‘There are enormous legal implications arising from emerging tech’

17 Oct 2022

Barry Scannell. Image: William Fry

William Fry’s Barry Scannell explains why he is optimistic about digital transformation but why companies need to do their homework.

Click to view the entire Digital Transformation Week series at SiliconRepublic.com

Barry Scannell believes that the positives digital transformation will bring far outweigh the negatives. “However, that’s very much based on the proviso that we must have the necessary legal frameworks and protections in place to ensure that individuals’ fundamental rights are protected,” he warned.

A consultant working in William Fry’s tech department, Scannell has years of experience as an expert in the law around AI, copyright, IP, data protection and other tech-related issues.

Prior to joining William Fry, he worked as the director of legal affairs and regulatory compliance at IMRO, giving him particularly strong expertise when it comes to music licensing and copyright law.

Despite having “a very optimistic attitude” towards digital transformation, Scannell is adamant on one point: “We cannot allow emerging technology outpace the law.”

“I think digital transformation is a natural progression of technological advancement, and in many ways is an inevitability,” he told SiliconRepublic.com.

But “there are enormous legal implications arising from emerging technology,” he added, singling out AI and the metaverse as points of interest.

‘We cannot allow emerging technology outpace the law’

He mentioned two EU proposals for legislation in this area – the AI Act and the AI Liability Directive. The former will “impose stringent regulatory obligations” on organisations producing and using high-risk AI systems.

Lots of organisations use so-called high-risk AI for a variety of purposes, such as performance measuring platforms in workplaces and AI-powered recruitment tools. Many companies deploy the tech as part of safety components, with use cases ranging from aircraft to medical devices.

If that’s not enough to make companies pay attention, the proposed AI Liability Directive will constitute a “dramatic change” to product liability laws. The proposed changes mean it would become easier for consumers who suffer damage from AI systems to prove that the AI caused such damage.

AI, the creative sector and copyright

According to Scannell, AI also has significant implications for the creative sector. Through the process of text and data mining, AI can scrape data from copyright works and then use the data to train generative AI systems to create new copyright works.

This is an issue that is beginning to arise in the area of AI-generated images and text-to-image models.

“From a copyright perspective, AI raises challenges because in most jurisdictions only a human being can be an author and only works with human authors can be protected by copyright,” Scannell said. “In Europe, the test is that there has to be an element of creativity, intellectual effort and a reflection of the author’s personality for the work to be eligible for copyright protection.”

But as generative AI becomes more advanced and human input is reduced, the resulting works may no longer be protected by copyright. The world may be flooded by autonomously generated works in the public domain, which may dilute and diminish the value of human-created works, Scannell explained.

The metaverse and IP interoperability

As the concept of the metaverse takes shape, Scannell believes the most significant legal issue in this space will be IP interoperability. He mentioned several major fashion brands that are selling digital versions of real items.

But these digital replicas might not be transferable from, say, the Minecraft metaverse to the Roblox metaverse. This is because the code in Minecraft that represents the digital item is different to the code in Roblox.

“The idea behind the metaverse is that you should be able to move seamlessly across platforms, but how can this work in practice if everyone is using different code?,” asks Scannell.

“One solution could be that the different platforms will need to enter into reciprocal licensing agreements where they can read and write each other’s code. Another solution could be to use a complex network of APIs, encryption keys and interoperating low-code. IP owners of brands and trademarks may need to enter into reciprocal licensing agreements allowing their IP to be used in various forms and various platforms to facilitate this interoperability.”

Preparation is key

If all of this sounds worrying for companies, Scannell suggests they begin considering new tech and licensing partnerships right now.

“They need to prepare for the regulatory obligations which will apply to them and implement risk reduction measures. Organisations need to consider the new types of licences and contractual provisions they need to put in place with partners, customers and end users.”

Last week, William Fry said it planned to release a series of articles aimed at helping businesses refine their digital transformation strategies. These will focus on themes such as environmental factors, the legal and regulatory landscape, cybersecurity risks, the EU’s strategy for digital transformation and emerging tech trends in blockchain, IoT and AI.

“It would be a critical error to ignore these issues, thinking that the change is on the distant horizon, because digital transformation is happening now, and those who don’t act immediately are going to be left behind,” Scannell added.

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Blathnaid O’Dea is Careers reporter at Silicon Republic