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Legal Issues in the Cloud

By Andrew L. Goldstein

A study reported earlier this year that 37% of all organizations worldwide are deploying cloud computing solutions, and predicted that by 2014 businesses in the U.S. will spend more that $13 billion on cloud computing, a 400% increase from today. Many companies are considering moving to cloud service providers that offer access to software applications on a “software as a service” (SaaS) basis, and many software companies are moving to cloud hosted environments as a means to offer their programs. Cloud computing, however, raises new and challenging legal issues for both cloud computing users and vendors.

Vendors typically have the advantage in negotiations for cloud services because they write the contracts and determine the terms they will offer. Many cloud services, particularly those used by small and medium-sized companies, are made available only through click-wrap agreements that are non-negotiable. Consistent with the cloud model of a “one-size-fits-all” commodity service, vendors are also typically reluctant to negotiate different terms for different customers. Those faced with non-negotiable contracts must review the terms of the agreement and do their diligence on the cloud vendor to be sure that the customer is not taking on more risk than it should and to determine whether the terms of the click-wrap agreement pose any problems to the customer.

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