JOHN YATES: Before I introduce our distinguished speaker I’d just like to say a few words about the Society. There are really two threads running through SCL, both in the past, the present and the future. One of those threads is change and the other is what I call community. If we think about the change that has taken place over the last 30 years, Richard Christou is the boss of a very big IT service business in a huge service sector that’s worth around £25 billion to the UK economy. It’s a service sector that provides a fantastic livelihood for people like you and me, and one that’s clearly grown over the years. The technology has changed radically. I entered the industry back in 1984 and I can remember sending telexes, I can remember the excitement of receiving my first fax, the excitement of an IBM Display Writer and then, more recently, carrying a mobile phone around which some of the younger members of the audience would be astonished at. It weighed about as much as a house brick, it was the size of a house brick but it was less reliable. You could make a call for about five minutes and then it used to cut out because it had a battery life of about 20 minutes.
There have also been changes in the law and Richard is going to be talking about those changes. Whereas 30 years ago if you had talked about IT law to people, they would have looked at you strangely. There were no books on the subject, there was no case law, but it is now recognised as a specialist profession, there are sections in the directories about it and there are hundreds – perhaps even thousands – of IT lawyers practising both in private practice and in industry. So, change is something that’s with us and clearly the industry is going to change and our profession is going to change, and I think SCL has been part of that change.
The other thing that I see running through SCL is this sense of community. I’m sure I’ll stand corrected by the politicians amongst us but I think it was Lady Thatcher who said that there is no such thing as community. Well, I beg to differ. I think SCL is a tremendous example of community. It is a place where people share ideas, information, experience through group meetings, through conferences, through the magazine, through the website. It is unusual in that a bunch of potential competitors can get together and do that in a way that doesn’t damage their business, and that’s something that I have got great personal satisfaction out of, being associated with SCL.
Now, to introduce the main event: Richard Christou. Having read Richard’s CV and indeed tracked his career in the industry, he is truly a man of many talents. He has had a distinguished career in the law, spent with very large businesses like STC – which was a big telecoms business – with ICL and then of course ICL became Fujitsu. He then made the bold switch from being the Legal Director of Fujitsu to being a businessman, to being the Chief Executive. Some of you, when you’re advising clients, will have thought from time to time, “I could do a better job” but it’s quite another thing to actually make the step and start making business decisions and running a business and Richard has been conspicuously successful in turning around the fortunes of Fujitsu Services over the last few years. I think today, he won’t mind me saying this: they’ve won one of the big Health Service contracts. In his spare time – and he can’t have much spare time – he has written a number of books and some of those books are the leading textbooks in their areas. Thank you very much. Richard Christou.
RICHARD CHRISTOU: Well, thanks very much and good evening everybody. We talk a lot about change, I suppose, and we’ve already had some words on that. I think the theme of what I’m going to talk to you about tonight is change in one form or another. The Society has been around in this industry for 30 years. I have as well, more or less, and everybody says there’s radical change. When I sat down to sort this lecture out, the question in my mind was: what has changed and how has it changed? And that, really, is going to be what I’ll talk to you about tonight. I’ve split it up into four areas, which actually I think are all interrelated and one drives the other. The first is IT technology, how has that changed, because this is the bedrock which drives everything that we do in the Society and in our professional lives. Secondly, how has IT contracting changed? Again, that’s driven, as I said, by the technology. Thirdly, lawyers have changed, and this isn’t unique to your particular branch of the profession. Law has changed hugely in the way it’s been practised since I started back in the 1960s and it’s changed, even more significantly in some ways since the 1970s. And finally, since we’re all lawyers here, I’m going to have a bit of a look at the law and try and tell you what I think IT law is. Since I was talking to IT lawyers, I felt it incumbent upon me to try and define exactly what IT law meant.
So, let’s talk a little bit about the technology and I’d like to try and embed that in the general cultural environment that we’ve had in the last 50 years. If you were a futurologist in 1974 (although I don’t think they had them in those days), what did you see, how did the world look? Well, generally it was what I describe as a rigid world; big power blocks, the Cold War, people snarling at each other across the Berlin Wall. Everybody thought that by 2001 we’d all be on the moon and moving on to Mars and travelling in space. That hasn’t happened. We feared we’d all be wiped out in a nuclear war. Well that, so far, hasn’t happened. So, in a way, to me 1974 didn’t feel very much different to the 1950s, when I was growing up. There was not that much change when you look back on it. Those of you who have seen 2001: A Space Odyssey, get quite a good idea of that era. It’s kind of clunky technology and you’ve got a large mainframe in it as well. 2004 is completely different. Our situation now – you’ve only got to look at all the things that have happened in the last three or four years – is fluid, everything is changing, it’s uncertain. We’ve got nationalism. In 1974, nationalism was a force that nobody really reckoned with. Religion, terrorism, we’ve got biological threats, genetic engineering – whether you call it opportunity or threat, it’s something different. The environmental challenges that we face are completely different. Nobody thought of global warming in 1974 – it wasn’t the sort of thing they were seriously concerned about.
