The IT and IP Revolution Hidden

in Retrofits and Green

Buildings William A. Tanenbaum, Chair, Technology, Intellectual Property & Outsourcing Group GreenTech and Sustainability GroupNew York Office

2 31971249.PPT

Which is Greener?

Paper or plastic bags? Plastic – if you reuse

Washed or dirty car? Dirty

Hand drier or paper towels? Electric hand drying machine

Movies from video store or online store? Online

Print or online newspaper? Paper, if reading for more than 30 minutes

Air conditioner or car windows open? A/C

Based on Nov/Dec 2008 issue of Mother Jones, article by Ben Whitford

Which is Greener?

Physical books or e-reader? Bottom line: break-even point is either

(a) 40-50 books, taking into account fossil fuels, water use and mineral consumption, or

(b) about 100 books taking into account global warming Comment

But what if your e-reader is a multifunction device, and “adding” e-books reduces physical books without adding to the original global footprint of manufacturing the device?

Conclusion: need end-to-end analysis to determine what is really Green

3 31971249.PPT

Climate Change, French Wine Growing Regions and Trademark Rules

Wine Growing Areas Moving North Out of Trademark Regions

4 31971249.PPT

5 31971249.PPT5

What Does the Term “Green” Really Mean?

Substitute “energy efficiency” for “Green” to emphasize the cost saving issues that are relevant ]

6 31971249.PPT

What is “smart” about the “smart grid?” “Smart” = “energy smart” technology “Smart” = computers = IT-enabled (software, hardware and

data) Water management needs to be “smart” too

What Does “Green IT” Mean?

7 31971249.PPT

Business Models Will Change, and Data Will Become King

“Just-in-time” business model as exemplar Strategic use of data can increase energy efficiency and

reduce emissions without changing the underlying technology

8 31971249.PPT

What Real Estate Factors Are Driving New Roles for IT and Outsourcing?

Need to implement new technology to achieve reduced energy savings and ongoing cost savings

Landlords are adopting energy smart technology in order to: Retain or attract tenants by reducing tenant operating costs Enable tenants to enhance sustainability image Increase tenant employee satisfaction Enable tenants to reduce carbon footprint – under standards

applicable to office-based buildings Potentially reduce need to buy carbon offset credits

Use of IT to introduce flexibility in place of simple on/off controls

Remanufacturing will ultimately be key

9 31971249.PPT

Stimulus funding for Green building retrofits For federal, state and local government buildings For residential buildings Prediction: stimulus funding will make government buildings

laboratories of development of Green building technologies Not just office buildings – transportation, bridges,

infrastructure projects Advances in building materials

Role of Stimulus Money

10 31971249.PPT

New Roles for IT Departments

Become responsible for electricity costs in data center and computer operations

Prediction 1: combination of IT and Facilities Management departments

Prediction 2: IT departments will take on responsibilities outside of traditional roles Become part of general operations Become a corporate strategic asset

Practical Steps and Traps for the Unwary in IT Contracts for Retrofits and New Green Construction

Basic structure of IT agreements: MSA – master services agreement SOWS and SLAS – technical schedules governing:

Specific projects Specific standards

Core principle - you get what you measure Litigation alert - disputes arise under SOWs more often than

under MSAs Conclusion: do preemptive planning now; spend necessary time

in negotiations and drafting It is more important to be precise than concise

11 31971249.PPT

Do You Want to Outsource?

What is outsourcing? Why use outsourcing for energy efficiency and energy smart

technologies? How experienced is your vendor with energy smart

technology? Is there hidden subcontracting? Subcontractor approval rights Services vs. specific technology Potential traps for facilities management outsourcing (“FMO”)

Vendor’s price is based on Google Earth Can webcams used for security be hacked Competitive intelligence risks

12 31971249.PPT

Important Phases of Green IT and FM Outsourcing Agreements

Pre-contract internal analysis of business objectives and definition of success

Pre-RFP stage RFP stage Vendor down-select stage Negotiation/Drafting Planning for transition Planning for exit

Draft the “pre-nup” carefully

13 31971249.PPT

Internal Pre-Contract Stage

Analyze business objectives and cost parameters Thoughtful RFPs save time and generate better vendor

proposals, but require time and internal analysis of business objectives For example: how much transformation?

