Now more than ever, technology is influencing the way we do business, communicate, move through and around the world, access and manage our homes, receive and administer healthcare, make purchases, secure information, and protect our most valuable property. Morrison Foerster keeps pace with this rapidly evolving landscape across our internationally recognized corporate, finance, intellectual property, and litigation practices. MoFo Tech brings together our insights relating to fields such as blockchain and distributed ledger, cloud and as-a-service technologies, driverless cars, drones, fintech, computer hardware and software, the Internet of Things, semiconductors, and telecommunications. The MoFo Tech blog offers real-time, in-depth analyses of the trends and complex issues shaping the global technology industry.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Scott Llewellyn’s practice focuses on complex litigation in federal and state courts around the country, with an emphasis on patent and trade secret disputes. Over the past decade, he has worked on some of the most significant, high–profile IP cases involving technology for televisions, smartphones, and self–driving cars, relying on 40 years of experience with computer hardware and software. Scott also has significant experience with business divorce cases before courts and arbitrators, involving a mix of trade secret, patent, tort, and contract claims relating to technology development and implementation.Scott also has successfully tried general commercial arbitration and agency matters, briefed and argued various appeals in federal appellate court, and tried more than 20 cases for the Denver City Attorney’s office, most of them jury trials.Scott also has an active pro bono practice, having worked on a variety of criminal and immigration appeals, and having represented Colorado criminal defense and mental health organizations in high–profile suits against the state of Colorado for violations of the constitutional rights of defendants.At MoFo, Scott serves on the board of the Morrison & Foerster Foundation. In the broader legal community, he serves on the boards of the Colorado Lawyers Committee and Drop in the Bucket (a charity that builds wells and sanitation systems in sub–Saharan Africa).After law school, Scott clerked for the Honorable Clarence A. Brimmer, District of Wyoming, and the Honorable Diarmuid F. O’Scannlain, Ninth Circuit. He was also previously an adjunct professor at the Georgetown University Law Center.

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Scott Llewellyn’s practice involves complex litigation before state and federal courts around the country, with an emphasis on patent and trade secret disputes for high-tech companies, to which he brings more than 35 years of experience with computer hardware and software, in particular relating to the processing and transmission of audio, video, voice, and other types of data. Mr. Llewellyn has also tried commercial arbitration and agency matters; briefed and argued various appeals in federal appellate court; and tried more than 20 cases for the Denver city attorney’s office, most of them jury trials.

Scott F. Llewellyn

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MoFo Tech brings together legal insights and in-depth analyses on trends and complex issues shaping the global technology industry, covering fields such as blockchain and distributed ledger, cloud and SaaS technologies, driverless cars, drones, FinTech, computer hardware and software, the IoT, semiconductors, and telecommunications.

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MoFo Tech brings together legal insights and in-depth analyses on trends and complex issues shaping the global technology industry, covering fields such as blockchain and distributed ledger, cloud and SaaS technologies, driverless cars, drones, FinTech, computer hardware and software, the IoT, semiconductors, and telecommunications.

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Current State of the AI VC Financing Market

MoFo Tech Law Summit – Tech and Antitrust: Policy Shifts in the Second Trump Administration