We talk about globalisation in many ways but where I see this happening is in the free flow of information all over the world. It’s trite to talk, I think, about global villages and so on but what we can see is that there is much more information exchanged – pure exchange of information and processing of information – than there was. You can see this nowhere better than with mobile phones. In a way, the invention of this technology has revealed a facet of humanity that we had almost forgotten, which is we all like to gossip. This is mostly what we do on mobiles. You look at the internet, a lot of it is about gossiping. I think, and better people than me have said this, that a better definition of humanity is the gossiping or the talking animal, rather than the tool-using animal. Lots of animals use tools but you don’t see them gossiping like us.
So, that’s how it is, it’s free flowing, people talking to each other, information moving around, things happening quickly and it has got a good and a bad side. The global village unites but when you’re in a global village, everybody is your neighbour. You often quarrel with your neighbours, so you see a lot of quarrels. A lot more, in fact, than we had 30 years ago. So, however you look at it, whether you like it or loath it, our civilisation, to my mind, is based in large part on computers and on telecommunications because the two go together in a way that I don’t think was foreseen 30 years ago. Somewhere I think there was a discontinuity – 1974 may have looked like 1950 to some extent but 2004 is completely different. I put the discontinuity somewhere in the 1990s, when to my mind information technology really took off. It largely caught us by surprise. Thomas Watson, Chairman of IBM, said in 1943 that he thought there was a world market for only five computers – you know how big they were in those days. Your watch, probably, has more computing power than the computers that they were using in 1943. And all of this change has been brought about by IT technology. I characterise it as complex, swiftly changing – it’s changing all the time – it’s extraordinary. It’s extraordinary in a way that many of the technologies that we have nowadays are not. They are evolutionary from things that happened in the first industrial revolution. Information technology is something completely different, in my view.
How do I characterise see the principal change? To sum it up, the change is: from rarity to ubiquity. They are everywhere nowadays, computers. If you look at the 1940s, really up to 1974 when the Society started, we were mainly looking at mainframes. Cumbersome animals, if you like, compared to what we have nowadays as mainframes, with very much lower capacity. 1975, of course, is when Microsoft started and 1976 was Apple, so it is from those times when you can see the start of distributed systems, PCs, client servers and so on, and that really seems to me to be the story of the 1980s. In the 1990s you can see how networks took off and led to the Internet and that, I think, is where we can see more of the discontinuity, and then we have the growth of mobility in the 2000s. I think we’re only now seeing what mobility can do for us. And the important thing to remember is each stage was additive. All of the previous ones are still around. We still rely on mainframes to a huge extent, no matter what people tell you about client/server. All of these things – mobile, PC, mainframe – are all interacting together and that makes for a very complex environment. Let me turn, now, from the environment, from the technology, to how I see changes in IT contracting.
If you look at 1974, again it is characterised by rarity. I think in those days people were making it up as they went along. This was the start of the commercialisation of IT. Basically you had a few large suppliers, relatively few large users and no real middle or small and medium-sized enterprise market because people couldn’t afford these things – and if they could afford them, they probably didn’t have the resources to run them. So, you were looking at single-vendor proprietary systems, hardware and operating systems, with support probably bundled at the beginning. There weren’t many proprietary application packages in the sense we see them nowadays, which are hugely useful packages that spread over great volumes – things like ORACLE and Microsoft and so on. There were proprietary packages but they were tied very much to the particular mainframe technology and a lot of applications were developed in-house by in-house IT departments, in particular organisations such as large government departments and the large banks. The important thing to remember about this is these systems were sold by experts to experts and used by experts. It was a very elite profession, something completely separate. Even the users were a breed apart; specially trained and understanding things that, frankly, were not user-friendly in the terms that we think of them today.
When I started in STC we had a Honeywell machine. One of the things I had to do as an in-house lawyer was to draft a UNIX licence. In those days people hardly knew what UNIX was and I certainly made it up as I went along when I first started. This Honeywell was a huge thing kept in an air-conditioned room – cabinet after cabinet after cabinet with big tape reels, and looked after by people in white coats who didn’t come out very often. Occasionally, you would shove a batch of stuff through into the air-conditioned room and they would process it for you and you’d get it back. That’s the way computers were used; they weren’t sitting on people’s desks. So, this was something completely different to what we’re used to today and, because of that, most of the sales were by product description on standard terms and conditions. I can remember fighting with IBM – again, back in the STC days – and you could not change one word. Any change had to go back to the Chief General Counsel – or at least they said it did. It was almost impossible to change one word of the standard terms and conditions.
Negotiation was basically about price or forms of financing, or both, and people did not really understand the concept of total cost of ownership. There was very little visibility on this. You simply bought the equipment for a price and then, whatever it cost, you paid the in-house IT department to run it. Little thought was given to how much value was added to the business. People talked about efficiency or cost saving, perhaps, but it was not at that stage, really, added value that was in people’s minds.
Now, by the time we get to 2004 a lot has changed. First of all, I think there’s been a division in the different ways one contracts. I divided this in my mind into large-scale contracts – the big ones that we all know and love, government departments, large private institutions – and those for the small and medium-sized enterprise and the middle market, perhaps, a bit bigger than SMEs but not really large corporations, and then consumers or home office users, this sort of thing. Very, very small single users.
