Grid and Cloud Computing as a Tool to Transform European Economy: Legal

Considerations FITCE 2009

Prague – 5/9/09

Davide M. Parrilli

ICRI – K.U.Leuven - IBBT

Business Experiments in GRID2

Agenda

•Introduction•Transforming economies: how to stimulate technology and service

providers?•Transforming lives: how to

stimulate the adoption of Grid and Cloud-based solutions by users?

•Conclusions.

Business Experiments in GRID3

Introduction (I)

Grid and Cloud computing transforms networks (dispersed resources); new

offers – new demands.

Dematerialisation of hardware supplied as a service – virtualisation of software: possibly, in the future all

data will be stored in and retrieved from the Cloud/Grid.

Business Experiments in GRID4

Introduction (II)

The legal framework is not neutral in facilitating or impeding the expansion of Grid/Cloud businesses and innovations.

Questions: assess whether and to what extent the applicable legal framework…

•…can stimulate the starting up and growing of Grid/Cloud technology providers and

Grid/Cloud-based service providers;

•…can stimulate companies and individuals to become users of Grid/Cloud technologies.

Business Experiments in GRID5

Introduction (III)

Focus on Europe: market, legal framework, users.

In Europe there are basically (only) academic Grids and Clouds.

Are there more legal barriers to commercial Grids/Clouds in

Europe than in other continents?

Business Experiments in GRID6

Transforming economies: how to stimulate technology and service providers? (I)

Chances – Software patentability.

European Patent Convention 1973: software ‘as such’ delivered through a Grid/Cloud

infrastructure is not patentable.

In the USA software patentability is not excluded as such → American software houses are in a

more competitive position:

•Easier to enter into the SaaS market (reward for investments);

•Risk of patent infringements in USA for European companies.

Business Experiments in GRID7

Transforming economies: how to stimulate technology and service providers? (II)

Advantages and disadvantages of software patentability:

Access to market for small companies is more difficult (often they add

functionalities to existing programs, but it is difficult if the programs are

patented);

More growth and revenues for companies already in the market.

Business Experiments in GRID8

Transforming economies: how to stimulate technology and service providers? (III)

Compliance costs: European Value Added Tax (VAT) and electronic supplied services.

Services delivered online: electronically supplied services – special regime.

Place of taxation in B2C is the supplier’s country: convenience to be located where the VAT rate is lower → competition between countries → potential advantages for consumers → the

winner is LuxembourgLuxembourg (15 %), many e-services providers are located in L.

Business Experiments in GRID9

Transforming economies: how to stimulate technology and service providers? (IV)

As from 2015 rules change: taxation at the rate of the customer’s Member State – extra compliance costs for

companies to apply the correct VAT rate (problems of location of

customers).

For the majority of consumers price will increase.

Business Experiments in GRID10

Transforming economies: how to stimulate technology and service providers? (V)

Risks – bankruptcy and liabilities.High risk to fail for innovative

businesses: it is not possible to establish a priori if the market is

mature or not.The fear to incur in severe

bankruptcy proceedings may prevent many entrepreneurs to take

the risk.

Business Experiments in GRID11

Transforming lives: how to stimulate the adoption of Grid and Cloud-based solutions by users? (I)

Users are required to trust technology Users are required to trust technology and service providers and store data and service providers and store data

and files in the Grid/Cloud. and files in the Grid/Cloud.

The trust now is market-driven, based on the reputation of the suppliers.

But: in the majority of commercial SLAs the customers are in a very weak position – the providers are never

contractually liable!

Business Experiments in GRID12

Transforming lives: how to stimulate the adoption of Grid and Cloud-based solutions by users? (II)

Legal protection for consumers but not for business costumers:

1.The SLA must be regulated by the law of the country where the consumer

has his habitual residence and in any case consumer protection rules of

that State will apply (Rome I Regulation) → provisions too

unbalanced in favor of the provider are invalid;

Business Experiments in GRID13

Transforming lives: how to stimulate the adoption of Grid and Cloud-based solutions by users? (III)

Legal protection for consumers but Legal protection for consumers but not for business costumers:not for business costumers:

2. Protection at the level of jurisdiction and competent court: Amazon cannot sue Mr. Smith in Los Angeles but Mr. Smith can

sue Amazon in London.

Business Experiments in GRID14

Transforming lives: how to stimulate the adoption of Grid and Cloud-based solutions by users? (IV)

These protections do not apply to businesses: would

you store all key files of your company in the

Cloud?

Business Experiments in GRID15

Conclusions (I)

Grid and Cloud computing are very promising to transform the European

software and hardware market; Reshape the notion of software

patentability without ideology; Modify VAT concepts and regime;

Harmonize protection of creditors with creation of new companies;

Business Experiments in GRID16

Conclusions (I)

Create trust towards providers based on solid legal groundssolid legal grounds:

role of soft law or best practices → label for companies that

follow good practices and take responsibilities when it is the

case.

THANK YOU!

Davide M. ParrilliInterdisciplinary Centre for Law and ICT (ICRI) –

Catholic University of Leuven – IBBT davide.parrilli@law.kuleuven.be

© BEinGRID Consortium