It was thirty years ago today when I landed in South Korea for the first time to start a new adventure- working in house for one of the largest multinationals in Korea- Samsung! Looking back, because of this move I have been blessed with a long and very interesting life and career. (more…)
Not too long ago, when you asked someone in the U.S. about Korea, all they thought of was MASH. To them, Korea was a poor, underdeveloped country in the throws of a civil war, or a poor country just coming out of a civil war. That is actually far from the truth. In the past 30 years, Korean has undergone a transformation from a poor country to a developed one. (more…)
Considering that the CES Show in Vegas is in full swing as well as the recent events in North Korea and China involving cybersecurity,etc, I think it is fitting to offer a post by a friend, Mike O'Brien at Wilson, Elser on the risks inherent in IoT devices. Here is his post .
The Internet of Things: The Inevitable Collision with Product Liability
By H. Michael O'Brien (White Plains, NY) on February 2, 2015 Posted in Product Liability, Technology and electronic products
The IoT – Internet of Things – is undergoing a rapid development that will continue to transform how we interact, conduct business and live our lives. The movement toward IoT’s ubiquitous application and use does not come without risk and, while some of the consequences can be easily predicted, many will not be fully understood for some time to come.
One area that will be impacted is product liability. The advent of smart devices will have far-reaching consequences for manufacturers and software developers to tech service companies, insurers and, most certainly, consumers. The U.S. Federal Trade Commission (FTC) issued a report in January 2015 that highlights and forecasts these very concerns.
The FTC report noted security concerns for consumers using IoT devices, such as enabling unauthorized access and misuse of personal identification, facilitating attacks on other systems and creating safety risks. It was noted that while these risks exist on traditional computers and computer networks, they are heightened in the IoT.
What Is the Internet of Things? The IoT has been identified as the third wave of the Internet. Various estimates and predictions suggest that as many as five billion devices are connected to the Internet and there will be 25 billion more within five years. The revenue stream from the IoT is expected to exceed $300 billion.
The IoT enables devices to connect to the Internet via embedded sensors built into the devices. These embedded sensors send environmental and activity information to data storage centers that in turn allow analytic engines to provide feedback and control. The IoT has transformed everyday devices into smart devices connecting consumer objects and industrial equipment to the Internet, enabling information gathering and management of these devices via software to increase efficiency, enable new services, or achieve other health, safety and environmental benefits.
A 2014 Goldman Sachs report identified five key IoT areas of adaption: wearables (e.g., smart bands), connected cars, connected homes, connected cities and industrial Internet (including transportation, oil & gas and health care).
Primary Market Forces The report identified primary market forces driving the growth of IoT, including low-cost enablers such as cheaper sensors, bandwidth and processing; smartphones and ubiquitous wireless coverage; the value proposition from revenue generation by new product cycles; and productivity and cost savings.
More than 900 exhibitors showcased IoT technologies for the home, cars, security systems and kitchen appliances at the 2015 Consumer Electronics Show.
Each day new products and services for businesses and the home are becoming IoT-connected. For the home, the primary reasons are twofold:
Security Concerns The proliferation of applications for IoT devices is raising concerns with respect to the security of these devices and the purposes for which personal data collected will be used. The use of IoT technology therefore introduces a new layer of risk for these products, which raises concerns about privacy and the potential for outside interference by individuals or groups with nefarious motives.
Could the vulnerability of IoT devices and products actually encourage such attacks against consumers? The answer is probably yes. A study released by Hewlett-Packard in 2014 found 70 percent of IoT devices are vulnerable to attack. The vulnerabilities identified in the report include password security, encryption and general lack of granular user access.
In 2014, the German government’s federal office for information security (the BSI) released details of an attack on the network of a steel plant. The perpetrators eventually gained access to the plant’s production network and other systems and took control of a blast furnace, preventing it from shutting down, which caused massive damage to the system. This was identified as the second cyber-attack to cause physical damage; the first known attack was the Stuxnet malware attack on the Natanz uranium enrichment plant in Iran.
In the consumer setting, the FTC report provides some examples of potential vulnerabilities:
The FTC report notes that the proliferation of inexpensive IoT devices may be part of the risk to consumers. IoT device makers may not be attuned to the security issues and lack the economic incentives to provide software updates and support when vulnerabilities are discovered.
In the private sector, similar concerns are being voiced. Michael Coates, director of product safety at Sharpe Security and chairman of OWASP (Open Web Application Security Project), has predicted that the lack of updates to IoT consumer devices will become an area of vulnerability for manufacturers because it will “be a very low priority for the manufacturer.” Coates also predicts “criminal organizations will run their malicious activities in the background without impacting the overall performance of the device and this will mean the customer will not notice the malware, and the security vulnerability will have no impact on the performance of the device. These kinds of vulnerabilities could result in the loss of private data that will be monitored and sold without their knowledge.”
