What just happened?
With the world bracing itself for a second wave of coronavirus there is much speculation that the economic downturn is here to stay. Unemployment is at a record high and many small businesses are facing the reality of foreclosures and are being challenged in unprecedented ways.
As in most recessions, a few contrarian 'rising star' businesses emerge. Amazon, hand sanitising producers, Uber Eats, and Netflix to name a few, have all prospered during this pandemic. However, the biggest winner by far has been the buzz around a little-known obscure tech firm called Zoom Video Communications Inc.
Founded in 2011, it took 8 years to first hit profitability. The San Jose, California based company has seen its market capitalisation reach $129 billion and its share price skyrocket 569% in the course of this year.1 In light of the Government's calls for an extension to Covid related social distancing measures there is a sense of 'doom and gloom' in the economy. The outlook however trends favorably for the high tech firms.
What does this mean?
Professor Prithwiraj Choudhury, from the Harvard Business School, had the following remarks about Zoom: “The technology offers strategic as well as HR advantages to an all-remote team. It reduces the cost of office space and travel, can avoid complications with visas for foreign employees, and can appeal to a broader range of talent, such as parents seeking flexible arrangements or military spouses who move frequently.”2 Whilst the technology has been widely embraced as revolutionary in terms of the way people work, it's the rapid rise in popularity has attracted critics. Currently, there are 5 class action and 42 individual law-suits being filed against the firm, the latest being in April 2020 which involves Facebook and LinkedIn.3
Some of the more serious allegations state false advertising and misleading security promises in relation to the technology service offering users end to end encryption. This has been proven false by the Consumer Watchdog bureau in Washington D.C. The technology only offers full encryption services between the servers and the users; not between users as had been promised. The court documents allege that this violates D.C's Consumer Protection Procedures Act (CPPA) by providing a false sense of security to users.
Another accusation relates to Zoom's practice of routing some conference calls through servers in China. In the current China vs America trade war climate, this certainly ruffled a few political feathers within the US Senate. Another consequence of this security lapse is that many users claim to have had their personal data shared and accessed by unauthorised parties. Firms such as Facebook and big data analytics firms have been blamed. Confidence in Zoom's technology service has fallen, having the knock-on effect of unsettling the firm's share price. This has led to lawsuits being filed by disgruntled investors and an investigation by the Securities Exchange Commission, suggesting that they have been 'materially' mislead by statements in the firm's financial reports on the product's 'security claims'.4
Zoom Inc has since tried to rectify some of these mistakes through a 90-day moratorium on releasing new features and have also requested a spin-off sale of some of the capital investment in China. These actions have alleviated some of the IP concerns, however the firm has been publicly chastised for violating human rights and free speech laws recently.
Human rights activists claim that this new technology will be used in unfair and often detrimental ways to others. Zoom has already been accused of censoring accounts, namely pro-democracy supporters in Hong Kong on the behest of Chinese Authorities.5 Most recently, the firm found itself the centre of a controversy between the Jewish Coalition lobbyist group and the San Francisco State University. The University had allowed a prominent member of the Popular Front for the liberation of Palestinian to host a conference. Zoom intervened and blocked this meeting, leading to the firm being criticised for censoring Palestinian voices.6
How does this impact the legal sector?
Though there remains an ominous threat for Zoom's operations to become politicised or entangled in human rights issues, there are bigger concerns for the ability of hackers and government-sponsored entities to attack the product's security features. For the Legal World, the rise of this tech behemoth presents more challenges surrounding IP, data handling and employment law protection however, businesses will undoubtedly capitalise on the “new way of working” patterns and seek to cut labour costs by using companies such as Zoom. Rise or fall, this new star in the tech space presents the legal world more opportunities to represent clients remotely and could mean legal sector jobs being offshored and virtual courtrooms a new reality.
Written by Jessie Mahal
Assessing Firms: #Bird & Bird LLP #Bristows LLP #Dentons #Fieldfisher #HuntonAndrewsKurthLLP #Linklaters LLP
References:
1. Levy, A. (2020, September 01). Here are incredible stats about Zoom following its blowout earnings report. Retrieved October 09, 2020, from https://www.cnbc.com/2020/09/01/here-are-incredible-stats-about-zoom-following-its-blowout-earnings-report.html
2. Turk, V., 2020. Zoom Took Over The World. This Is What Will Happen Next. [online] WIRED UK. Available at: <https://www.wired.co.uk/article/future-of-zoom> [Accessed 8 October 2020].
3. Stubbs, M., 2020. Zoom Faces Multiple Class Action Lawsuits Over Privacy Complaints. [online] Expert Institute. Available at: <https://www.expertinstitute.com/resources/insights/zoom-video-faces-multiple-class-action-suits-over-privacy-complaints/> [Accessed 9 October 2020].
4. Threatpost.com. 2020. Zoom Faces More Legal Challenges Over End-To-End Encryption. [online] Available at: <https://threatpost.com/zoom-legal-challenges-end-to-end-encryption/158341/> [Accessed 8 October 2020].
5. Davidson, Helen, and Lily Kuo. “Zoom Admits Cutting off Activists' Accounts in Obedience to China.” The Gaurdian, June 12, 2020. https://www.theguardian.com/world/2020/jun/12/zoom-admits-cutting-off-activists-accounts-in-obedience-to-china.
6. Greschler, G. (2020, September 23). Zoom will not host S.F. State event featuring Leila Khaled. Retrieved October 09, 2020, from https://www.jweekly.com/2020/09/22/after-protest-zoom-will-not-host-s-f-state-event-featuring-leila-khaled/
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.