Keeping Up with the Law

FRAMINGHAM (04/18/2000) - The internet is forcing Charles Garner to become more savvy about the law at Lesco Restorations Inc., a property management company in Spartanburg, South Carolina, where he's director of information technology and telecommunications. Since every employee got Internet access about a year ago, new legal issues have come up - so much so that the company's employee handbook has been changed to include IT concerns.

As technologies change, so do the legal issues that go with them. And that's requiring IT managers like Garner to keep up-to-date with the law as well as technology.

Lesco's handbook, which employees must sign off on when hired, gives causes for termination that include such IT infractions as downloading potentially embarrassing information (such as pornography) from the Internet, e-mailing company documentation without authorization to people outside the company and getting involved with electronic chain letters.

These weren't issues Garner needed to concern himself with until recently, because employees weren't on the Internet. He didn't wait for these issues to become problems; with help from outside legal counsel, he drew up the rules before problems came up. He says he figured he was vulnerable to Internet problems based on what he read in trade publications and heard discussed at various trade group meetings.

Copyright Concerns

Garner also now copyrights all internally developed software. Until the Internet became ubiquitous, he didn't have to worry much about software theft, because customers and others couldn't access it. But now he says he worries, "If an application is out on the Internet, we can't control who sees it."

E-commerce is also causing legal ripples for Thomas J. Murray, vice president of information services at J. C. Whitney Inc., a Chicago-based vendor that sells auto parts to consumers via mail-order catalogs and the Internet. "We have a Web site selling directly to consumers, and we're very concerned about [state sales] taxes on Internet sales, because sales tax rules vary among states and it's tough making sure one adheres to each state's law," he says.

Nevin Anderson, an IT manager at Mity-Lite Inc. in Orem, Utah, says hiring and firing remain legal hot spots. "Any time we separate an employee, we make sure it's done for the right reasons," he says. When firing, he also pays particular attention to severing the separated employee's access to infrastructure like file servers and e-mail. A couple years ago, the manufacturer of institutional tables and chairs added a section to its employee handbook on the use of computers and telephones. It covers the proper use of e-mail and the Internet and the fact that employees give up their right to privacy when they use company computers.

Newspaper headlines are filled with news on mergers and acquisitions, leading Lauris Nance to think proactively on some of her contracts with IT vendors.

Nance, CIO at Public Service Company of North Carolina Inc., a natural gas utility in Gastonia, North Carolina, says she knew her company might make an acquisition or be acquired. That's why she made sure her contracts had the flexibility to allow software ownership rights to pass to a new owner, for example, or to cancel or change a contract when the two merging parties shared some of the same vendors. Good thing, too, since her company is now being acquired. "With so many companies being involved with mergers, I would think CIOs would want to review their contracts," says Nance.

The fast pace of technological change is also driving the need for flexibility in contracts, says Paul Arne, a partner at the Atlanta law firm Morris, Manning & Martin LLP. That's because technology, especially the Internet, is creating relationships between companies that have never existed. He has a for-profit client that's trying to attract volunteers for certain activities through Web sites and portals. The relationships between Internet companies "is something my client has never had to consider before," says Arne.

Another new potential problem area is giving software providers the right to cancel a license with a 30-day notice, even with mission-critical software. Who had mission-critical software a decade ago? "It puts the company in a situation where the software provider can hold the company hostage," warns Arne. If the software is critical, make sure the contract adequately protects you.

Outsourcing Contracts

Contracts become particularly critical when the IT department outsources some or all of its functions. Gail Peterson, vice president of technology and support at ChoicePoint Inc. in Alpharetta, Georgia, says that for an outsourcing contract, it's vital to define intellectual property rights, technology refresh provisions, service-level agreements and other business-oriented aspects. ChoicePoint provides decision-making information to the insurance industry.

Although many CIOs rely on in-house attorneys or outside counsel to keep up-to-date on IT-related legal developments, some IT managers also work to keep current. Peterson has attended IT legal conferences sponsored by major computer industry research firms, while Garner relies on articles in trade journals and Murray belongs to the Chicago Research and Planning Board, which has held meetings related to legal issues.

Legal issues may not be as compelling as technological ones to IT professionals, but the landscape is shifting quickly enough that no IT manager can ignore what's happening with the law.

Horowitz is a freelance writer in Salt Lake City. Contact him at alan@ahorowitz.com.

In-House or Outside Counsel?

Should you use in-house legal counsel or rely on outside help? IT managers suggest it's a matter of personal preference.

Alliant Foodservice Inc., a Deerfield, Illinois-based food distributor, has two in-house attorneys who work on technology issues, says Barbara Moss, senior vice president and CIO. "I'm dependent on them. I talk to them once or twice a week," she notes.

Public Service Company of North Carolina Inc. uses in-house counsel but has no technology specialist, says CIO Lauris Nance.

Lesco Restorations Inc. is too small to have its own in-house counsel, says Charles Garner, director of IT and telecommunications, so he relies on a firm that specializes in business law.

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