Legal challenges in the internet age

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Anna Xue is the IP director at the legal department of Perfect World. In today’s developed network economy, how counsel with internet companies address issues involving data privacy and copyright protection is of interest to all in-house counsel. Here she shares her views with China Business Law Journal.

CBLJ: Can you outline your early career experience?

Xue: I have worked at state-owned, foreign-funded and private enterprises. They are very good companies, among which are time-honoured establishments, a company listed in Europe, and a Fortune 500 company. They have provided me with excellent growth platforms and resources at different stages – I had the time of my life serving each of them.

For example, I was the head of a new department in a state-owned enterprise, where I felt the pressure to meet market expectations, as start-ups did. This experience enabled me to take a more empathic approach to balancing the income pressure and compliance needs of business teams in my future career.

When working at a foreign-funded company, which is a time-honoured European enterprise with a history going back more than a century, I reported directly to the CEO. I had the opportunities to zoom in and fully experience the well-established compliance and governance culture of the company and its relevant systems. I was also able to work side by side with business teams for each order.

The work experience at the global Fortune 500 company was uniquely different. The huge business size brought unexpected complexity to compliance programmes and risk controls, providing me with opportunities to further strengthen my project execution and management capabilities.

CBLJ: What can you tell us about your experience in translating data privacy laws across jurisdictions, and what can outbound Chinese companies learn from these laws?

Xue: I have participated in the translation of legislation, cases and literature on personal data protection from jurisdictions that included the US, Europe, Brazil, India and Japan. Generally, there are two views that I would like to share. First, the perception that personal data protection should be valued in the digital economy era has become a widely accepted value. Second, countries are fighting increasingly fiercely for legislative power in the online world.

Anna XueFor Chinese internet companies, meeting data privacy regulatory requirements of target markets is a new challenge and proposition that cannot be circumvented in their “going global” process. The effectiveness of the EU General Data Protection Regulation (GDPR) has driven many Chinese internet companies to “open a window”, whether actively or passively, and get informed about data privacy regulation in foreign jurisdictions.

However, we need to further “open up our gateway” to learn more about legislation and enforcement in foreign jurisdictions, and ensure success of our going global process by incorporating the concept of data privacy compliance into the design of products and services. After all, data privacy compliance risk can be the sword of Damocles hanging over the head of offshore business at any time.

CBLJ: In this era of heightened data regulation, what challenges do in-house counsel at internet companies face, and how do they deal with them?

Xue: What I say is my personal opinion only, and is not the opinion of my employer. Except for general challenges relating to regulation in the IP [intellectual property] and TMT [technology, media and telecoms] sectors, in-house counsel at internet companies also face challenges from data privacy protection, which is a new field of heightened regulation.

This field involves legal compliance issues that an in-house counsel at an internet company faces almost in the entire process of his or her routine work. What should the user-end online protocol look like? How should product models be designed to ensure privacy protection? How should user rights requirements at back office be met? How are employee data collected and managed? How is the data transmission risk of the entire supply chain controlled? From the perspective of corporate governance, how is the accountability system for data privacy and network security supervision implemented?

In this era of heightened data regulation, in-house counsel at internet companies face some new challenges. From my personal experience I believe that, against this backdrop, in-house counsel can improve their work by taking the following three steps:

First, we should be well familiar with the regulatory requirements of local jurisdictions and keep informed about foreign laws. As a rising star in the field of data regulation, China has legislation that is vague and changing rapidly, and it assigns legislative and enforcement work to a relatively dispersed collection of bodies. Given these facts, it is a big challenge for in-house counsel to truly understand the crucial regulatory objectives and make sure that iterative updates of products meet regulatory requirements at any time.

Second, compared with constant attention to legal provisions, performing specific work concerning data privacy requires in-house counsel to pay more attention to what real data mapping looks like, and have the ability to translate machine-readable data to legal texts understandable by human beings – which puts an in-house counsel’s level of understanding products and technologies to the test. For many conventional in-house counsel, coping with this test is not so easy. But it is precisely these challenges and innovations that compel us to talk in different languages with teams of diversified backgrounds, thereby enabling us to grow quickly.