MoFo Tech Law Summit – Responsible Tech: Policy Becomes Practice

AI Dynamics: Regulatory Landscape and Industry Insights

Introducing the MoFo Tech Law Summit – Innovation Under Regulation

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Given the broad use and relative importance of service-level agreements (SLAs) in a variety of contexts, in this blog post, we provide an overview of the basics of SLAs and what they should address. An SLA is an important part of any contract with a provider of technology-based products or services. Customers and providers use SLAs to establish performance expectations for a wide variety of services, ranging from software-as-a-service (SaaS), maintenance, hosting, support, or other cloud-based services, to delivery of tangible goods.An SLA sets out the provider’s performance obligations with respect to the services it provides to the customer in measurable and objective terms via defined service-level requirements. 1.  Elements of a service level<ul><li>Service scope: Definition of what services are covered by the service levels.</li></ul><ul><li>Performance requirement: Definition of what performance is required for the measured activity. Think of it as the substance of what specifically must be done to have performed the service level (the “what” of the equation).</li></ul><ul><li>Performance standard: Definition of the performance standard. Think of this as proportion of the time (or some other means of measurement like percentage of transactions) for which the performance requirement must be met in order for the service level to be achieved. <ul><li>Often this is expressed as a percentage of the time the provider has performed the measured activity in accordance with the performance requirement.</li><li>The provider may designate certain exceptions or carve-outs to the performance standard (e.g., windows during which not meeting the performance standard is excused).</li></ul></li></ul>2.  Measurement of a service level<ul><li>Measurement period: Definition of the time period over which the service level is measured (e.g., hourly, daily, monthly).</li></ul><ul><li>Means of measurement: Reporting or other means of measuring whether the above elements have been achieved. The provider is typically responsible for measuring the service levels and reporting on a regular basis (e.g., monthly) on actual performance against the service levels. <ul><li>The parties should avoid subjective standards that are susceptible to conflicting interpretations, such as “reasonable efforts.”</li><li>The customer may want to specify how the service levels are reported and require the provider to carry out trend analysis on problems that are occurring.</li><li>Failure to provide a service-level report on time, or at all, may legitimately result in a service credit (see below) since the customer does not have the necessary means to assess whether the relevant service levels have been met without a service-level report.</li></ul></li></ul>3.  Remedies for failure to achieve service levelsRemedies for failure to achieve service levels are typically: (a) fee reductions or service credits against fees incurred, and (b) ultimately, termination for repeated failures. a.      Fee reductions or service credits against fees incurredService-level requirements are keyed to a specific formula for calculating fee reductions or service credits that the provider must issue to the customer if performance falls below the required service level. The fee reductions or service credits can be weighted based on relative importance. Service credits are usually expressed as a percentage of fees for the applicable service, to be credited against future charges to the customer if the provider fails to meet a service level.<ul><li>Optional to include: <ul><li>“At risk” amount: The percentage of the fees payable over a specified time period that are subject to service level credits. <ul><li>Example: “The maximum percentage of Fees payable over a Contract Year that are subject to the Service Level Credits is 30% of the sum of that Contract Year’s monthly recurring fees.”</li></ul></li></ul></li><li>Weighting factor: Apply a percentage value to each Service Level (total of all percentage values corresponding to the Service Levels should add up to 100%). <ul><li>Example: “If Provider does not achieve any of the Service Levels, Fees payable hereunder will be reduced in an amount equal to the product of: (i) one-twelfth of the Annual At-Risk Amount, multiplied by (ii) the Weighting Factor for the Service Level that was missed.”</li></ul></li><li>Multiplier applied to weighting factor (if service level credits and “at risk” amount is applied): The percentage of the “at risk” amount that is attributable to the service level for purposes of calculating service level credits. <ul><li>Example: “If there is a failure as to a single Service Level in 2 or more consecutive Measurement Periods or as to any Service Level within any 3-month period, then the Weighting Factor will be multiplied by 2.”</li></ul></li></ul><ul><li>Pro-provider terms that customers with greater leverage may be able to avoid: <ul><li>Limitation of service credits to a stated cap (for example, the total amount of fees otherwise payable for the services during the period when the service-level failure occurs).</li><li>Earn-backs: The parties might agree to a mechanism for the provider to earn back some or all credits imposed due to failure to meet service levels if its average performance over the course of a specified time period (e.g., a year) meets or exceeds the required service level.</li></ul></li></ul><ul><li>Service credits are typically applied to (deducted from) charges in the next invoice after they are incurred, but the parties may agree to apply them on an annual basis, deducting the total amount of service credits from the first invoice of the contract year.</li></ul><ul><li>To enhance the likelihood that service credits will be enforced, remedies generally should reflect a reasonable estimate of the customer’s injury for the corresponding service-level failure and constitute compensatory liquidated damages rather than a penalty for non-performance.</li></ul><ul><li>Exclusive remedy: Customers want to preserve the right to pursue other remedies under the master agreement (such as damages and termination) if the provider fails to meet service levels. On the other hand, providers want the service credits to be the customer’s only remedy for service level failures. <ul><li>Pro-customer example: “The Service Credits shall not be considered liquidated damages or Customer’s sole and exclusive remedy for Provider’s failure to meet Service Levels."</li></ul></li></ul><div>  b.      Termination for repeated failure to achieve the service-level commitment over a pre-defined period of   timeCustomers will want to negotiate for the right to terminate without liability or further obligations for repeated failures to meet the same or different service-level requirements.<ul><li>Example: “Provider’s failure to achieve a single Service Level in 2 or more consecutive Measurement Periods, or any Service Level in 4 or more Measurement Periods during any 6-month period or Contract Year will constitute a material breach under the Master Agreement and Customer may terminate for cause as set forth therein.”</li></ul></div>

