloud computing relationship. These can include service levels, security, incident response, use limitations, and other issues.
  2. Compliance audits – new government regulations (of, for example, data) substantially constrain or alter the relationship between the company and its service providers.
  3. Litigation – the rules of e-discovery and electronic evidence raise specific complications when applied to electronic data stored in the cloud.

In upcoming posts in this “Cloud Computing” series, we will delve into the specifics of each of these three scenarios, considering each of the situations and summarizing the relevant issues and potential responses.

Did you miss a post in our Cloud Computing series? Not to worry, you can catch up here!

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