Coates, like the FTC, forecasts effective patches as a problem: “Once it is discovered, the manufacturer will rush to issue a patch. But, how will the patch be delivered? Will consumers have to reboot their oven? Will the updated software only be available in the next release of the physical product?”
The Impact on Product Liability There are at least three areas of vulnerability for consumers and businesses that are fairly predictable:
These types of problems, if widespread within a product line found to be vulnerable to such malfunctions and attacks, could lead to product liability law suits and class action litigation by the affected consumers.
Liability and Consequences In each of these hypothetical situations, one can ask: “Who will play a role in the allocation of fault and who will bear the financial consequences?”
Under the traditional principles of strict liability, fault flows up the chain of distribution from the retailer through mid-channel distributors ultimately to the manufacturer. But will the software developer for an IoT product or handheld device be brought into the equation when an IoT product causes a loss? Who will bear the responsibility if the software is vulnerable to an outside attack? These risks are often addressed between parts suppliers and manufacturers under the terms of supply agreements where a contractual duty to defend and indemnify against damages caused by a malfunctioning device is spelled out.
What role will the consumer play? Will the consumer become a target for fault apportionment if it is found that the consumer failed to update security software or used easily hacked passwords or downloaded malware from unsecure sites? What issues of privacy will develop when litigation is brought and demands are made by potentially liable third parties to examine the device used by the consumer and download its contents? What issues of privacy will arise when information downloaded from an IoT product is stolen? What issues of privacy will exist when information collected from an IoT-connected device is sold by the IoT device manufacturer to a third party?
How will the losses be investigated and will responsibility for failure of an IoT product prove more difficult to investigate and thus to establish liability? What types of experts will now be called on to play a role in the investigation?
Wilson Elser has been examining and evaluating the potential impact of the IoT across several distinct but interrelated legal practice areas and has taken an integrated, multi-practice approach to inform and advise our clients as to the potential impact the IoT will have on various stakeholders and business interests. Wilson Elser has specific practice area specialists who are knowledgeable about the issues emerging with IoT applications. Consequently, the firm is positioned to help guide clients through myriad complexities and issues to avoid or reduce risks. In the worst-case scenario Wilson Elser is positioned to act as a first responder when the inevitable problems emerge. Wilson Elser hosts CL and CLE programs on the IoT for our clients and interested businesses. For more information, please direct inquiries to michael.obrien@wilsoneleser.com.
In international business it pays to appreciate other cultures or as I say- dont soak in a hot tub without bathing first! .......I was in the sauna the other day. Koreans like Japanese (and me) like to go to the sauna on regular basis to bathe, soak, bake and perspire. Though Koreans may not have a water culture that is identical to the Japanese, they do have a sauna culture with jimjilbangs and mogyoktangs on almost every block. When Korea was digging out of the rubble of the Korean war, it was hard for them to get hot water, etc. So they started going to saunas on a regular basis.
So, while I was in a local sauna, soaking away in one of the many hot tubs (they have cold tubs too) I noticed what looked like an American or European walking in. I thought he was an American as the area I was in caters to foreigners especially those from the US, etc. What surprised me was the person I noticed coming in (in Korea all saunas are separate sex saunas as Korea is a rather conservative society) just plopped into the nearest hot tub without bathing! In Korea like Japan, the bathing etiquette requires one bathe and wash oneself prior to jumping in a hot tub. The hot tub is there to soak in- not bathe in. I think he must have noticed the dirty looks he got from people including me, but it didn’t matter. He obviously didn’t look at the signs posted at the entrance of the sauna reminding everyone to wash prior to using the hot tubs. No-he just continued to soak – upsetting those around him. He forgot the main rule of international travel and business- to honor the customs and culture of the society you do business in. Being culturally aware when you travel to other countries is very important.
Obviously, when doing business in a different country than your own you need to be aware of local laws that may impact your deal. You also need to be aware of local customs, culture, language and etiquette. Is it proper to give your host (or his wife) a gift? Is it proper to go out to tea or coffee with your host prior to having that initial business meeting? Is it proper to disregard local religions and customs? Should you use an interpreter? The list is endless. It means you need to place emphasis on cross cultural issues. Likewise, your host, or the local law firm that is advising you on local legal issues must also be sensitive to your culture, as both parties must make an attempt to understand each other prior to trying to do a deal.
Remember, culture will determine how companies or organizations and their negotiators look at or perceive negotiations or business deals. Some cultures or countries will look at things differently than other groups or countries. Some cultures will look at the future differently, or will value compromise differently. Some societies promote problem solving while others promote individualistic goals with little concern for the other side. Negotiating with other countries or cultures can lead to a clash of values, disagreements over the meaning of words, confusion over inaction or action, and of course failed negotiations. That is why not only communications across culture is difficult but why language itself is key in international communications. Having a good grasp of your counterpart's language and culture may determine success or failure. Knowledge of one’s counterpart or customer’s culture language in an international setting is very important for many reasons. For example, it helps avoid the potential for miscommunication, confusion and misunderstanding of issues.