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Stephanie assists companies with technology and life sciences transactions, representing both private and public companies, from emerging growth through the Fortune 50. In particular, Stephanie focuses on helping companies that leverage data through technology in structuring their business and commercial transactions.

Stephanie Sharron

Stephanie Sharron is partner in the Palo Alto office and a member of the firm’s Technology Transactions Group. Clients turn to Ms. Sharron for advice on how to leverage data through technology and the related issues that apply to their business models in light of the rapid changes in business, technology and law.

Stephanie Lynn Sharron

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Service-Level Agreement Basics

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Given the broad use and relative importance of service-level agreements (SLAs) in a variety of contexts, in this blog post, we provide an overview of the basics

Service-Level Agreement Basics

Until recently, retail sellers of goods and services were not required to collect sales tax unless they had a physical presence in a state. Sellers that operated primarily from one location and offered goods and services via the Internet or other technological means thus had very limited sales tax collection obligations.Those days are over. On June 21, 2018, in a decision that overruled over 50 years of precedent and abruptly changed the sales tax compliance obligations of sellers throughout the country, the U.S. Supreme Court decided in South Dakota v. Wayfair, Inc. that physical presence is no longer required for a State to impose a sales tax collection obligation on sellers. <a href="https://mofotech.mofo.com/topics/if-your-company-offers-streaming-services.html">In a previous post</a>, we explored the various approaches taxing authorities are taking to the sales taxation of streaming services, and noted the impact that the Wayfair decision may have on sellers of streaming services. The decision in Wayfair similarly impacts sellers offering goods and other services through the use of the Internet. In the wake of Wayfair, all sellers should be aware that they may incur sales tax liabilities if they fail to collect and remit sales tax in jurisdictions, even if they have no property or employees.Limitations of the Wayfair Decision and Post-Wayfair ChallengesNevertheless, Wayfair only answered the question of whether a physical presence is required under the U.S. Constitution for a jurisdiction to impose a sales tax collection obligation on a seller. The U.S. Supreme Court made it clear in Wayfair that the Constitution still requires a substantial nexus between the taxing jurisdiction and the business that it seeks to tax, as discussed in MoFo’s Special Edition of State + Local Tax Insights. The State statute at issue in Wayfair, for example, only required sales tax to be collected if the seller sold more than $100,000 of goods or services into the State or engaged in 200 or more transactions for the sale of goods or services in the State. Sellers should be aware that jurisdictions currently have statutes with widely varying standards for when a seller will be subject to sales tax collection obligations.Additionally, even if a jurisdiction may generally require a seller to collect sales tax, no sales tax may be collected on sales of goods or services that are not subject to sales tax under the jurisdiction’s sales tax laws. Therefore, sellers must be familiar with the sales tax laws of every jurisdiction in which they have a general obligation to collect sales tax to ensure that they collect sales tax only on taxable sales. If a seller fails to collect and remit sales tax on a taxable transaction, the seller will be liable to the taxing authority. On the other hand, if a seller improperly collects and remits sales tax on a nontaxable transaction, the seller may be at risk of being sued by customers in a class action lawsuit.Digital and Cloud-Based Goods and Services May (or May Not) Be Subject to Sales TaxHistorically, most jurisdictions imposed sales tax primarily upon sales of “tangible personal property” and only limited services. However, in recent years some jurisdictions have revised their sales tax laws, and other State and local revenue departments have interpreted existing sales tax laws, to impose sales tax on digital and cloud-based goods and services. For example, many jurisdictions now impose sales tax on sales of remote access software or software as a service (SaaS). Companies that have a physical presence in a small number of jurisdictions, but offer access to software to customers in many jurisdictions, may now find themselves subject to new sales tax collection obligations. Moreover, jurisdictions may impose tax on platforms as a service (PaaS), infrastructure as a service (IaaS), and many other cloud based services.Further, some jurisdictions impose sales tax on so-called “information services.” New York, for example, generally imposes a sales tax on services involving the provision of information that is created or generated from a common database or that is widely accessible. Similarly to sellers of SaaS, sellers of information services are susceptible to increased sales tax collection obligations following Wayfair, since the services may be provided electronically to a wide audience in many jurisdictions.These are only a few examples of the types of digital and cloud-based goods and services that may be subject to sales tax. Any seller that makes remote sales of goods or services through the Internet should carefully analyze its sales tax collection obligations in a post-Wayfair world.ConclusionStates, just like sellers, are adjusting to the changes brought on by the Supreme Court’s decision in Wayfair, and this area of the law is rapidly evolving. While the responses to Wayfair from states and localities may vary, it is clear that sellers may no longer rely on a small physical footprint to minimize sales tax compliance obligations. Further, the removal of the physical presence requirement may embolden states and localities to apply sales tax laws to new industries, goods, and services. Therefore, sellers must continue to monitor this ever changing landscape.