If I look at the large scale, what can you see in large contracting? The purchasers have certainly become more sophisticated. I think that, simply by the passage of time, people have understood more about what computer contracting is all about, compared to those working in 1974. One of the big changes, of course, is this business of best of breed, or mix and match, which was coming into contracts probably from the late 1980s and onwards. ‘Proprietary’ became a dirty word, along with bundling, and people really said it was synonymous with ‘rip-off’. We don’t want proprietary systems, we want to be able to mix and match, pick our own things, deal with the components. I don’t think it was always justified but there was a general perception that the proprietary vendors had ripped off people for many years and now the chance to get revenge was here for the purchasers with open systems. It is debatable, in my mind, whether the technology came first or the desire for it came first, but however it worked you can see in the 1980s all of these niche companies – or specialist companies when they’re dealing with software or hardware storage, different parts of the systems – that enabled people to mix and match. If those companies hadn’t come along, open systems would not have become the fashion. The real issue, of course, is that, as we all know if we’re in the business, open systems are never actually quite so open as they are advertised to be, and because of that it is not easy to put all these bits together and end up with a system that is as efficient as a proprietary system. They may give you more freedom of choice but it’s more difficult to do and because of that we now see the rise of the system integrator or the solution provider. If it’s too difficult for you, I’ll take responsibility and put all the bits together. This had led to two modes of contracting. One is where the system integrator supplies the solution and puts it all together. The second, which still exists but certainly existed to a much greater extent in the past, is where the purchaser deals with system integration itself via its internal IT department; these purchasers still largely buy on product description. And the big question, to me, when you’re in this sort of contract is: who takes the system risk? If you don’t know that, you’re headed for disaster and many of the large contracts that I have seen go wrong have a kind of hybrid nature.
So, you start off with the supplier saying, “I’m the system integrator and I’ll do it all” but gradually – maybe it’s written into the contract, maybe it’s not – you see the purchaser taking over by a kind of almost creeping extension into the contract. First of all they say, “Well, let’s have a look at the design”. Then they want to give some comments on the architecture, then they’d like to check whether your components or the elements of the system are really up to it. Finally, they want to break it all down and look at the pricing and tell you what the specification should be and by the time you’ve finished, you’ve got split responsibility. So, the IT department ends up telling the supplier what to do but the supplier has the responsibility if it goes wrong. Now, I’m not saying that all contracts of a hybrid nature are like that but that to me is the root cause of many of the disasters that we’ve seen. Split responsibility is a bad thing.
I would maintain that, if we’re going to have two good modes of contracting, we either need to stick to the system integrator outsourcer, who delivers the solution, or we go to the old-style product procurement and let the purchaser do it, and let the purchaser with large internal IT departments take the system risk. I have to say the latter is still more fashionable in the private sector than it is in the public sector. You certainly see more of this in the large financial institutions than you do in most areas of the public sector. That seems to me to be the way large contracts are going, but I think there are some current trends that I’d like to draw to your attention.
First of all, this system integration game is becoming more and more complex and difficult to do properly, particularly when you add bespoke software on top of it. Purchasers are finding it more difficult, even if they have large IT departments, to cope with system integration. They just don’t have the breadth of experience in many cases. Purchasers, partly because they’re waking up to what’s important but also partly because they can’t handle the system integration risk, start to become concerned with outputs. I think we are moving towards output contracting.
Purchasers worry about total cost of ownership; they want business change out of these contracts – they’re not content to computerise existing processes. One of the symptoms of poor contracts is contracts which simply computerise what you are already doing instead of looking at what you ought to be doing and then working from there as to how you computerise it. Cost reduction has not become less important. Cost reduction is taken as a given. If you are going to take over a contract you are expected to do it for less. The purchasers want more for less in the current environment but that is not the primary purpose of the contract.
Now, the consequence of this – and this is something which I think I’ve been seeing in the last couple of years – is that purchasers are becoming less concerned about vendor independence. If you don’t worry about the components of the system, why do you necessarily care where the components are sourced from? You may say, “Well, I want to be sure that they’re cheap” but as long as the total cost of ownership of the whole system is cheap and you can work out what you think it should cost, which is the way much public sector contracting is done on the basis of a should-cost model, why does it matter? This is something that the system integrator should be left to deal with by themselves.
