Learn how integrating AI contract review into your Data Processing Agreements (DPA) can improve your contract negotiation, ensuring clarity, precision, and mutual understandin
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A Data Processing Agreement (DPA) is a legally binding contract between a Data Controller ("Controller") and a Data Processor ("Processor"). The agreement outlines the rights and responsibilities of both parties concerning the processing of personal data. DPAs are an essential tool for defining the relationship between the Controller and Processor, ensuring compliance with data protection laws, and protecting the rights of data subjects.
DPAs are widely used across various industries that handle significant amounts of personal data, including technology and software, e-commerce, healthcare, finance, education, marketing and advertising, telecommunications, and travel and hospitality.
There are several key reasons why businesses should use DPAs:
The top provisions to consider in a Data Processing Agreement are:
In addition to these top provisions, a comprehensive Data Processing Agreement should also include:
To ensure that your DPA is effective, comprehensive, and legally compliant, use this checklist:
To give you a sense for the benefits of leveraging ai legal contract review trained by lawyers, we’ve selected some sample language our software presents to customers during a review. Keep in mind that these are static in this overview, but dynamic in our software - meaning our AI identifies the key issues and proactively surfaces alerts based on importance level and position (company, 3rd party, or neutral) and provides suggested revisions that mimic the style of the contract and align with party names and defined terms.
These samples represent a small sample of the pre-built, pre-trained AI Contract Review solution for Data Processing Agreements. If you’d like to see more, we invite you to book a demo.
For: Controller
Alert: May be missing an article regarding the processing of personal data.
Guidance: To guarantee data protection and legal compliance, it is essential for the processor to comply with the terms and conditions set forth in the DPA. This obligation is particularly significant when the controller engages a third-party service provider (the processor) to handle sensitive data, such as customer information in a CRM system.
By explicitly outlining the processor's obligation to process personal data in accordance with the DPA, both parties can establish a clear understanding of their respective responsibilities. This helps to preserve data privacy and adhere to applicable laws and regulations.
Relevant statutes or laws to consider in this context include federal and state privacy laws, such as the California Consumer Privacy Act (CCPA) and the Virginia Consumer Data Protection Act (VCDPA), as well as sector-specific regulations like the Health Insurance Portability and Accountability Act (HIPAA) for healthcare data. If the data processing involves personal data of individuals in the European Union, the General Data Protection Regulation (GDPR) may also be applicable.
It is crucial to be aware of the extensive reach of state-specific laws like the CCPA, which can impact businesses located outside of California if they process personal information of California residents. Ensuring compliance with these laws and any other applicable state data protection laws is vital for maintaining a secure and legally compliant data processing environment.
Sample Language:
PROCESSING OF PERSONAL DATA
1. PROCESSOR shall not collect, retain, use, or disclose the Personal Data (and has not collected, retained, used, or disclosed the Personal Data) for any purpose other than to perform the Services pursuant to this Agreement, except, where a Data Protection Law applies to particular Personal Data, where and only to the extent permitted or required by that Data Protection Law.
2. Without limiting the generality of the foregoing, and for the avoidance of any doubt, PROCESSOR:
(i) shall not collect, retain, use, or disclose the Personal Data for a commercial purpose (other than providing the Services);
(ii) shall not sell the Personal Data (where “sell” means selling, renting, releasing, disclosing, disseminating, making available, transferring, or otherwise communicating the Personal Data, orally, in writing, or by electronic or other means, to another person or entity, for monetary or other valuable consideration);
(iii) shall not collect, retain, use, or disclose the Personal Data outside the direct business relationship between Provider and Customer;
(iv) shall not collect more than the minimum Personal Data necessary, nor retain the Personal Data longer than necessary, to perform the Services;
(v) shall not use the Personal Data to build or modify a profile about a natural person to use in providing services to an entity other than CONTROLLER; and
(vi) shall not correct or augment the Personal Data nor otherwise combine it with Personal Data from another source (including from PROCESSOR itself).
This Agreement does not authorize processing of Personal Data for “targeted advertising” or “cross-context behavioral advertising.”
