Key Takeaways:
(1) Technological services contract must include key clauses such as force majeure and data privacy provisions.

(2) Adequate data protection and cybersecurity measures against breach of customer information must be in place.

(3) Copyrights, trademarks and trade secrets of a business must be registered with the Intellectual Property Office.

Governmental restrictions brought about by the COVID-19 pandemic forced many businesses to scale down operations, or worse, to completely close shop. In a July 2020 survey conducted by the Asian Development Bank, 29.1% of businesses remain open but with limited operations, 65.9% have temporarily closed down, while 1.1% have permanently ceased operations.

Because of the contractions on both the supply and demand, organizations has recognized the importance of digital transformation as a tool for survival. Prior to the pandemic, a lot of corporations did not see the urgency to innovate and digitally transform. The COVID 19 pandemic, however, has underscored this need.

Here are the key factors to consider to ensure successful outcomes in the digitalization of your business:

1. Contracts

Digitalizing one’s business entails the use of various technology services. The use of these services must be covered by adequate contractual agreements with fine print designed to protect and guide you in this digital transformation. The following key clauses must be considered and incorporated in your contracts:

· Force Majeure — contracts should now specifically include pandemics as an event that qualifies as force majeure. A pandemic does not necessarily fall under the legal definition of force majeure or fortuitous events, because definitions can differ per jurisdiction. Hence, for the avoidance of doubt, pandemics must be expressly included in the enumeration of what constitutes force majeure in the design and negotiation of commercial contracts.

· Signing in Counterparts — a provision stating that parties need not to sign the same copy of the agreement helps facilitate the execution of contracts. Each counterpart shall be deemed an original, but when taken together, constitutes one and the same document. It must be indicated, however, that the agreement is not effective until a party delivers a copy of his or her signed agreement to the other. It is also best to stipulate that any of the copies can be treated as an original in court in case of litigation.

· Data Privacy — by virtue of technological services to be rendered, businesses may have to share personal information of its customers to its technological service provider and/or partners. Note that consent of the customers must be secured before businesses may be allowed to share the customers’ personal information. Customers will need to be informed on the extent of processing of his/her personal information. Also, businesses will need to ensure that the processing of information will only be within the purpose consented to by the customer. Mechanisms to ensure that these personal information are kept confidential and used within a limited purpose can be laid out in a data sharing agreement.

· Intellectual Property — a provision protecting the intellectual property of the business, such as its copyrights, trademarks, and trade secrets, must be incorporated in commercial agreements in order to protect the business from any breach or violation. The commercial agreement must identify the owner of the intellectual properties, state whether there’s a transfer of the said rights, and determine extent of use to be given to the other party.

· Warranties and Indemnities — the contract must have a clause containing the warranties of its service provider and the indemnities due to the business owner should damage be caused to the latter by reason of misrepresentation or breach of warranty.

· Liability and Termination — liabilities must be clearly defined and set forth in the agreement as well as the causes that may lead to contractual termination.

2. Data Protection and Cybersecurity

Digital transformation changes the way businesses handle their customers’ data. It introduces a different brand of security risks. Adequate measures should be in place to protect any data breach involving customers’ personal and/or sensitive information.

The Data Privacy Act (DPA) requires organizations to implement organizational, physical, and technical measures in the collection and use of customer data, such as an access control policy, data center security, and data encryption. Further, the appointment of a data protection officer is required to ensure compliance with the DPA. Terms of Use and Privacy Policies should likewise be properly drafted in relation to the use of the digital platform.

3. Intellectual Property Protection

Copyright, trademark, trade secret, and other intellectual property (“IP”) protection must be ramped up once a business is digitalized. To fully protect the business as IP owner, it must register its copyright, trademark, and trade secrets before the Intellectual Property Office.

On the other hand, businesses must also ensure that it is not infringing any IP rights of another in the course of its operations. For new businesses, there is a need to conduct at least an online search if the proposed name and/or logo is not confusingly similar with another entity. Due diligence must be exercised by business owners to ensure that their IP rights are protected and that they are not infringing on the IP rights of others.

Kashmere Tame “Kash” P. Duran is a Junior Associate at Gorriceta Africa Cauton & Saavedra (www.gorricetalaw.com). She is a member of the Corporate, Technology, and Litigation Groups of the Firm. Her practice includes civil and criminal law litigation, data privacy law, general corporate and commercial law, and quasi-judicial proceedings.

Gorriceta Africa Cauton & Saavedra is a multi-awarded full-service law firm in the Philippines. Connect with us at http://www.gorricetalaw.com.

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