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Of Counsel

Rebecca Midori Ulich-Balinskas is of counsel in the State and Local Tax Group in Morrison & Foerster’s New York office. Her practice focuses on state and local tax controversies at the audit, administ

Rebecca Balinskas

Rebecca M. Balinskas

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Don’t Snooze on Potential New Sales Tax Collection Obligations

Google Ordered to Comply with Warrant for Foreign-Stored User Data

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Until recently, retail sellers of goods and services were not required to collect sales tax unless they had a physical presence in a state. Sellers that operate

Don’t Snooze on Potential New Sales Tax Collection Obligations

May the U.S. government compel a company operating in the United States to produce data that it stores outside the country? A new law called the CLOUD Act makes clear that, in the case of legal process served under the Stored Communications Act (SCA), the answer is yes. But the SCA does not apply to all types of businesses or all types of data.Learn when the SCA does apply, as well other specifics like when a company served with a subpoena under the SCA may file a petition to quash that subpoena and how the United States’ Executive Agreement with a foreign government’s might affect a U.S. company subject to that foreign government’s jurisdiction.

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Bob Litt, former General Counsel for the Director of National Intelligence, is of counsel and co-chair of Morrison & Foerster’s Global Risk and Crisis Management group. He advises industry-leading org

Robert S. Litt

Robert Litt

CLOUD Act: New Legislation Will Overhaul U.S. Laws for Obtaining Data Stored Overseas

May the U.S. government compel a company operating in the United States to produce data that it stores outside the country? A new law called the CLOUD Act makes

CLOUD Act: New Legislation Will Overhaul U.S. Laws for Obtaining Data Stored Overseas

When one of the most closely watched technology cases in years, United States v. Microsoft, was argued before the U.S. Supreme Court in February, the justices heard arguments for and against allowing the government to require Microsoft to produce emails that the company has stored overseas. The Court’s decision hinges on its interpretation of the Stored Communications Act (SCA), a law that was passed in 1986, a time when—as Justice Ginsburg pointed out during the oral arguments that day—“no one ever heard of clouds. This kind of storage didn't exist.”In an article for Wired, Morrison & Foerster counsel David Newman explains why this point of Justice Ginsburg’s as well as other significant factors lead him to believe that the justices’ decision—irrespective of which party it ultimately favors—will put pressure on Congress to enact new legislation that does a far better job of resolving this privacy issue than the justices ever could as the law currently stands.Learn how the recently introduced CLOUD Act would resolve the issue presented by United States v. Microsoft in a way that would satisfy both parties. Read <a href="https://www.wired.com/story/us-v-microsoft-supreme-court-oral-argument/" target="_blank">David Newman’s piece in Wired</a>.

