Innovations in technology are reshaping industries and society at unprecedented speed. When it comes to cybersecurity risk, advancements in artificial intelligence, cloud computing and data analytics are redefining how companies do business. However, when new technology outpaces our existing laws and regulatory frameworks¾as it often does, the resulting uncertainty can create a host of legal, financial and reputational risks, as well as operational and compliance challenges for businesses.
Below, we explore five (5) of the most significant legal risks facing today's technology companies, and outline the key elements of a proactive compliance approach that can help mitigate these risks.
1. Data Privacy Regulation isn't just about Privacy
Regulators across the globe are prioritizing the protection of
personal data, adopting stringent data privacy requirements backed
by hefty financial penalties. As these laws evolve in the U.S. and
abroad, companies have no choice but to double down on their
compliance efforts. The problem is that most of these regulations
are cybersecurity laws in disguise.
Proactive risk mitigation includes:
- Understanding all applicable legal requirements, including state (e.g. CCPA/ CPRA, VCDPA) and federal (e.g. HIPPA) laws, and in some cases, international regulations (e.g. GDPR)
- Building a strong data governance program, including mapping company data over the course of its entire lifecycle
- Conducting regular operational audits and privacy impact assessments
- Implementing strong encryption and access controls
- Conducting cybersecurity due diligence of subprocessors
2. Increasing Threats lead to Increasing Attacks
Unfortunately, creative cyberattacks and new types of ransomware
threats are on the rise, buoyed by increasingly sophisticated
methods at the disposal of today's cybercriminals. In response,
regulators are taking a hard line on rules that govern incident
reporting, imposing strict timelines on data breach reporting
requirements and severe financial penalties for noncompliance.
Finding new ways to safeguard data and user privacy, and detect,
respond to and mitigate security incidents, has become a top
priority for businesses.
Effective risk mitigation includes:
- Understanding all applicable reporting laws, such as those issued by the SEC
- Leveraging appropriate threat detection and response solutions
- Developing and testing an incident response plan with an eye toward narrowing the time between incident and response
- Creating well-defined policies and procedures to help ensure proper implementation of the plan
- Training employees and fostering a culture of awareness and responsiveness
- Conducting security assessments of third-party vendors
- Including explicit incident reporting obligations in vendor agreements
- Building external incident reporting protocols for vendors and customers to support incident reporting efforts
3. Risks to Intellectual Property
When innovation drives a company's market position, securing and enforcing intellectual property rights to protect its value is a necessity. However, rapid advancements in artificial intelligence are presenting new challenges to effective IP protection. Among the top concerns facing today's technology companies are issues relating to ownership of AI-generated content, licensing and usage of proprietary software, and infringement of copyright, trademark and trade secret assets.
Proactive risk mitigation includes:
- Conducting a thorough inventory of existing IP
- Securing IP rights (patents, trademarks, copyrights) in proprietary technologies
- Developing a comprehensive strategy to protect and monetize IP
- Staying on top of legal and regulatory changes impacting your assets
- Training employees on identifying and responding to IP risks
- Strengthen provisions pertaining to ownership and licensing rights in contracts with partners, vendor, and customers
- Establish robust guidelines for brand usage, particularly by third parties engaged as ambassadors of your brand
- Implement internal processes (e.g., exit interviews with departing employees) to help protect against disclosure of confidential information relating to proprietary works
4. Securing Remote Teams
Despite a recent uptick in 'return-to-office' mandates, many companies are leveraging remote and hybrid work arrangements as a means of attracting talent and reducing overhead costs. Still, distributed work models can present a host of challenges, including employment-related issues (e.g., worker classification, cross-border employment, local minimum wage law compliance), as well as data security and privacy concerns caused by remote employees accessing data from unsecured networks or personal devices. The sophisticated attack by North Korea on remote team hiring proves how hard it is for technology companies to create effective process. https://www.recordedfuture.com/research/inside-the-scam-north-koreas-it-worker-threat
Proactive risk mitigation strategies include:
- Develop comprehensive remote work processes and policies in compliance with applicable employment, labor and data privacy laws that protect employee privacy rights and verify identities
- Invest in secure remote access solutions to address risks posed by unsecured networks and use of personal devices
- Develop data security protocols and encryption policies to minimize employee access to sensitive data
- Conduct regular cybersecurity training for employees
- Implement clear contracts and agreements to safeguard IP
- Establish guidelines for workplace safety and remote work liability
- Monitor trends in remote work regulations
- Clarify employee confidentiality obligations to protect against theft or unauthorized use of IP
5. The Rapid Pace of AI
The slow pace of AI regulation has created an environment of legal uncertainty for technology companies. While the passage of the EU AI Act and similar initiatives in U.S. state laws have set some initial regulatory boundaries, governments across the globe continue to debate appropriate oversight measures. As a result, the likelihood of encountering legal and reputational risks remains high for companies deploying AI solutions.
Steps to mitigate AI-related risks include:
- Closely monitor AI-related legislation and advocate for balanced and proactive AI regulations
- Train employees on the ethical use of AI
- Ensure transparency in AI decision-making processes
- Conduct regular audits to test for bias and errors in data outputs
- Preserve human oversight of critical decision-making processes
Because new technology almost always outpaces the laws regulating it, technology companies are often forced to navigate evolving risks without clear legal guidance. A proactive approach to compliance and risk mitigation can help to ensure their continued growth and success. OGC supports a wide range of companies in this space, handling their data privacy and cybersecurity legal issues, supporting IP protection, and developing regulatory compliance programs. Contact us today to discuss the specific needs of your business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