Specialty IT consultants can be valuable Learn from other industries Benchmark against best of breed, not best of peers Use internal IT staff strategically

14 31971249.PPT

Confidentiality Agreements

Enter into NDA’s before RFPs Will probably need to be asymmetrical Duration

15 31971249.PPT

RFP Stage

RFP stage is the time of greatest leverage, especially in this economy

Determine how to measure success and what metrics to use in contracts

Goal is to “down-select” vendors meaningfully It is acceptable if RFP causes some potential vendors to self

down-select Vendor’s pricing challenge is based on assessing risk

Consider setting up private data room and due diligence process to allow vendor to gather information to assess risk and therefore generate informed price proposal without reserve for unknown risk

16 31971249.PPT

RFP (2)

Are executive dashboards desired? What information is required?

Need to establish scoring criteria for vendor proposals Establish roles in scoring proposals for customer

management and tech teams, lawyers and consultant roles in evaluating different aspects of proposal (price, technical ability, transition steps, steady-state operations, etc.)

Stop and learn from vendors during RFP process, and recalibrate if necessary

17 31971249.PPT

Negotiation and Drafting Stage

Consider drafting SOWs and SLAs BEFORE the MSA Consider setting up private data room for finalist vendors to

analyze customer’s operations, determine risk, and provide realistic price based on understanding of risk

Involve technical staff, but in meaningful way, by requiring checklists and specific inputs

Be aware of potential dangers in letting IT staff control negotiations

Determine what is important about new technology and contracting for transformation

Separate services from technology

18 31971249.PPT

19 31971249.PPT

Driving Energy Efficiency Down to Useable Contract Metrics

Adapt EPEAT and DOE’s DC PRO software tool from Federal contracts and use them in private sector Green IT and outsourcing agreements

EPEAT = Electronic Protection Environmental Assessment Tool DC PRO = Data center software assessment tool to benchmark data

center energy use and efficiency Advantages of EPEAT and DC PRO:

minimize contract negotiation time Energy Star LEED Beyond LEED

SOWs and SLAs

Ability to change KPI’s over time Ability to change scope, and notice and price requirements Does benchmarking work?

20 31971249.PPT

Vendor Staffing and Subcontractors

Do you want the A-Team? Specify key personnel Is the FM outsourcing provider the actual service provider or

a general contractor for subcontractors? Subcontractor approval rights Can subcontractors work for customer’s competitors? Subcontractor confidentiality obligations

21 31971249.PPT

Key Contract Features – Illustrative Examples

Agreement should serve as an “early warning system” Combine Force Majeuer, Disaster Recovery and Business

Continuity Provisions Establish temporary lower SLAS during pending of force majeuer

or DR event “Governance” provisions are important and staffing and

escalation provisions are important Customer should have step-in rights Use definitions carefully and require all parties to use them in

subsidiary documents Exit planning is key

22 31971249.PPT

Using Jeopardy to Introduce Intellectual Property Rights

Here are the answers; what are the questions? Arises automatically Requires examination and government issuance 20 years Life plus 70 years or about 100 years Requires offer for sale Protects work of authorship Protects algorithm, not dependant on specific software code Protects expression of idea but not idea itself Federal court jurisdiction

23 31971249.PPT

Key IP Issues

Who owns customization to existing software? Importance of ownership assignments What warranties are significant?

Treatment of “combinations” in outsourcing warranty provisions Remedies for potential infringement

Services vs. software Collaborative improvements Potential problems with joint IP ownership How to trade price for ownership, and when and why should it

be done Where does data fit under IP rules?