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In U.S. v. Microsoft, a Decades-Old Law Leaves Few Good Options

Clashing With Second Circuit, Court Orders Google to Turn Over Foreign-Stored Data

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When one of the most closely watched technology cases in years, United States v. Microsoft, was argued before the U.S. Supreme Court in February, the justices h

In U.S. v. Microsoft, a Decades-Old Law Leaves Few Good Options

Based on an April 2017 <a target="_blank" href="https://dlbjbjzgnk95t.cloudfront.net/0915000/915244/https-ecf-cand-uscourts-gov-doc1-035115371508.pdf">opinion</a> by a federal district court in California, storing user communications abroad is not a failsafe way to avoid U.S. law enforcement requests for user data.The Northern District of California issued the opinion in response to Google’s motion to quash a search warrant from the Department of Justice (DOJ). Citing the <a target="_blank" href="https://www.law.cornell.edu/uscode/text/18/2703">Stored Communications Act</a> (SCA), the warrant directed Google to produce stored content related to certain email accounts. Google withheld some of the data, arguing that it was stored overseas and therefore beyond the SCA’s reach. The federal district court rejected this reasoning and ordered Google to “produce all the content responsive to the search warrant that is retrievable from the United States, regardless of the data’s actual location.”Distinguishing the case at hand from the Second Circuit’s Microsoft opinion, which held that email stored outside the United States might be beyond the government’s reach, the California federal court held that Microsoft had been storing data in accordance with the user’s self-reported location in Ireland, whereas Google was moving data around the world based on efficiency-driven algorithms.

Clashing With Second Circuit, Court Orders Google to Turn Over Foreign-Stored Data

Based on an April 2017 opinion by a federal district court in California, storing user communications abroad is not a failsafe way to avoid U.S. law enforcement

In an opinion that departs significantly from one issued by the Second Circuit in 2016 in a similar case against Microsoft, the U.S. District Court for the Eastern District of Pennsylvania <a target="_blank" href="https://links.casemakerlegal.com/docView.aspx?DocId=2924357&Index=d%3a%5cdtsearch%5cindex%5c01Test%5cALL_NC_CASE&HitCount=8&hits=27f6+27f7+27f8+27f9+2800+2801+2802+282e+&categoryAlias=District%20Court%20Opinions&fCount=4&cf=0&dt=CASES&jurisdictions.allFederal=False&jurisdictions.allStates=False&searchType=overview&bReqSt=US&dataT=CASES">held</a> that Google must comply with a subpoena from the Department of Justice (DOJ) for user data stored overseas.Both courts’ holdings were based on their interpretations of the <a target="_blank" href="https://www.law.cornell.edu/uscode/text/18/part-I/chapter-121">Stored Communications Act</a> (SCA), which prescribes the ways in which Internet service providers may disclose their users’ information. Both courts agreed that the SCA applies only within the United States, but they differed on where the relevant conduct in such cases takes place. The Pennsylvania district court “respectfully disagreed” with the Microsoft court’s finding that seizure of the data abroad was the relevant conduct, and held that the relevant conduct was “the actual invasion of the account holders’ privacy—the searches—[that] will occur in the United States.” As a result, the Pennsylvania district court held that the SCA applies.Find out what this decision means for U.S.-based cloud services providers and what it implies about the import of the Second Circuit’s Microsoft opinion.

Google Ordered to Comply with Warrant for Foreign-Stored User Data

In an opinion that departs significantly from one issued by the Second Circuit in 2016 in a similar case against Microsoft, the U.S. District Court for the East