The purchasers should be concentrating on the real issues: Will the solution work? Will it be flexible enough to deal with the future problems that may happen? Will it deliver on my change agenda – the way in which I want to change my business processes? If you go down this route, it imposes a great deal of responsibility on system integrators or outsourcers to deliver. The response of purchasers – and those of you who act for purchasers will be either instructed by them on this or even aiding and abetting them with this – is to impose increasingly harsh contract terms to punish vendors for failure. You may say that, given my point of view, this is special pleading but I genuinely believe this and I’ve seen it in many cases. It is no use the purchaser loading all the risk onto the supplier and having horrendous penalty or damages clauses (as you all know, penalties are not enforceable but I have to say some of the damages clauses look like penalties to me) and sitting back, hoping that somehow it’s all going to be all right and the supplier will deliver, if not, “well, we’ve got the damages”. The usual result of such an approach, again, as most of you will know in the room, is long and costly disputes with uncertain outcomes and nobody wins at the end of these disputes. First of all, I don’t believe these harsh clauses are necessarily an incentive to deliver because many of the people who are actually delivering, the people on the ground, don’t understand the consequences of these clauses. Secondly, damages isn’t any substitute for having a system. The opportunity cost of the failure cannot in most cases, particularly in the public sector, be compensated for by damages. It is not something that money can buy off.
So, what is my recipe for good contracting? Well, I’ve got a few things down here. They’re not by any means the whole but they are thoughts which occurred to me. You must clarify the output required at the beginning. People often rush into contracts without actually deciding what the output is that they want, and very often they do this without knowing whether the output that they want can actually be achieved. More time spent on feasibility studies and pilots up front, even if it delays the end delivery date, is time and money well spent. I am very keen on adequate preparation before you get to final contract. Second point, allocate the risk to the party that is best able to manage it – and different risks are best managed by either party – and then leave that party to manage that risk without interference. Make sure that the contract is flexible enough to allow changes to be baked into it as the contract progresses. This is particularly true with multi-year contracts. And the way I characterise this when I’m talking in other fora is the virtuous circle.
If you think about business processes and technology supporting them, it is clear that there’s an interaction between business process and technology. As the technology changes, it can either force business processes to change or it can open up opportunities for business process to change, and this goes both ways. So, if I want to change my business process, I can go to the information system provider and say, “Please change it in a way that supports a different process”. Alternatively, if I – as the infrastructure provider – have new technologies, new things that I can do, I can go to the process owner and say, “Look, this is what my technology can do, is it useful to you?” Or, if I understand the business sufficiently, “This is what my technology can do, you should change your processes to take advantage of it because there is this added value coming out of it”. This exchange goes round and round between the business process owner and the IT infrastructure supplier in a kind of virtuous circle. The result should be that the contract changes as business needs change and as the capability of technology changes; you need to be able to have mechanisms in the contract that enable you to take advantage of this virtuous circle, because that is how added value is delivered to the business of your clients.
Now, that’s idealistic stuff but if you want to get down to real mechanics one of the most important things is frequent monitoring of progress. You need milestones of some sort and you need to monitor as you go along. You cannot leave it until the end. Frequently – not as a lawyer but as a chief executive – I get hauled up in front of customers and they fix me with a steely gaze and they say to me, “Are you committed to this contract?” I say to them, “Yes, sure I’m committed but don’t ring me up the day before it’s due to deliver and tell me that the whole thing has failed. Nothing is going to happen because it’s too late for me to fix it”. So, what I normally do in those circumstances is I say, “That’s fine, let’s have regular reviews of milestones so that we both know in advance whether something is going wrong and we’ve both got time to do something about it”.
And the other thing that I say to them – and this is something which I would recommend that you have in your contracts from the beginning – is an end-to-end programme plan. Now, this sounds like a project manager’s thing and nothing to do with lawyers, but it is a listing of both customer and supplier dependencies – what actions has the customer got to deliver, what actions has the supplier got to deliver – and both sides have to be contractually committed to deliver the things that are required for successful delivery of the project. If you have only the poor supplier nailed down and the customer has no commitment to deliver on the things the supplier needs, the supplier will not be able to deliver anything. Similarly, if the supplier is only loosely tied down, the customer has got no means of seriously dealing with creeping delay because the supplier will not be in breach until you get to the end date. Customers might worry about it (they can ring me up and say, “Am I committed?”) but they can’t do very much about it. So, end-to-end programme planning baked into the contract with the dependencies is very, very valuable in my view. And finally – this has got nothing to do with the law but take it from me – strong project managers on both sides are absolutely vital if you’re going to get these contracts delivered. You cannot do it without them.
Now, I think, unfortunately, we can kind of skate over contracts with the middle market, or SMEs, and indeed consumers. I don’t think there’s been a lot of change except that the middle market has appeared. But in a sense it has taken over where the old contracting market has changed, so we’ve got packaged solutions or systems, often quite small, usually proprietary for common business applications, accounting packages, HR, databases, word processing, emails and so on and they normally sit on standard hardware., You can do a little bit of networking to link them together in your office and they’re sold very often on standard terms and conditions. I don’t think it’s a market that is properly addressed either by IT suppliers or by the customers in the market. I think that at the lower end the customers in that market are not properly exploiting the opportunities that there are for IT to add value to their businesses. I think it’s a difficult market and there are suggestions that things like utility computing or grid computing will come along and make a difference. I think it will, in due course, but we have to see exactly when that’s likely to happen.