For: Processor
Alert: May be missing an article regarding the use of sub-processors.
Guidance: It is generally acceptable to consider allowing sub-processing under DPAs. This approach enables the data processor to delegate specific tasks to sub-processors, resulting in increased efficiency and cost-effectiveness while ensuring the data controller's requirements and data protection obligations are met.
A practical example of this suggestion's effectiveness is when a cloud service provider, acting as a data processor, engages a third-party data center to store and manage the data controller's data. By permitting sub-processing, the data processor can utilize the specialized services of the data center while maintaining compliance with the DPA and meeting the controller's data protection requirements.
It is always important to ensure that any sub-processors engaged are contractually bound to adhere to the same data protection obligations as the data processor. Relevant statutes or laws to consider in this context include federal and state data protection laws, such as the California Consumer Privacy Act (CCPA) and the New York SHIELD Act, as well as industry-specific regulations like the Health Insurance Portability and Accountability Act (HIPAA) for healthcare data. Additionally, if the data processing involves the personal data of EU citizens, the General Data Protection Regulation (GDPR) should also be considered.
Sample Language:
SUB-PROCESSING
PROCESSOR may engage third-party sub-processors to process Personal Data on behalf of CONTROLLER, provided that PROCESSOR enters into a written agreement with the sub-processor that contains data protection obligations that are no less protective than those set out in this Agreement.
For: Controller
Alert: May be missing an article regarding data subject rights.
Guidance: To safeguard data subjects' rights and promote transparency in data processing activities, it is advisable to include provisions addressing data subject inquiries in DPAs. This approach helps establish trust and demonstrates compliance with data protection laws.
In practical terms, this entails that parties involved in data processing activities should create and maintain a transparent and accessible channel for addressing data subject inquiries. For instance, when a data subject contacts the data processor to inquire about their personal data, the data processor should be capable of providing the necessary information or directing the data subject to the appropriate party for further assistance.
Relevant statutes or laws to consider in this context include federal and state privacy laws in the United States, such as the California Consumer Privacy Act (CCPA) and the Virginia Consumer Data Protection Act (VCDPA). Moreover, the European Union's General Data Protection Regulation (GDPR) may offer guidance on best practices for addressing data subject inquiries, even though it is not directly applicable in the United States.
Sample Language:
DATA SUBJECT RIGHTS
1. PROCESSOR will assist CONTROLLER in fulfilling its obligations to respond to requests from data subjects to exercise their rights under Data Protection Laws.
2. PROCESSOR shall not respond to requests from data subjects as to Personal Data, except where and to the extent applicable Data Protection Law requires a response directly from PROCESSOR. However, this Agreement does not authorize or permit PROCESSOR, on CONTROLLER’s behalf, to respond to requests from data subjects, or other third parties unless the parties agree otherwise in a writing signed by both parties.
To make the most of your DPAs and ensure their effectiveness, follow these best practices:
Data Processing Agreements are critical for ensuring the lawful and secure processing of personal data, protecting the rights of data subjects, and managing the relationship between Controllers and Processors. By including essential provisions such as the scope of processing, the obligations of the Processor, sub-processing conditions, data subject rights, data breach notifications, data portability, security measures, confidentiality, audit rights, liability, and termination, DPAs provide a strong foundation for compliant and accountable data processing.
To ensure the effectiveness of your DPAs, it's important to conduct due diligence, be specific and detailed, regularly review and update the agreement, monitor compliance, communicate and collaborate with the Processor, and train your team on the importance and requirements of the DPA.
By investing time and effort into crafting comprehensive and tailored DPAs, businesses can foster trust, mitigate risks, and demonstrate their commitment to data protection and privacy.
Our guides are for informational purposes only. Such information is not legal advice and is not guaranteed to be correct, complete, or an up-to-date representation of LegalOn's legal content. Nor is the information tailored to the unique needs or objectives that accompany each transaction. For legal advice for a specific problem, you should consult an attorney licensed to practice law in the appropriate jurisdiction for each transaction.
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