So before you rush off to a foreign land remember to become cross-culturally aware. Study the culture and language if possible. Understand your surroundings. And above all else- dont soak in a hot tub without bathing first!
LAWYERS MUST MARKET THEMSELVES TOO-LIKE IT OR NOT ITS ALL ABOUT MARKETING…
Looking at the Christmas and holiday signs I am reminded that 2015 is almost over. Everyone is busy preparing for a new year of client meetings or thinking about new sales targets. A new year of meeting or exceeding goals and of course increasing revenue. The trouble is that some divisions within a company (excluding sales and marketing of course) fail to think about their organization in terms of marketing. However, even departments, such as the legal department or compliance department, must market themselves within a company, and even sometimes outside of the company itself. Why? Its all about resources. Unless, you properly market yourself, you may not get access to resources that departments or divisions such as sales and marketing have. If an in house law department doesn’t market its needs properly to its favorite law firms, those firms may opt to devote the law firm’s scarce resources to other clients. This means the company may get the law firm's B team or the C team instead of the A team. It may not get the quality legal representation that you want.
Law firms must think about marketing as well. If law firms fail to properly market themselves- they may not get the chance to use their A team as corporations may use other more well known firms. Marketing is becoming more important for those involved in the legal profession. Its not just providing a legal opinion or drafting a contract that lawyers must concern themsleves with. The practice of law, like any other profession is in fact a business. And like any other business, marketing is very important.
So, in terms of a law firm or even an in house law department what does marketing entail? First, the law firm or practice groups within a law firm ( or even an in house law department ) should ask a series of questions including:
1.What goals has the law firm set for the coming year if any?
2. What resources does the law firm or law department need to meet the goals it has set for the following year?
3.What budget processes must the General Counsel go through? Normally, a law department must think about 2 budgets- its budget and the company’s ( its client) overall budget.
4.What are the true legal/business needs of the company?
5.How can the law department add to the bottom line?
6. What can the law firm do to add to its clients' bottom line- or how can it add value to its clients?
7.What marketing budget does the law firm need?
8. How can the law firm distinguish itself from its competitors via marketing?
Those in house lawyers new to an in house setting might be shocked to realize they are in a sense expected to be more than just a lawyer - but also a trusted business partner/advisor. They are expected to understand internal corporate processes and not just basic legal theories or doctrine. They are expected to know how to interface with the business units, and yes, to know how to properly support them. Lawyers in law firms are usually specialists in a narrow area of law. They are supposed to be able to give expert legal advice on certain narrow topics whether it is tax, product liability, civil litigation, etc. But they don’t know the inner workings of a company! In house lawyers, if they do their job correctly, are not only aware of the big picture but also familiar with implementing processes and procedures within the company. In other words, how to make things work. So, for those in house lawyers out there - what have you done to ensure you have adequate resources in 2016 to protect your client? When considering the law department budget of even the compliance budget remember you need resources to make things happen. You therefore need the support of not only upper management but mid- level management as well. Are managers inviting you to their meetings? If not, it may be hard to learn about the major issues facing the company. Do employees understand the role of the law department or compliance department? If not, steps need to be taken to provide sufficient training and support. So think about marketing legal or compliance within the organization. Here are some practical steps for in house law departments:
1.Market your compliance department to employees. Hold introductory training sessions within the organization. Offer little gifts or tokens so the employees remember the compliance department. Make certain they remember your processes.
2.Market the law department to management. Every month send out a top ten list to upper management and your division managers on what legal issues you resolved or handled that helped the organization. Sales and marketing managers may not be aware that legal just handled a serious legal/business matter that saved the bottom line and yes, maybe even the company.
3.Hold lunches with senior managers on a regular basis. Once they are comfortable with you they will open up. That’s when you hear about how efficient the law department or compliance department is perceived and why. Or of course, you may hear about the perceived problems with the law department or compliance department which will then give you a chance to correct such perceptions.
Remember, just because legal or compliance is in most cases not a profit center does not mean you doesn’t have to worry about the bottom line. In order for legal or compliance to do its job properly, it needs resources. Which is why you must also think about marketing your services within the company. Management as well as the company's employees should realize the importance of your function and should want your department to succeed.
As for law firms- marketing is very important too! What have you done to prepare for 2016? Does your clients know about your new practice groups or new capabilities? Has your marketing department gotten ionvolved?
As 2015 winds down, everyone starts to think about 2016. They make grandiose plans that perhaps they cannot keep or are simply to agressive in their planning. Managing risks, like many other business processes takes planning and careful consideration. (more…)