Consumers are still pretty unsophisticated in many ways in what they buy but they are growing in understanding. There was a case involving IBM PC. This European Commission decision in 1984 was basically that computers are strange new things for consumers, so we will accept a selective distribution system based on the need to have really carefully trained technical staff so they can explain everything about PC’s to consumers. Now you go into X, the shop shall be nameless, and you’re lucky to find an assistant. You have to fend for yourself and really, as far as I can tell, selective distribution systems for the lower end of the market really don’t exist any more. Anybody who fancies can sign up as a distributor.
So, summing up the changes. In 1974 we look at scarce technology supplied by experts to experts and used by experts. There was a close link between the IT vendor and the IT department. Whatever they used to get up to, nobody else really understood what was going on. So the vendor goes in, deals with the IT department (the people in white coats behind the closed door) and the rest of the organisation had to hope that somehow it would all work out. The change in technology has driven the change in contracting. Today we have ubiquitous technology, many different channels of supply, many different ways that it’s procured and the most important change: it is used by everybody in their everyday life at home and at work. This, I think, is at the bottom of some of the biggest changes. What you have nowadays is a kind of eternal triangle, particularly in large contracts. You’ve got the vendors at one apex, the IT procurement at the other and at the third you’ve got the users. These users are no longer a secret branch of the profession trained in its mysteries, they are you and I and everybody else who works in the organisation who has a PC on their desk, and they have expectations, which sometimes the vendors and the IT department don’t understand or can’t deliver on under the terms of the contract. When these three drift apart then you start to get the problems. It is very important to understand what the users want and make sure that they’re part of this constituency. Another factor is the importance of user training. Everybody here thinks they know how to use a PC, including me. The truth is that nobody in this room uses anything like the full capacity of what their PC can do. Maybe because they don’t need to but in many cases it will be because they don’t know how to. Formal training, particularly when you’re putting in large new applications, is something that should be part of your contract. Very, very important.
Now let’s move on to the lawyers, a subject that interests us all, I guess. Let’s consider what has changed. When I started as an articled clerk, everything was done on manual typewriters (and they were very old ones) and there was an IBM Electric Golfball typewriter – it was a new invention in those days – with three carbon papers, as we didn’t have photocopiers. I had to learn as part of my articles how to turn the handle on the Gestetner duplicator because that was how we duplicated our large contracts. Fax, well we didn’t have it so there was no sense of excitedly receiving it. All drafts were written by hand so our agreements were very much shorter. To give you and example, in STC the first Wang word processor was installed in 1976 or 1977 and we had one in our legal department a couple of years later. The system had green screens and secretaries had to be taught how to use it because we didn’t have terminals. It revolutionised the way we did things. I also remember, when I was articled that we put timesheets in. Before the mid 60’s we didn’t know what they were. Peat Marwick Mitchell (now KPMG) were our clients with 20 partners, along with Coopers & Lybrand who were next door with another 20 partners, and they worked out how to do timesheets for us and we kept them all manually, and of course now they are computerised along with client billing. However, I don’t think computerisation of the back office is all that significant. What is significant is the way client intimacy and response time has changed. Look at the way in which you deal with documents nowadays. You email the contract round overnight and whether you like it or not you’ve got to sit down and deal with responses by the next morning. The clients see all that goes on, they can get into your files in some cases, and understand exactly how much it’s costing them and so on and so forth. So, I think intimacy and response time has made a big difference to the way we do things.
But I would say that the main changes for lawyers have come about as a result of a general development in the law, which really does not have much to do with computers. If you think back, they lifted the limit on partnerships in 1967 and in those days there were really only generalist commercial departments. So, you had a kind of company and commercial department. When I was in it you did everything – employment, competition, corporate, securities law, tax, a bit of financing. I wrote pension deeds in those days, and we did M&A, intellectual property and licensing, and all sorts of commercial transactions; buying computers was somehow in amongst all that. By 2004 of course everything that I’ve spoken about is a separate speciality and there are many medium-sized and large firms. What we now call medium-sized (60-80 partners) are huge by the standards of even 1974. There are still some firms that would say, “We’ve got a general commercial practice” but I think that general commercial practice tends to be much reduced in scope compared to the sort of commercial practice we had back in 1974. Amongst these specialities we have the IT speciality but I think this is not something unique to IT or unique to computers, it is part of the general specialisation in the law as firms have grown larger and the law has grown more complex. Look at the growth in another area, taxation. I had a chance to look at the Yellow Book for something the other day. It is now ten times the size it was when I started; it is in several volumes and the pages seem to me a lot thinner as well. You need to be a specialist to understand the Yellow Book. So, in general, law has become much more complex, and divided into many specialities – IT law among them.
That brings me on to the final issue, IT law. My question: is there any? We talk about this as a speciality but what does it really mean? So far as I’m concerned, I never thought of myself ever as an IT lawyer or a technology lawyer or a telecoms lawyer or something like that. What I thought of myself as was a commercial lawyer who happened to work in a particular industry, the IT industry. So, what is it that is special about this thing that makes it a separate discipline? Why don’t we have automobile lawyers or food lawyers in quite the same way? Maybe you have pharmaceutical lawyers but a lot of that is about intellectual property and patenting, isn’t it? I thought I’d take the opportunity to see what is legislation that you can really call IT law, that’s IT law and nothing else. Well, I found actually very little legislation that I think falls within that category.
