By Gerard Pecht and Peter Stokes (October 6, 2017, 11:32 AM EDT) -- Public companies can face significant securities litigation risk over defective algorithms, data errors and software glitches. As securities class action filings continue to increase across the board, plaintiffs lawyers have attacked numerous companies over stock price declines that occur after software problems are revealed. Recent court decisions denying dismissal in securities class actions against Fitbit and OSI Systems illustrate the risks that technology companies face when there is a gap between their public disclosures and the actual status of their software, including undisclosed defects in software algorithms. Short sellers have also targeted companies with negative investigatory "reports" over alleged software problems and data errors, which can trigger securities lawsuits and U.S. Securities and Exchange Commission investigations if the stock price falls after the short-seller report. Even companies that follow best practices in software development can face securities liability for unexpected problems if they do not also follow best practices from a disclosure standpoint. Fortunately, companies can mitigate the risk of shareholder litigation by enhancing their cautionary disclosures, carefully scrutinizing their affirmative statements (including in analyst call Q&A) to avoid overstating the capabilities or development status of new software, and developing a robust crisis management plan to ensure appropriate disclosures in the immediate aftermath of a software problem....