24 31971249.PPT

25 31971249.PPT

New Roles for Sourcing and Outsourcing Teams

Manage compliance with corporation’s sustainability requirements, including supply chain and providers Technology-enabled sustainability improvements Green IT BPM – implementation of technology to

meet regulatory requirements Data mining and management

IT, Sourcing and Outsourcing will become part of corporate sustainability and carbon footprint reduction Two possibilities, based on GHG protocols:

(1) Sourcing/Outsourcing = outside of corporation carbon footprint, or

(2) Sourcing/Outsourcing = within carbon footprint; outsourcing expertise used to reduce footprint

26 31971249.PPT

What to Do with Existing Contracts Now

Review contracts for energy inefficient provisions, such as automatic pass-through of fuel surcharges

Renegotiate or replace contracts to provide more “sustainable” provisions

Contract requirements should reflect results of “energy audit” of company operations

27 31971249.PPT

What to Do with Contracts Going Forward

Identify energy efficiency and sustainability risks and requirements during development of sourcing strategy

Include requirements in RFP Assess provider ability and financial impact of

requirements as part of down-select process Due diligence – use well-defined checklists of energy

considerations to ensure operational compliance Sourcing management – conduct

audits based on established written ground rules and specific performance measurements

28 31971249.PPT

Data Center Operations

Data centers are often a corporation’s single largest source of energy consumption and, for some, the largest source of carbon emissions

EDS report called data centers the “SUVs” of high tech: accomplish much, but energy inefficient

If data centers were considered a separate industry, they would be the sixth largest electricity user (The 451 Group)

29 31971249.PPT

Data Center Operations

Where is the energy use? Power, cooling, inefficient use of underutilized servers

Gartner: Power and cooling expenses will increase from 4-10% of IT budget to 50% in next 5 years IT and communications industries = 2% of global emissions,

almost equal to aviation IDC: 50% of total cost of ownership of hardware is for power;

expected to increase to 71% over next 4 years (a 54% increase)

30 31971249.PPT

Datacenter Conclusion

Financial incentives alone are Financial incentives alone are sufficient reason to reduce energy sufficient reason to reduce energy

costs of data centerscosts of data centers

$$$$$$

31 31971249.PPT

Getting to Energy Reduction: Combine IT with Facilities Management to Reduce Energy Costs

Buildings Site location to optimize use of nature – look to LEEDS White roof, roof-top co-generation

Location Near power grid to optimize peak and

off-peak power Near telecommunications node to

enable high-speed remote access Near water requirements

Questions and Answers

William Tanenbaum, Kaye Scholer wtanenbaum@kayescholer.com

32 31971249.PPT

33 31971249.PPT

William A. Tanenbaumwtanenbaum@kayescholer.com

William A. Tanenbaum is the international chair of Kaye Scholer’s Technology, Intellectual Property & Outsourcing Group, a partner in the GreenTech Group and resident in the firm’s New York office. Chambers identifies him as an “internationally recognized intellectual property, technology and outsourcing lawyer” and concluded that he “has built one of New York City’s most outstanding transactional IT law practices.” It awarded him “Recommended” ratings in both “Technology and IT Outsourcing” and “Business Process Outsourcing,” and named him as a “Notable Practitioner” at the national level in Business Process Outsourcing. He was voted one of the world’s top 250 IP strategists (IAM client survey) and he was selected as one of the country’s top 25 pre-eminent IT practitioners in the Best of the Best USA 2009. He regularly advises clients on strategic intellectual property concerns, privacy, data security, data transfer, information life cycle management and competitive intelligence matters, in both transactional and litigation contexts.

34 31971249.PPT

William A. Tanenbaum(continued)

Mr. Tanenbaum is the founder and co-chair of PLI’s annual Outsourcing Conference, the founder and co-chair of its Green Technology conference, and a regular lecturer at industry outsourcing conferences. He chairs Kaye Scholer’s GreenTech breakfast seminar series and presents a monthly series of webcasts on Green law topics. He is a past President of the International Technology Law Association (formerly the Computer Law Association) and is listed in Who’s Who in America, the International Who’s Who of Business Lawyers, the Guide to the World’s Leading Litigation Experts and the Guide to the World’s Leading Patent Law Experts. He is the privacy and data protection columnist for the New York Law Journal, co-author of a book on privacy law and has been quoted in The Economist as an expert on IP law. His articles have been used at Harvard and other law schools. He graduated from Brown University (degree with highest honors and Phi Beta Kappa) and Cornell Law School.