I started off with the Computer Misuse Act 1990. If you look at the cases around this I think you can have a debate as to whether or not you really needed the Computer Misuse Act. If you’d had a few really robust House of Lords decisions, would it have been necessary? I guess the one reason why I’m sort of convinced it was necessary arises from the case of Oxford v Moss, (the undergraduate who cheated by having a look at the paper with the questions on it but didn’t actually do anything else) from which it is clear that you can’t steal information under the common law. I think it would have been different if some of the Law Commission’s recommendations on confidentiality had been legislated but they hadn’t and still haven’t. So, that’s one – Computer Misuse Act. The other one, I think, we’ve got to admit is the Copyright, Patents and Designs Act 1988. So, you’ve got a section, which says copyright is how you protect computer programmes, and then you’ve got all the provisions which implement the EC software directive.
The Directive, I think, is quite interesting because there’s a lot in it but I wonder how much it has actually been really implemented. I’d be quite interested to hear afterwards who knows of a request for interface information from one of the major suppliers. I certainly don’t. We fought over this, I cannot tell you how we fought over it. I was one of the people involved in the lobbying for Fujitsu in 1991 and 1992. There was a huge battle over reverse engineering but, when it comes down to it, it doesn’t seem to have been necessary or at least people haven’t invoked it. Maybe the manufacturers have just given interface information because they’ve been frightened of the Directive. The only other thing I would mention, I don’t see why I shouldn’t pat myself on the back, is the black box exception. I worked this out with NCR. Nobody knows this but I don’t see why I shouldn’t tell you – it is the only little bit of drafting that I can actually see anywhere in legislation which has got my print on it. The black box exception is my only claim to fame.
For more IT law, we can talk about electronic signatures, the Communications Act 2000, but I’m starting to run out after that. The Mobile Phones Reprogramming Act 2002 was suggested to me, which I have to confess I have not heard of, but I think after that we don’t have very much. If you look at the data protection legislation, things like RIPA, protection of databases, and so on all these sort of things actually don’t just apply to computers; they’re getting at the information which is stored sometimes on computers but of course can be stored in other ways as well, for instance hard copy. So, I’d argue that this legislation is allied to IT law, but not necessarily unique to it.
I don’t find all that much case law either which is really about computers as opposed to commercial transactions in which computers are involved. The two cases I think that stick out most to me are IBCOS and Saphena. These are really cases about computers and software programmes and you can’t think of them in any other way. There’s another case – Shetland Times v Wills – which does seem to be about websites and again that seems to me to be a unique application of copyright. You wouldn’t expect me not to mention St Albans, it’s kind of engraved on my heart, but if you leave aside the observations which were obiter on the status of software (is it goods or isn’t it or when it’s embodied on a disk is that goods, and if it isn’t, what is it?), it was really about limitation clauses. You know South West Water – let’s get that on the table as well – and then you’ve got Cap, Pegler v Wang and, thankfully, at last, Watford v Sanderson. All of those cases are nothing particularly to do with computers. They are really concerned with the Unfair Contract Terms Act. You’ve also got many cases about domain names and so on. To me, these don’t look much more than – how can I describe it – the applications of the law of either trademarks or passing off, things which are pretty standard in the common law or in legislation anyway.
There is another round of cases which deal with why you can’t patent computer programmes and there obviously the law is different to some extent in the US to what it is here. There is the Beta Computers case, the Scottish case about shrink-wrapping, which seems to me to be more or less to do with offer and acceptance in a Scottish law context, so I’m not convinced about that one either.
All in all, I found a few Acts and a few cases. So if this is all it is, it’s not much of a speciality. But I don’t really want to stop there. I want to tell you what I think the speciality is and afterwards you can tell me why I’m wrong over a glass of champagne.
The way I think of it is as the application of ordinary law to extraordinary technology. Now, I think that the strength of the common law – and this is a thing that civil codes do not have, I’m unregenerately a common lawyer rather than a civil code lawyer – is the way it adapts itself to changing circumstances and changing technology. You don’t particularly need any legislation to deal with telecoms or telex in the formation of contracts or service of notices. All those things were dealt with by case law. So, the common law is pretty adaptable and with a little bit of judicial law making, perhaps in the House of Lords, most of these things, such as computer misuse, legal status of software and a lot of the issues covered by the Software Directive, could have been dealt with by an extension to existing case law.
We had a big discussion at one time as to whether in the UK you needed to change all that much to accommodate the things in the Software Directive because a lot of it would fall under the heading of fair dealing. Where we fell down was of course because in civil jurisdictions they don’t have the concept – so if you don’t write it down, you can’t do it.
