IP, Technology & Data

There have been lots of articles about cloud computing by lawyers. Most of them: i) have a dodgy pun in the title; and ii) bang on about data protection and the risk that your data is outside Europe.

That is not what I am going to write about. Partly because it’s been done to death, and partly because I think DP law is dull (sorry Grant and other data law lovers).

I am going to talk about data ransom in a cloud or hosted environment. That is the risk that your supplier goes bust and you have to buy your data from an administrator/receiver, or that you get into a commercial dispute with your supplier and they either turn off your service or ransom your data. Both are possible scenarios.

Remember that administrators are legally bound recover as much money as possible for the creditors. They are also not too bothered what your contract with the insolvent company says. These facts can make them quite interesting to deal with!

On the commercial dispute side it is traditional for purchasers to manage suppliers by withholding payment on invoices or similar. But with cloud or hosted apps the power has shifted – if the purchaser withholds payment then the supplier can probably turn off the service. Gulp! Worse imagine you have decided not to renew the contract, and your supplier starts being “sticky” about handing over your data to the new supplier. Remember “sticky” could include giving the new supplier all your data, but in an incomprehensible format.

So what do you do?


  • Have an obligation to get a weekly or daily back-up of your data delivered to you in a format you could decode.
  • In fact why not take advantage of virtualisation technology and get a virtual copy of “your environment” and related rights to run it on your servers. (I have been putting this in contract for about a year – so far I have not seen anyone else do this).
  • Have strong exit management provisions (preventing the supplier mucking you around on exit).
  • Have a source code escrow agreement.  Note from a “self-help” basis these are probably useless (partly) because you may not have the object code; but having the right to get the source code will give you bargaining position against an administrator/receiver *.


  • Actually Enforce any of the contractual rights described above (it is probably too late to start enforcing them once the “ransom” starts).
  • Make sure your lawyer really understands concepts such as cloud, source code and virtualisation (this is an undercover sales pitch).

Not one dodgy pun!

*I find a lot of lawyers still ask for source code escrow in a hosted app environment (where the client doesn’t even have the object code) not because of the reasons I have outlined but simply because the turnkey contract they are using as a style has an escrow clause in it. This strikes me as fairly dumb. Rant over.

IP and Technology

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IP and Technology