Third, compared with some conventional in-house counsel, we need to put ourselves more in specific scenarios to feel what users’ privacy and security experience is like in those scenarios. All our advice on data privacy compliance naturally reflects the logic of a product manager. How should every sentence be written, and when should a pop-up window appear? These details do not only have a great impact on the smooth use of products by users, but also affect user perceptions about the risk of their privacy being compromised. Therefore, performing in-house counselling duties require us to stand in the shoes of product managers. This can be a challenge for lawyers in this field. But where there is a challenge, there is also fun.

CBLJ: What capabilities do IP-related in-house counsel in the entertainment industry need to perform their work well?

Xue: The entertainment industry is an IP-intensive sector. Generally speaking, a company in this sector has an IP asset base comprising three categories of IP, the first being copyrights, which account for the largest percentage, the second being trademarks, and the third being patents and trade secrets.

The toughest professional challenges that I have met involve ambiguities and uncertainties surrounding copyright systems in this internet age. The approaches to presenting products, the granularity at which copyrights are dividable, and the manners in which copyrights can be licensed and used have become very difficult to observe. And there are even propositions that are unknown to judges. In-house counsel must be able to describe unprecedented businesses, products or service models with existing words and expressions about copyrights.

This is what conventional legal professionals call the ability to “subsume” between facts and legal texts. The more precise, conventional and stable a fact is, the easier it is to subsume. But legislation naturally lags behind facts, which are constantly changing. Addressing changing facts with current copyright laws and regulations is a challenge that in-house counsel in the entertainment industry must tackle in the internet era.

Using hysteretic legislation to deal with ever-changing products does put an in-house counsel’s capabilities to the test – apart from the ability to understand products, we must also prove that we have solid legal expertise. Fields with more innovations and ambiguities pose proportionately tougher challenges for in-house counsel to prove their basic capabilities. As a matter of fact, professionals working at the frontiers must have well-founded expertise.

CBLJ: What roles do external law firms play in your work, and what standards do you use to select these firms?

Xue: External lawyers play an indispensable role in an in-house counsel’s work process because they provide both a professional resource and external support. Lucky for me, having worked with well-known law firms at home and abroad on many complex major projects, I have gained valuable expertise and experience from many external lawyers. But generally speaking, it’s not easy to find partnering external lawyers who are acceptable in all aspects, not to mention the difficulty of doing so within budgets.

When selecting external lawyers, I generally consider two categories of factors, one being basic factors and the other being “plus” factors.

Anna Xue

The basic factors relate to fundamental capabilities of external lawyers: they must have deep expertise in their own fields of practice and be really better skilled than in-house counsel in legal search, precedent and statutory interpretation, legal analysis, and text drafting. Otherwise, I can’t see why there is a need to hire external lawyers for mandates.

The “plus” factors involve a comprehensive assessment process that measures with more diversified standards. Specifically, external lawyers must: (1) be able to fully and accurately identify and understand the problems that in-house counsel need to solve; (2) leverage on their extensive industry and practice experience to co-ordinate in the interpretation of regulatory requirements and industry practices; (3) be able to grasp the essence quickly, and act with extraordinary responsiveness and flexibility, when working on projects of an adversarial nature, for example negotiations and proceedings; and (4) be able to assist in-house counsel to manage projects effectively where they involve teams of multiple parties.

They must also keep effective communication with in-house counsel, respond timely and effectively, and always work carefully, as these details also affect the “user experience” of in-house counsel on working with external lawyers.

When an excellent in-house counsel works together with an outstanding external lawyer, it is actually a process of driving mutual improvement and achievement. Each time after the two parties complete a challenging project with joint effect, they feel a sense of accomplishment that only legal professionals can understand.

Video in Mandarin Chinese –

 

The views and opinions expressed in this article are Anna Xue’s and do not represent those of her company.