Let me just give you a final illustration of this because I think this is quite short and pithy. When I was at STC – and again this goes back to the late 1970s, we bought what was called an automated small-part store, and this was one of these things which has got all sorts of cages and rails and goodness knows what and if you’re lucky the cage goes in and comes out with the small parts that you want. It was sold to us it on the basis that it was automated it, so it would be run by a computer – a mainframe in those days – and the seller couldn’t make it work. So, they installed this huge thing – it took up one building at New Southgate where STC was – and it was all there and it worked fine manually. So as long as you got an operator or two to punch the buttons you could get your parts out. And it was pretty efficient but they didn’t provide the software. I was there as the lawyer and they came to me and said, “Well, what do we do about this?” I took the view that it was a sale by description. It was going to be an automated small-part store that ran by computer, and they didn’t deliver it. So, under the Sale of Goods Act, what happens when you don’t conform to description? The answer is that you can reject the goods. So, I said to them, “We don’t want your small-part store, come and take it away”. Now, the fact is it would have cost them quite a lot more to move it – and of course you mustn’t damage my building or you would have had to reinstate the building – so for many years we had an almost free, semi-automated small-part store. That was all about the Sale of Goods Act. It wasn’t computer law.
I think that underlines the point that I’d like to make. You see, I think most IT disputes circle around common legal issues. Limitation of liability, Unfair Contract Terms Act, warranties, specifications, was there a contract, was it breached, did the contractor deliver? Some large-scale contracts are a lot like construction disputes and I think the same kind of skills are very often useful. I understand when you’re dealing with licensing that you need patent and copyright law but I think these probably again depend on the application of general principles.
The real thing that is special about IT law and IT lawyers is that, if you don’t understand this extraordinary technology, you can’t apply the law to it and you can’t see how to deal with the various issues. I’ll give you three examples. Lawyers and judges in the Technology & Construction Court can’t deal with the dispute if they don’t understand what the expert witnesses are saying, and some of the things that they say are pretty opaque if you’re not familiar with the technology. You can’t draft licences if you don’t understand the capabilities of software, particularly how easy it is to copy it, transfer it and so on. You can’t deal with licensing on the internet if you don’t understand how the internet works. For instance, it’s all right to forbid reverse engineering but if you don’t understand what it means in the context of a software programme, it’s not easy to write the proper clauses. How can you draft an outsourcing contract if you don’t actually understand the technology being outsourced, the pitfalls, what are the risks, what are the exposures, what’s the desired outcome?
I could go on like this but I hope I’ve made the point. My idea of an IT lawyer is a technically-knowledgeable lawyer who can apply ordinary law with some – admittedly some – computer law in a practical, commercial way to this extraordinary technology, I actually asked for a mission statement for the Society. I’m not sure whether you have one but I didn’t get one. However,I think this is what you’re all about because you are actually called the Society for Computers and Law. You see I’m being very careful here. You are not the Society for Computer Law, so you don’t confine yourselves to the simple things like the Computer Misuse Act and these other issues. It’s computers and law, the whole gamut. You need extraordinary lawyers who can both understand the technology, apply the law to it properly and decide what the law is that goes with it. I think there are actually quite a lot of extraordinary lawyers here who do do that in the audience tonight. That is the strength of this profession of IT lawyer. I think, also, that with the Society and the kind of work that the Society does, you can actually produce a great many more of these extraordinary IT lawyers over the years to come.
You’ve been doing this for 30 years and I think these are good values to move forward with. Both customers and suppliers need people like you to bridge the gap between them and to help them to realise the benefits of this technology. I do not minimise the importance of your role because if you do it well and understand properly exactly what this technology can do and how the law should apply to it, you can make the difference, in many cases, between success and failure in these projects. I think it is a serious charge and something that you really do need to be mindful of with the support of the Society.
So, I hope that this is going to be the way that you carry on. These are good values for lawyers to keep in what is an increasingly difficult, changing world. I’m sure – at least I hope – that many of us here tonight will be here in 30 years’ time when we can say, after 60 years of going through all this, that you’ve been encouraging the same values for another 30 years. So, great thanks from me – as a businessperson in this context – to the profession. Thank you very much for all you’re doing, keep on with the good work and I hope you’ve found useful some of the things I’ve said. Thanks very much.
JOHN YATES: We have just got time for a couple of questions.
QUESTION FROM FLOOR: Owen Roberts. You made some comments about lack of progress in back office systems. I would say that probably most of the firms of solicitors would now be bust without considerable improvement in back office systems thanks to computer systems because you rightly said in 1974 most solicitors’ firms were small, about 20 partners. Now, there are 100-plus partners and you would not be able to manage those today in the way that you did in 1974 without a considerable improvement in back office systems. I should also remind you that this is also in a context of a considerable decline in profitability of solicitors’ firms. Where in the 1970s you’ve got scale fees and everything like that, nowadays people have actually got to work hard for their money.
RICHARD CHRISTOU: Let me just correct you on one thing. You’re quite right in everything you said but it’s not that I think there’s been a lack of progress in back office, I think the progress in back office has been necessary but to me as an outsider, it’s not that important because I expect it. Just as you expect it from me as an IT supplier, I expect you to provide me an efficient low-cost service. The difference if you deal with an outside firm is the speed of response and customer intimacy. I accept that the back office is of vital importance to you, and there has been a lot of progress otherwise you couldn’t survive,.I agree, but if you’re a customer you tend not to worry about that. What you worry about is how efficiently the law firm responds to your requirements and certainly I think that’s grown by leaps and bounds. It is not that I don’t recognise the importance of the back office or that you don’t, but I think, to the outside world, it’s speed of response and intimacy that’s most important. But it’s certainly a lot harder for the profession than it was in 1974 . certainly a lot harder.
