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 GRID 2 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 GRID 3 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 GRID 4 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 GRID 5 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 GRID 6 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 GRID 7 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 GRID 8 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. Luxembourg 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 Luxembourg (15 %), many e-services providers are located in L.

Business Experiments in GRID 9 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 GRID 10 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 GRID 11 Transforming lives: how to stimulate the adoption of Grid and Cloud-based solutions by users? (I) Users are required to trust technology and service providers and store data 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 GRID 12 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 GRID 13 Transforming lives: how to stimulate the adoption of Grid and Cloud-based solutions by users? (III)

Business Experiments in GRID 14 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 GRID 15 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 GRID 16 Conclusions (I) solid legal grounds Create trust towards providers based on solid 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. Parrilli Interdisciplinary Centre for Law and ICT (ICRI) – Catholic University of Leuven – IBBT © BEinGRID Consortium