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Significant Legal Issues Faced By Technology Companies

With innovation at their core, technology companies often face friction from the existing legal framework in which they operate. New or disruptive technologies oftentimes do not fit within the present regulations and the law can be slow to adapt to any new and novel technologies. Operating on the fringe of existing regulations creates unique and challenging legal issues. This article looks to summarize the more significant legal issues faced by technology companies so that these organizations can take steps to reduce their legal risks.

Data Protection – The protection and management of data collected from third-parties traverses multiple areas of law and differs significantly between jurisdictions. The ever changing legal landscape governing the privacy of individuals and data security means that it is critical for organizations to establish processes and security measures for administering and protecting the collection, management and exploitation of personal data. This includes well-drafted privacy policies and terms of use that are customized to the objectives of the business as well as internal policies which comply with the law of each jurisdiction you choose to operate in. Failure to do so opens companies up to a raft of liability which could cripple an organization.

Borderless Commerce – Due to the nature of the industry, technology companies have the ability to rapidly expand their operations into new countries. Yet, organizations must realize that compliance must be achieved on a territory-by-territory basis as the laws concerning security and compliance can differ wildly from country to country. Although certain geographic regions have taken steps to reduce inconsistencies between jurisdictions, such as the European Union’s adoption of the General Data Protection Regulation in May 2018, these efforts are limited in material and territorial scope. This creates an obligation on an organization to be aware of the legislation of each jurisdiction they choose to conduct business and confirm their compliance. Failure to adequately do so can open up an organization to risks that may be catastrophic to the success of the business. As such, technology companies must strategically adapt and significantly invest in their policies and procedures to meet the requirements of any given territory.

Operating on the Fringe of Existing Regulations – Innovative technologies create unique challenges when assessing which existing laws and regulations apply. The ambiguity surrounding the impact of existing laws means that technology companies must take a broad approach to compliance to confirm that their products or services do not fall under the scope of an unanticipated area of law, such as securities and tax regulations. For example, regulators from numerous jurisdictions, such as the Ontario Securities Commission, introduced stringent regulations in response to the proliferation of crowdfunding platforms. Further, when a technology company looks to take advantage of gaps in the legal and regulatory framework in the relevant market, they must monitor and plan for when and how the laws will change and how such changes would impact their business.

What is clear is that technology companies will need to invest time and resources to ensure that their products and services not only comply with existing laws and regulations, but also continue to do so as the laws and regulations evolve in response to innovation. As such, it is essential that a company seek the advice of a lawyer with experience working with technology companies.

This article was written by Myron Mallia-Dare, a business lawyer based in Toronto, Canada. The information in this article is not intended to be legal advice and is of a general nature. Consult a lawyer for advice for any specific situation.

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