JOHN YATES: My question is about a point you made earlier, which was about contracts, particularly at the larger end of the market with increasingly punitive terms. You might use the phrase that some contracts are over-engineered. What would you say to lawyers, what counsel would you give us, in order to avoid that trap, and I guess it does depend on your perspective? You’re the boss of a very big supplier and many of the people in the audience will represent purchasers.
RICHARD CHRISTOU: I think, of course, partly as lawyers you are bound to the instructions of your client. So if your client insists on a particular course you can advise against it but at the end of the day you either have to implement it or decide that you don’t want to represent them. I can understand that. I think the point that I would make is, first of all, don’t regard yourself, and this is true for any contract it is not just about IT, as a kind of hired gun. Lawyers shouldn’t think of themselves as going in to fix it and drive the hardest possible bargain for whatever side they’re on. It doesn’t matter whether it’s supplier or customer. I think of lawyers as almost ambassadors and their purpose is to get two sides to an agreement which is workable for both sides – a treaty, if you like. The only agreements that survive the test of time are those agreements which benefit both sides. If you forget that then you’re actually not doing your client a service. Now, it doesn’t mean that you’re soft on the other side or anything like that but you have to realise that there is very often a middle way in some of these areas.
The other thing – and I can say this because in my new role I get impatient – is, if you look at the process from outside, it seems to be involved in focussing on minutiae – many things that most people who aren’t legally qualified wouldn’t understand. You sit round the table and turn the pages and somebody argues about this word or this comma or whatever. It is important to get the drafting right, nobody would say that more than I would, but I do think sometimes lawyers concentrate too much on the form as opposed to the substance. Tackle the most important issues — and perhaps don’t be like a dog with a bone with some of these things that really don’t matter. If you can’t do it because you’re worried about the negligence policy – and I can understand that too – then advice to the client in the right sort of way that allows them to grasp what the essentials are is important. So, don’t make it adversarial. The purpose of this is to get an agreement signed, not to have a fight. It’s not a zero sum gain.
NIGEL MILLER: I would like to express our appreciation for what Richard has said. The world moves so fast these days that it’s only when you actually stop and look back and reflect on what’s happened over the past few years that you can see the extent of that change. The IT industry has perhaps had unprecedented change. The change has been astonishing and Richard has brought that to life for us. He has also, I think, given us a rare opportunity to have some very valuable tips from a client, but in language that lawyers can understand, about how lawyers should act on either side of the supply fence. We’ve also had some challenging thoughts about whether lawyers actually exist or are necessary and no doubt we’ll discuss that and perhaps St Albans over some champagne in a moment. And yes, we are the Society for Computers and Law and perhaps, Richard, there’s no-one more qualified in terms of IT industry and IT law to celebrate with us the 30th Anniversary of the SCL. I would just – on behalf of us all – like to express our deep appreciation to Richard for taking the time to come to us this evening and share some valuable insights with us, so please could you show appreciation in the usual way.
[Prolonged applause]
Now, in marking our 30th anniversary, I’m delighted to say that we have with us this evening three of our founding members: Sir Brian Neill, Richard Morgan and Allan Brakefield. These gentlemen were amongst the first to identify and to anticipate the enormous changes that would come about in relation to IT, how that would impact on the legal industry and IT law, and I noticed recently on the SCL website that there was a paper written by Allan Brakefield, who many of you will know served as the Treasurer for the Society for some 29 years, and it’s instructive just to look at the first sentence of that paper that dates back to 1971. It reads,
“As yet, the practising lawyer in England receives no assistance from computer-based systems other than with his accounts, for which computer systems are available, although not widely used”.
Allan’s paper went on to describe the possibilities of document management and legal information retrieval systems. It takes courage to envisage the future and our challenge at the SCL is to look ahead to the next 30 years. Moore’s law has stood the test of time over recent years but the question really I think that we face is whether the pace of business and society can keep pace with those changes in technology. Our aim at the SCL is to be the leading forum within the legal industry for debating those issues and I look forward to doing that with all of you.
Finally, some words of thanks — additional words of thanks. I’d like to thank WordWave, who have transcribed tonight’s lecture so that you can go back and look over some of the detail. It will be posted on the website of the SCL as soon as possible. I’d also like to thank our sponsor, Lexis Nexis, for sponsoring this event. At the SCL we like to look after our sponsors so please take a look at the services of Lexis Nexis and make some enquiries about them. I’d also like to thank Ruth and Caroline at the SCL office for successfully organising this event and indeed many others that the SCL have held over many years. Finally, thanks to you. Thanks for participating this evening, thanks for participating in many events of the SCL and if you’d like to be more involved in planning and organising some of these events, and having some of the debates, please have a word with myself, John or Ruth.
