Establish clear rules, ensure trust and minimise liability risks
Whether streaming services, cloud platforms, car sharing or online shops – digital business models have become an integral part of everyday life. The development of digital business models and the use of modern technologies offer great economic potential, especially for companies, but also pose legal challenges and potential liability risks. Contract design therefore plays a key role in digital business models. The contractual definition of rights, obligations and responsibilities of the contracting parties is essential and indispensable in order to create transparency and legal certainty.
IT contract law
Just as the range of digital business models is diverse, their legal structure is also complex. Digital business models are characterised by new and digital sources of revenue and customer acquisition strategies. Therefore, the basis for contract design first of all is the detailed description of the service, such as the provision and use of the products or services offered. Frequently, mixed concepts are offered that are made up of various components. Depending on the business model, regulations from purchase, rental, work or service contract law must be observed. The digital world also brings about new risks of liability, e. g. for the failure of online services. Contracts must clearly regulate the warranty and liability obligations of the contracting parties in order to avoid disputes and claims for damages. The regulations must be adapted to the applicable digital business model and remain within the limits of the law on general terms and conditions.
Intellectual property
In addition to IT contract law, intellectual property also plays an important role. Companies must ensure that they own the necessary rights in and to the content used and they must include appropriate terms of use for their customers. The use of open source software (OSS) poses a particular challenge. Even if OSS is “open source” software, it is not free of rights and is sometimes subject to strict licence conditions. Companies should therefore check whether they are using OSS and ensure compliance with the applicable licence conditions, as licence violations can have serious consequences such as injunctive relief claims and claims for damages. If a company develops OSS further, it is also necessary to choose suitable licence conditions. Special challenges also arise when using AI-generated content.
Data protection
The provision of digital business models often involves the processing of personal data. In this case, the data protection responsibilities of all parties must first be assessed. Depending on the business model, contracts for commissioned data processing or joint controllership may need to be reviewed and/or drawn up on this basis. The contracts must contain clear regulations on data protection and data security. This can pose a challenge due to the strict requirements imposed by the data protection supervisory authorities. In particular, critical aspects such as the controller’s instruction and control rights, the processor’s support obligations or the deletion of data after the task has been completed must be taken into account when drafting contracts.
Cybersecurity
The EU has responded to the increasing cyber threats. While the regulation of cybersecurity has so far been rather unclear and fragmented, the new European cybersecurity law places numerous specific requirements and obligations on companies. The scope of application of the new cybersecurity law is broad, meaning that all contractual partners, suppliers and service providers of a company must guarantee an appropriate level of cybersecurity. Contractual regulations are the means of choice to ensure this. In view of the increasing number of security incidents, contractual regulations for all suppliers and service providers and the passing on of obligations in the supply chain are essential and indispensable. At the same time, this reduces the risk of sanctions and measures by the supervisory authorities.
Conclusion
In order to successfully develop and market digital business models, companies must familiarise themselves with the numerous regulations of digital law and draw up corresponding contracts. Existing contracts should also be reviewed regularly.
You can find more tips on this in our onepager on drafting contracts for digital business models.
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